What is a broker's ethical responsibility in handling a buyer's earnest money?

A broker's ethical responsibility when handling a buyer's earnest money is to keep it secure and in a trust fund or escrow account. This practice ensures that the funds are protected and used appropriately, demonstrating the broker's integrity and professionalism. By depositing earnest money into a dedicated trust or escrow account, brokers not only comply with legal requirements but also build trust with their clients, assuring them that their funds are safeguarded until the terms of the purchase agreement are fulfilled or the transaction closes.

Using personal accounts to hold earnest money would pose significant risks, including potential misappropriation or unauthorized use of the funds. Informing buyers about the risks of checks, while important, does not speak to the direct responsibility for earnest money handling. Relying on verbal agreements can lead to misunderstandings and disputes, making it essential to adhere to established protocols involving documented processes for managing earnest money. Thus, the correct approach emphasizes safeguarding clients' funds through proper accounting practices in a trust or escrow account.