Wisconsin Real Estate Sales Practice Exam

If a licensee receives an item, such as a painting, that cannot be deposited as earnest money, what must they do?

1. Exchange it for cash immediately

2. Draft an agreement to hold it

3. Cannot hold the item or draft an agreement

4. Sell it to a third party

The correct answer is: Cannot hold the item or draft an agreement

In real estate transactions, earnest money typically refers to a deposit made to demonstrate the buyer's serious intent to purchase a property. However, not all items can serve as earnest money, particularly those that cannot be easily liquidated or converted to cash, such as personal property like artwork. When a licensee receives an item that cannot be treated as earnest money, they must adhere to real estate rules regarding the handling of funds and assets in transactions. The appropriate action here is to refrain from holding the item or trying to draft an agreement concerning it. This is important to ensure compliance with real estate regulations and to avoid potential complications that could arise from holding non-cash items in a purchase agreement. Thus, the most suitable course of action when presented with an ineligible item for earnest money is to not hold it or draft any agreements, ensuring that the transaction adheres to legal standards and protects all parties involved.