Idaho Real Estate Practice Exam

What action should a broker take before accepting an earnest money deposit?

1. Immediately deposit it into their personal account

2. Complete necessary documentation and deposit it into the trust account

3. Hold it until the transaction is finalized

4. Inform the buyer of potential delays

The correct answer is: Complete necessary documentation and deposit it into the trust account

A broker is required to follow strict protocols regarding earnest money deposits to ensure compliance with legal and ethical standards. Before accepting an earnest money deposit, the appropriate action involves completing the necessary documentation and depositing the funds into a trust account. This trust account is specifically designated for holding client funds separate from the broker's personal or operational funds, which helps safeguard the buyer's money and ensures it is used appropriately within the context of the real estate transaction. This process protects both the buyer and seller by ensuring that earnest money is managed properly and reduces the risk of disputes arising from mishandling the funds. Additionally, maintaining thorough documentation helps to provide a clear record of the transaction, which can be important for accountability and legal compliance. Depositing the funds into the broker’s personal account or simply holding them until the transaction is finalized does not comply with ethical standards and could lead to potential legal issues. Informing the buyer about potential delays is an important aspect of communication, but it does not address the immediate requirement for how to manage the earnest money deposit itself.