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.
5 Comments
2/2/2024 05:02:43 am
This article provides valuable insights into the importance of clear procedures and communication in real estate transactions, specifically regarding the handling of earnest money. It highlights the potential pitfalls that can occur when parties involved in a real estate deal fail to follow established protocols, such as delivering signed agreements promptly and ensuring that the closing attorney holds the funds as agreed. The article's cautionary tale serves as a reminder to both buyer's and listing agents of their responsibilities to ensure a smooth and successful transaction. It emphasizes the need for diligence and timely action to prevent potential disputes and legal complications. Well done for shedding light on this crucial aspect of real estate transactions!
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2/15/2024 08:58:34 pm
This article offers insightful observations on the critical need for transparent procedures and effective communication in real estate dealings, especially concerning the management of earnest money. It underscores the risks that arise when parties in a real estate transaction neglect to adhere to set protocols, such as timely submission of signed contracts and the agreed-upon safeguarding of funds by the closing attorney. Serving as a cautionary example, the article reminds both buyers' and sellers' agents of their duties to facilitate a seamless and successful transaction. It stresses the importance of careful attention and prompt actions to avert potential disagreements and legal issues. Kudos for highlighting this essential element of real estate transactions!
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2/20/2024 12:45:10 am
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3/19/2024 11:26:06 pm
This article effectively outlines the crucial procedures involved when the closing attorney holds the earnest money in a real estate transaction. It emphasizes the importance of clear communication and adherence to timelines to prevent complications and potential legal issues. The hypothetical scenario provided offers a practical example of how things can go astray when these procedures are not followed diligently. By highlighting the responsibilities of both the buyer's and listing agents, as well as the closing attorney, the article provides valuable guidance to ensure smooth transactions and protect the interests of all parties involved. Thank you for shedding light on this aspect of real estate transactions and offering practical advice to agents navigating these processes.
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