CLEARING BUYER FUNDS – “CAN’T YOU USE OTHER MONEY IN YOUR ESCROW ACCOUNT FROM OTHER DEALS?”
We closed a record number of transactions in December – a record at least for us – and one closing stands out for a disturbing statement by the buyer’s real estate agent. As the closing agent and because this was a short sale and funds had to be disbursed to the lender immediately at closing, we advised the buyer that we needed wired funds so they would be immediately available.
The buyer’s agent went apoplectic upon our mentioning that we needed wired funds instead of local bank check. When we advised that if it was a bank check, even a local one, we would have to wait for that check to clear the depository bank before disbursing and immediate credit would not be given to the check. Here is the disturbing statement – the buyer’s agent said why can’t we accept the bank check and just use other funds in our escrow account to send to the bank?
OK, those were not the exact words. The exact words were, “That’s ridiculous! Don’t you have any money in your escrow account from other deals?”
The result was we got the wired funds. But the statement from the agent was gripping.
Let’s talk about Florida in particular, but nationwide in general.
The issue is, what are “good funds”. Good funds are generally also known as “collected funds”. Both the Florida Association of Realtors and the joint “Florida Realtors and Florida Bar” form contracts reference funds from the Buyer or any lender as “being subject to clearance” or “actually collected and deposited in the escrow account” of the closing agent. The key is that the money has to be finally collected and deposited by the closing agent’s bank for unrestricted draw.
The agent’s statement that we could rely on existing funds in the escrow account violates the primary directive given to anyone with an escrow account – including Realtors. The problem is that each dollar in the agency’s or closing agent’s escrow account is designated to a specific depositor. Essentially, each deposit is its own account. In fact, many banks that handle escrow accounts allow the escrow agent to set up sub-accounts for each file, so one file’s monies are not confused with another file’s monies.
The statement by the agent not too obtusely said, use OTHER PEOPLE’S MONIES IN YOUR ESCROW ACCOUNT TO CLOSE MY DEAL, AND REIMBURSE THOSE PEOPLE WHEN MY CHECK CLEARS.
For the old timers, yes, times are “a changing” – the acceptance of a cashier’s check or bank check used to seem acceptable for most transactions. But new rules, a plethora of phony checks, and immediacy in getting pay-off funds to mortgagees, have conspired to make the closing process “black and white” with “no grey” allowed.
Today, no closing / escrow agent is to be a “short term lender” for anyone. The monies in the escrow account are sacred. I don’t have exact statistics, but I bet that most of the suspensions of attorneys that I read about are from escrow account violations, and this conduct condoned by this agent would warrant such a result.
And Buyers! – Don’t forget that you have plenty of work to do on YOUR side of the transaction so your funds are ready to get to the closing agent – as timely posted in the recent AR article by Jim Braun, Yes they will put a hold on that check!
Agents should prepare their buyers to either deposit funds with a bank check PRIOR to the closing, allowing time for it to clear, or expect to wire funds into escrow early on the day of closing.
Copyright 2011 Richard P. Zaretsky, Esq.
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.
Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660begin_of_the_skype_highlighting email: RPZ99@Florida-Counsel.com – FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW – We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com New Website www.Florida-Counsel.com.