Tennessee Real Estate License Exam Practice Question
A real estate broker wrote a full price offer of $350,000 for a buyer. The amount of the earnest money deposit was $25,000. The offer was accepted and the broker placed the deposit in her escrow or trust account. The next week, the buyer and the seller decided to cancel their agreement and notified the broker in writing to return the deposit. Which of the following is TRUE?
Correct Answer: B
Rationale: In this scenario, the broker must return the earnest money deposit unless there is a specific agreement stating otherwise. Since both the buyer and seller have mutually agreed to cancel the contract, the broker has no claim to the deposit without explicit authorization to retain any portion.
Option A is incorrect because the broker cannot negotiate her commission from the deposit without prior agreement from both parties. Option C is misleading; the broker cannot unilaterally decide to subtract her commission. Option D is also wrong, as the broker has not earned a commission in this case since the transaction did not close. Thus, returning the full deposit is the appropriate action.
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