There appears to be a misconception among some members of the real estate industry as to the disposition of earnest money in the event the transaction fails. Earnest money is not prepayment for, or to be considered as partial payment of ' or as protection against, the broker's commission. Earnest money is not in the broker's trust account as a payment to be retained by the broker if the sale, for any reason, is not completed. Earnest money is given as a part of the contractual agreement, or proposed contractual agreement, executed by the buyer or the seller or both..I.t-is given as evidence of the earnest intent of the buyer to fulfill the terms of the contract. Disbursement of earnest money may be made only with the full knowledge of the contracting parties, and pursuant to their agreement.

If a broker is in doubt as to the proper disposition of earnest money retained in his trust account, he should seek legal counsel as to the proper procedures and documentation to be executed in disbursing such monies. As a broker, you MAY NOT simply appropriate such money to your own use.

-Minnesota Real Estate News