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:
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.
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