Ask the Agent: Earnest Deposit Not Deposited
Posted on November 27th, 2007 by Jonathan Dalton
Received this e-mail yesterday morning and have been going up and back since. This one almost reads like a text case for an agency class.
Got a couple questions on behalf of my mother who is trying to sell her home…
My mother is facing foreclosure, 3 months past due as of Nov 1,(note held by Homecomings Financial), and she recently retained a real estate agent who located a buyer(agent is representing both parties). During the process, a counter-offer was agreed to by my mother the seller, and a sales contract was signed(Nov 14), and the buyer presented a personal check for earnest money, but the agent did not deposit it into escrow. A home inspection was done(Nov 20th) and that evening the buyer made a second offer less than the first, and she agreed to the second offer over the phone.
Again the agent came by the house and he not only had a new personal check from the buyer, but the original personal check with VOID written on it, which clearly shows the money was never deposited into escrow.
My mother the seller, has yet to receive an updated signed copy of the sales contract (agent said the new price would be noted as an addendum to the original contract), never got one of the original, and still no copy of the Home Inspection report. She also has not received written notice of buyer wanting to cancel the sales contract.
1) Isn’t Earnest money suppose to be deposited into Escrow?
2) Is the signing of the paperwork suppose to take place at the title company office?
3) How long does the agent have to provide the seller with a signed copy of the sells contract and a copy of the inspection report?
Thank you for your time!
Standard disclaimer: I’m a real estate agent, not a lawyer. For legal advice please consult with an attorney. (Taxes and tags extra, offer not valid in all states.)
Separating everything out here’s what I’m seeing:
- The agent’s holding the earnest deposit check and has not deposited it with the escrow company. Page 8 of the AAR Residential Real Estate Contract specifies the check will be held either by the escrow company or in the broker’s trust account. Doesn’t appear either is taking place, which would be a bad thing.
- For the agent to represent both sides, a separate Consent for Limited Dual Representation form ought to have been signed by the seller. (UPDATE FROM TODAY: Seller does not recall signing the form, agent says she did. This could be verified except …)
- The agent’s not given the seller copies of anything, at least according to the seller. As best I can tell the contract still is valid, though, because delivery to the agent (in this case delivery to himself) is akin to delivery to the seller.
- The buyer demanded a lower sales price in lieu of repairs which technically isn’t contractually allowed. It’s common but it’s not technically in the contract.
My suggestion to the questioner was to have a conversation both with the agent’s broker and the Arizona Department of Real Estate. Holding on to the earnest deposit is a big no-no. So is practicing undisclosed dual agency.
On questions two, the only paperwork that needs to be signed at title are the deed and the loan docs … and even that can take place elsewhere so long as a notary is involved.
On question three, the buyer is supposed to provide the seller with a copy of the full inspection report though I can’t find a set time frame for delivery. I would presume during the inspection period but I don’t see it specified.
ADDENDUM: Latest update from the seller indicates they’re seeking legal counsel. Damn good idea, I say.
Thoughts from the assembled crowd?
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Jonathan,
This type of behavior is far too common. I hope these people let your real estate commission know what is going on. Until more people start reporting this mess, these incomps will keep doing it. We have them in our market too.
Enjoy your blog!
Thanks, Charles …
I kept hoping there was something not stated in this person’s description but as the conversation deepened it was pretty clear that there wasn’t.
ADRE complaint’s being filed … from what the reader told me, they have 600 active files and 10 folks to handle them. That’s a complaint on just under 1% of the agent population, but still.
This makes me absolutely sick. This might be one of my biggest pet peeves of this industry. Less than honest folks are able to proceed with their business seemingly without consequence. All the while innocent, hard working home owners are harmed, sometimes without even knowing any better. At least in this case the seller has family that cares enough or is involved enough to spot a potential injustice and ask around for some advice. I hope this agent gets what coming his way.
I guess it’s possible that the agent just doesn’t know any better, but that doesn’t help the seller’s situation any. Either know the laws, the contract, the CODE OF ETHICS, or go work at McDonald’s. The worst thing you can do there is forget to make a cheeseburger without onions.