If the contract terminates, to whom must the broker return the earnest money immediately?

• A. The other party
• B. The buyer
• C. The seller
• D. The original party immediately

Answer: (D)

Earnest money is a buyer’s good-faith deposit held in the broker’s trust account. When a contract ends, the funds no longer serve as a deposit for a pending deal and belong to the party who put them up. The broker has a fiduciary duty to safeguard those funds and disburse them promptly back to the original party who deposited them, unless the contract or a court order says otherwise or there is a dispute that must be resolved first. Returning the money immediately to the depositor preserves the rightful ownership and avoids unnecessary delay or misappropriation. The other party isn’t automatically entitled to the funds, and the broker isn’t entitled to keep them. If there’s a dispute, the funds can be held in escrow until resolution.