California Real Estate Practice Exam

Broker "U" receives a $5,000 deposit with an offer to purchase one of his personal listings priced at $100,000. The escrow is to close in one week, and the seller has agreed to pay a $5,000 commission for any sale. The seller instructs Broker "U" to place the deposit into escrow. What should Broker "U" do?

1. keep the $5,000 in the office until the seller signs the papers related to the sale

2. put the $5,000 into escrow

3. put the $5,000 into escrow with instructions to pay the amount back to the broker at closing

4. put the $5,000 into the broker trust account

The correct answer is: keep the $5,000 in the office until the seller signs the papers related to the sale

In this scenario, the most appropriate course of action for Broker "U" is to place the $5,000 deposit into escrow. This choice reflects a firm understanding of standard real estate practices and legal requirements concerning earnest money deposits. When a buyer provides a deposit with an offer to purchase, it is crucial that the broker handles the funds according to legal guidelines and in accordance with the seller's instructions. The seller explicitly directed Broker "U" to place the deposit into escrow, which protects both the buyer's and seller's interests and provides a clear record of the transaction. Keeping the funds in the office until the seller signs the papers may expose Broker "U" to risks and potential disputes. It does not comply with industry standards or protect the parties involved effectively. Similarly, options that involve manipulating the escrow arrangement, like intending to return the deposit to the broker at closing or depositing it into the broker's trust account, do not align with the seller's instructions or standard procedures for handling deposits in real estate transactions. Overall, placing the deposit into escrow is a responsible, transparent, and legally compliant action that fulfills the requirements of the transaction and ensures trust between the parties involved.