Michigan License Law Practice Test

What should Broker Karen do with the earnest money check she received?

1. Keep it until closing

2. Deposit it in her personal account

3. Deposit it into a non-interest bearing trust account

4. Return it to the buyer immediately

The correct answer is: Deposit it into a non-interest bearing trust account

When Broker Karen receives an earnest money check, the appropriate action is to deposit it into a non-interest bearing trust account. This practice safeguards the buyer’s funds until the transaction is completed, ensuring compliance with Michigan licensing laws that require brokers to hold earnest money in a trust account specifically designated for these purposes. Using a non-interest bearing trust account helps maintain transparency and accountability, as the funds remain separate from the broker's personal or operational accounts. This separation prevents any potential misuse of the funds and ensures that they are handled in accordance with legal and ethical standards established for real estate transactions. Depositing the check into her personal account would not only violate licensing regulations but could also lead to serious legal repercussions. Keeping the funds until closing without proper holding protocols would similarly be inappropriate. Returning the check to the buyer immediately might contradict the buyer's intent to secure the property, which is essentially the purpose of earnest money. Hence, the safest and most compliant handling method is to place the earnest money in a designated trust account.