PSI Oklahoma Real Estate Practice Test

In what scenario should earnest deposits be returned to a buyer?

1. When the buyer changes their mind

2. When the seller cannot deliver clear title

3. When the contract has expired

4. When market conditions change

The correct answer is: When the seller cannot deliver clear title

The return of earnest deposits to a buyer is a critical aspect of real estate transactions that protects buyers from losing their funds under certain circumstances. In the scenario where the seller cannot deliver clear title, it is essential to understand the implications of this situation. Clear title means that there are no liens, encumbrances, or other legal issues that would prevent the buyer from taking full ownership of the property. If a seller is unable to provide clear title, the buyer is often within their rights to terminate the contract. Since the ability to obtain clear title is a fundamental condition for the buyer’s commitment to the transaction, the buyer’s earnest deposit should be refunded. This action upholds the principle of good faith in the transaction and ensures that buyers are not left at a disadvantage due to issues that are the seller's responsibility. In contrast, changes of mind, contract expiration, or shifts in market conditions typically do not automatically warrant the return of earnest deposits without specific contractual arrangements allowing for such outcomes. These situations often require a more detailed evaluation of the terms of the contract and the reasons behind the buyer's actions.