RE/MAX AROUND ATLANTA
  • Home
  • RMAA HUB
  • Events
  • Local Service Providers
    • Attorney Partners
    • Lender Partners
    • Home Cleaning Services
    • Home Inspection Companies
    • Home Staging Sevices
    • Home Warranty Companies
    • Insurance
    • Photography
    • Estate Sales/Clean-outs
    • Property Management
    • Repair Services
    • Security Systems
  • OUR TEAM
  • SMART MOVE PROGRAM
  • Online Payments
  • BROKER CORNER
  • Locations

BROKER CORNER

Rules of the Game: Closing Attorney Holding the Earnest Money

1/9/2020

0 Comments

 
Picture
Most of the time, Buyer deposits are held by the Selling Agent’s Broker.  At RMAA, we have clear procedures in place to track the funds.  We follow the money and let you know if the money isn’t forthcoming.
But what if the parties have agreed that the closing attorney should hold the money?  GAR Forms 510 and 511 recite the procedures, but things can go astray.

Consider the following hypothetical:

You are the Listing Agent. A “Closing Attorney Act as Earnest Money Holder”  (GAR F510) has been included in the Purchase and Sale Agreement, so you assume the earnest money is safely in the closing attorney’s account. You assume the closing attorney has agreed to hold the funds, but you have not received a signed Escrow Agreement (GAR F511) back from the closing attorney.  And it has slipped your mind to check on it.   But the Buyer’s agent did not deliver the purchase agreement or the Escrow Agreement to the attorney.  The attorney has received the funds by wire, but has no name or address for it.  The deal is falling apart and the seller expects the wired funds to be forfeited.  Or worse, no contract and no funds were delivered to the closing attorney.  Oops.

These are the rules of the game:
  1. The Buyer’s agent must deliver the fully executed PSA  and Escrow Agreement (F511) to the attorney within 2 days of the binding date.
  2. The Closing Attorney has to agree to hold the funds within 3 days, countersign the Escrow Agreement (F511) and return it to the agents.  If the attorney never got the contract, there is nothing to agree to or deliver.  
  3. The Buyer (or the Buyer’s agent) is responsible for sending all earnest money to the Closing Attorney by wire transfer and immediately notify Seller when it has been done.
  4. If the Closing Attorney named as Holder has not become Holder either because the Closing Attorney rejects being the Holder, fails to timely become Holder or becomes Holder but later resigns, then the Alternate Holder,  named in the GAR F510  (who must be a broker in this transaction) automatically becomes the Holder and the funds can be transferred to the alternate Holder.  
Back to the hypothetical.
  1. No F511 was signed, so the Closing Attorney has not agreed to be the Holder. 
  2. The funds were wired, but the Closing Attorney rejected the wire because there was no agreement.  (Or no funds were wired at all.)
  3. The deal is falling apart.  There are no contingencies.  The Seller is expecting the earnest money to be forfeited to him.  
  4. But there are no funds.  
  5. The Buyer’s agent didn’t do his job, but doesn’t look so bad to the Buyer because the Buyer didn’t lose his money.
  6. The Listing Agent has have to answer to his client because he didn’t check to see if the Buyer’s agent did his job and that the funds were held.
  7. Does the Seller sue for the earnest money that should have been in escrow?  Who does the Seller sue? His agent or the Buyer’ agent?  Or both?  Yikes.

Moral of the story:  If you are the Buyer’s agent, deliver the fully executed agreement along with the Escrow Agreement ASAP after the Binding Date.  The Rule is 2 days.  If you are either the Listing Broker or the Buyer’s Broker, make sure you have received the Escrow Agreement back from the Closing Attorney no later than 5 days after Binding Date.
0 Comments



Leave a Reply.

    RMAA

    Real Estate News, Brokers Blog & More

    Categories

    All
    Broker's Corner
    Mortgage Minute

    Archives

    March 2023
    February 2023
    January 2023
    December 2022
    November 2022
    October 2022
    September 2022
    August 2022
    July 2022
    June 2022
    May 2022
    April 2022
    March 2022
    February 2022
    January 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    July 2020
    June 2020
    May 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019

    RSS Feed

RE/MAX AROUND ATLANTA
© COPYRIGHT 2023. ALL RIGHTS RESERVED.
  • Home
  • RMAA HUB
  • Events
  • Local Service Providers
    • Attorney Partners
    • Lender Partners
    • Home Cleaning Services
    • Home Inspection Companies
    • Home Staging Sevices
    • Home Warranty Companies
    • Insurance
    • Photography
    • Estate Sales/Clean-outs
    • Property Management
    • Repair Services
    • Security Systems
  • OUR TEAM
  • SMART MOVE PROGRAM
  • Online Payments
  • BROKER CORNER
  • Locations