You need to know – Who are escrow funds held in trust for?

YouNeedToKnowWeb500Escrow funds are deposited with a third party (such as a real estate broker or attorney or title company) in trust for others

When a deposit is made with an offer to purchase real estate, the escrow funds are held in trust for the buyer, pending acceptance or rejection of the offer to purchase

If the offer to purchase is accepted by the seller and all contingencies have been cleared, the deposit funds typically become held in trust for the seller, since the deposit formed a part of the binding contract to purchase the real estate

You need to know – What is an earnest money deposit?

YouNeedToKnowWeb500An earnest money deposit (also known as a good faith deposit or binder deposit) is an amount paid in good faith by a buyer when making an offer

The deposit normally accompanies the written contract offer and will be held in trust in an escrow account

If the offer is rejected by the seller the deposit is returned to the buyer

If the offer is accepted by the seller then the deposit will become a part payment of the contract price

If, after the offer is accepted, and the buyer defaults, the deposit is typically forfeited to the seller as liquidated damages arising from the buyer’s failure to complete the purchase

You need to know – What is a court action?

YouNeedToKnowWeb500A court action (also known as litigation) involves the filing of a law suit (also known as a complaint) in a civil court in which a plaintiff who claims to have incurred loss as a result of a defendant’s action demands a remedy

Court action is one of the procedures authorized to settle an escrow dispute

2 types of court action are available to resolve escrow disputes:

  1. If the broker has no claim on the deposit under dispute, a Bill of Interpleader would be filed with the court.
  2. If the broker believed he was entitled to some or all of the deposit under dispute, a Declaratory Decree would be requested

You need to know – What is arbitration?

YouNeedToKnowWeb500Arbitration is a form of alternative dispute resolution where the parties to a dispute refer it to a third party (the arbitrator), whose decision (the award) the parties agree to be bound by

Arbitration is one of the procedures authorized to settle an escrow dispute

The award made by the arbitrator is binding on all parties and can be enforced in a civil court

All parties must agree to arbitration

You need to know – What is mediation?

YouNeedToKnowWeb500Mediation is a form of alternative dispute resolution where a third party (the mediator) assists the parties to negotiate a settlement

The mediator has no power to impose a decision on the parties, but acts as a facilitator

Mediation is one of the procedures authorized to settle an escrow dispute

When mediation is used to settle an escrow dispute the mediation process must be completed within 90 days of the last demand for funds in escrow

If the mediation is not completed within 90 days the broker must employ one of the other authorized escrow dispute settlement procedures

All parties must agree to mediation