A real estate escrow account is essentially an account in which the escrow officer holds deposits until closing. The escrow officer (sometimes called an “escrow agent”) is responsible for both the money and related documents. Their job is to facilitate the transaction between the home buyer and home seller. When a buyer purchases a home, they hand over what is called “earnest money” to the escrow officer, usually about three percent of the purchase price. The earnest money is a deposit to demonstrate good faith on the part of the buyer. The escrow officer will deposit closing costs that the buyer and seller are to pay into the escrow account. If a problem occurs and you want to back out of the deal, you may find yourself wondering how to recover your real estate deposit.
Why You May Want Your Deposit Back
Under normal circumstances, the earnest money will stay in the escrow account until closing. Exceptions to that rule include clauses in the purchase contract triggered by issues found during an inspection, or an appraisal price that is lower than the purchase price. Either of those issues can cause the transaction to fail.
These disputes occur when the buyer and the seller are unable to agree on how to divide the real estate escrow money upon the failure of the transaction. Each party believes that the other has defaulted on the terms of the contract and that they are therefore entitled the money. In most cases, it is possible to resolve the dispute by looking at the provisions within the contract. Another option is to settle with the other party; in some cases, the buyer and the seller may arrive at a settlement via mediation. If all attempts at resolution fail, then it is necessary to consider litigation.
Contingencies Removal Protection
The best way to protect your deposit and avoid any legal dispute is to exercise your right as a home buyer. In any real estate transaction, home buyers have a grace period in which to inspect the home and secure the loan. During this inspection period, the seller has minimal legal right to the buyers’ earnest money or good faith deposit. However, once all buyers contingencies are removed, a seller can legally (or through arbitration) pursue the deposit money claiming collateral damages. To protect your deposit make sure all contractual terms and property conditions are to your satisfaction before removing contingencies. Be sure to consult with your realtor during the transaction, as he or she will be managing the transaction terms and dates.
If you are involved in a real estate transaction that you believe is about to fail, a knowledgeable real estate lawyer can help. They may be able to assist with dispute resolution and may even be able to get the transaction completed.
Whether your a first time home buyer or an experienced investor you need a real estate expert to help you find your property and manage your real estate escrow. Mona Koussa is an experienced and knowledgeable local broker in the San Ramon Tri-Valley area with over $300 Millions of sales. I love to help, call or email today with any question!