What must happen to earnest money once it is received by the broker?

When earnest money is received by the broker, it is essential for it to be placed in a trust account for safekeeping. This is a fundamental practice in the real estate industry, governed by ethical standards and legal requirements. Trust accounts are designed to hold funds that belong to clients or third parties, ensuring that the funds are managed responsibly and utilized appropriately.

This safeguard protects the buyer's money until the transaction is finalized or a mutually agreed upon decision is made regarding the funds, such as returning it or applying it toward the purchase. Failing to deposit earnest money in a trust account could lead to significant legal issues for the broker, including accusations of mishandling client funds.

Trust accounts also provide transparency and accountability, as they keep the funds separate from the broker’s personal assets, thereby reinforcing trust between clients and real estate professionals.