PSI Oklahoma Real Estate Practice Test

If a buyer demands the return of an earnest deposit due to a seller's inability to provide clear title, what should the broker do?

1. Delay the return until the issue is resolved

2. Return the entire amount of the earnest deposit

3. Keep a portion for processing fees

4. Advise the buyer to seek legal action

The correct answer is: Return the entire amount of the earnest deposit

The scenario involves a buyer seeking the return of an earnest deposit because the seller cannot provide a clear title. In this case, the correct course of action is to return the entire amount of the earnest deposit to the buyer. This is appropriate because earnest money is generally meant to show the seller that the buyer is serious about purchasing the property. If the seller fails to meet a significant condition of the sale, such as delivering a clear title, the buyer is entitled to retrieve their earnest money. The earnest deposit serves as a security for the buyer's intent to buy, and if the transaction cannot proceed due to the seller's inability to fulfill their obligations, the buyer should not be penalized for circumstances beyond their control. Returning the full earnest deposit also helps maintain ethical standards and the integrity of the real estate process, facilitating trust between buyers and brokers. Keeping the deposit or only returning a portion would often lead to disputes or could violate fiduciary duties owed to the buyer, as the broker has a responsibility to act in the best interests of their client. Advising legal action is unnecessary in this context, as there is a straightforward resolution.