According to Michigan law, how should earnest money be handled by a broker?

The handling of earnest money by a broker under Michigan law is crucial for maintaining proper trust and compliance with legal requirements. The correct procedure is that it must be deposited into a trust or escrow account within 3 business days of receipt. This requirement ensures that the earnest money is safeguarded and not intermingled with the broker's personal or operational funds, thereby protecting both the buyer's and seller's interests in a real estate transaction.

When earnest money is placed in a dedicated trust or escrow account, it is held securely until the transaction is concluded. This practice builds trust between all parties involved and allows for an orderly resolution of any potential disputes regarding the earnest money. The regulatory framework emphasizes transparency and accountability, hence the specific timeframe for depositing the money.

Different methods of handling earnest money, such as storing it in a personal account or allowing the buyer to hold it, do not meet legal requirements, which is why they are considered inadequate. Additionally, immediately returning the earnest money if the deal falls through overlooks the possibility that certain conditions might need to be met before determining the rightful party to the money, such as agreeing on contract terms or contingencies. Thus, the practice of depositing into a trust or escrow account aligns with established legal standards in Michigan real