Under what condition is the broker allowed to retain escrow funds in escrow?

• A. A dispute arises regarding the commission amount due to the broker
• B. Any minor administrative error
• C. If the buyer demands release
• D. If the seller is willing to release funds

Answer: (A)

Escrow funds are held by a real estate broker to satisfy obligations under the contract and to protect both parties until the terms of the deal determine who is entitled to the money. The condition that allows the broker to retain those funds arises when there is a dispute about the amount of commission owed to the broker. Until that dispute is resolved—by agreement, court decision, or arbitration—the broker may keep the funds in escrow to ensure they aren’t distributed without proper authorization.

This protects the broker’s earned commission while the parties sort out who actually owes what. It also helps prevent unnecessary releases to one side that could leave the other with unpaid commissions or improper payments.

Unrelated issues aren’t a basis to keep funds. A minor administrative error should be corrected and the funds released according to the proper procedure, not held indefinitely. A buyer’s demand for release or a seller’s willingness to release don’t override the contract or any active dispute over commissions. Only when there’s a genuine dispute that requires resolution does withholding in escrow become appropriate.