What must a broker do upon receiving an earnest money deposit?

When a broker receives an earnest money deposit, the appropriate and required action is to deposit it into an escrow account. This is a crucial step to protect both the buyer and the seller during the transaction process. An escrow account is a neutral third-party account where the funds can be held securely until all the conditions of the sale are met. This ensures that the money is safeguarded and provides assurance to both parties that the funds will be managed properly.

Depositing the earnest money into escrow helps to demonstrate the buyer's serious intent to purchase the property, while also giving the seller confidence that the funds will be available when it comes time to close the deal. It also helps to avoid any potential disputes surrounding the handling of earnest money by keeping the funds separate from the broker's personal finances or business funds, ensuring compliance with legal and ethical standards in real estate transactions.