When must a broker return earnest money to the buyer?

A broker is obligated to return earnest money to the buyer upon termination of the transaction. This is because when a purchase agreement is voided or cancelled, the earnest money—which is a deposit made to demonstrate the buyer's serious intent to purchase—is no longer applicable. It is essential for the integrity of the transaction process that the buyer receives their earnest money back promptly in such circumstances.

Returning the earnest money at this point is a reflection of the mutual understanding that the transaction is not proceeding as planned, thereby safeguarding the buyer’s financial interests in case the deal falls through. Other options, such as returning the money at any time or at the broker's discretion, do not align with the principles of fiduciary duty and accountability that brokers have towards their clients. Optioning to return the earnest money only when requested by the buyer could also lead to potential disputes or misunderstandings between the parties involved.