Closing Attorney As Holder of Earnest Money Requirements

The following two forms must be executed and included with the contract:

1. GAR Form F510 – Closing Attorney Acting as Holder of Earnest Money Exhibit. This document specifies who the closing attorney is with their contact information. It also includes a section to name an alternate holder who must be a broker. It is very important to name an alternate holder in case the closing attorney does not timely agree to be the holder. Otherwise, there would not be a contractual holder of the earnest money to enforce the terms of the agreement should the earnest money not be delivered or if there is an earnest money dispute.
2. GAR Form F511 – Agreement of Closing Attorney to Serve as Holder of Earnest Money (“Escrow Agreement”). The Buyer’s agent must deliver the fully executed purchase and sale agreement and Escrow Agreement (F511) to the attorney within two days of the binding agreement date. The closing attorney must agree to become the holder within five business days of receiving the entire contract.

Important to remember:

• In All-Cash transactions, the closing attorney can hold the earnest money but in the event of a dispute between the parties regarding the disbursement of the funds, the closing attorney shall not disburse the funds based upon a reasonable interpretation of the agreement. The only remedy available to the closing attorney shall be to interplead the funds into a court of competent jurisdiction.
• If the closing attorney agrees to be the holder of the earnest money, they are required to follow the procedures set forth in the purchase agreement.
• If the closing attorney does not agree to become the holder of the earnest money within five business days, the alternate holder automatically becomes the holder.
• The buyer (or the buyer’s agent) is responsible for sending the earnest money to the closing attorney and immediately notifying the seller (or seller’s agent) when it has been done.
• If the holder of the earnest money is changed to the closing attorney by an amendment after the contract is binding, the F510 exhibit needs to be added to the contract as an exhibit and initialed by both parties. The F511 also needs to be completed and agreed to by the closing attorney and provided to all parties.

We recommend that you have RMAA hold earnest money whenever possible, so we have greater control over compliance and notices.