In Michigan, how must earnest money be handled by real estate brokers?

In Michigan, real estate brokers are required to deposit earnest money into a trust account. This practice ensures that the funds are held securely and are kept separate from the broker's personal or business accounts. The use of a trust account provides transparency and protects the interests of all parties involved in the real estate transaction. It also complies with Michigan's real estate laws, which dictate how brokers must manage and safeguard clients' funds.

This approach fosters trust between the buyer and seller, as it shows that the earnest money is being handled in a professional and lawful manner. By placing the funds in a trust account, the broker can ensure that the earnest money is accessible for its intended purpose, which is usually applied toward the buyer's deposit or closing costs if the transaction proceeds as planned.

In contrast to other options, retaining earnest money until closing, keeping it as a management fee, or not allowing brokers to accept earnest money is not permissible under Michigan regulations. The requirement for a trust account is a crucial safeguard in the real estate process, ensuring that all parties are treated fairly and that their financial commitments are managed appropriately.