Escrow Accounts/Earnest Money


Details on escrow accounts (from the basics to escrow administration) and earnest money, as well as information on escrow fraud.


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Know Your Client's Rights - Six Must-Know Escrow Facts

  1. Escrow instructions should specify in writing how and under what conditions monies will be disbursed, especially if the transaction doesn't close.
  2. Escrow is a fiduciary relationship but is limited to the duties involved in the escrow. The escrow agent is a trustee of both parties and is equally responsible to both parties for the administration of the escrow.
  3. If a transaction fails to close as scheduled, monies may continue to be held in escrow provided there is no written demand from one party to cancel the contract. Monies are typically held after the closing date if a date to obtain the loan has passed but the parties still want to proceed with the transaction.
  4. If the transaction is cancelled by either party, the agent holding the escrow monies shouldn't disburse any funds until all parties agree in writing how to disburse them.
  5. If parties can't agree on how to disburse funds, the escrow agent may file an interpleader, which names all the parties that might have an interest in the monies and asks a court to decide how to disburse the money. Otherwise, an escrow agent may be obligated to keep funds indefinitely.
  6. If a transaction is cancelled by the parties, real estate brokers and other third-party vendors may have first claim to escrow funds. That claim would depend on procuring cause.

Source: The list issue: legal - 6 must-know escrow facts, (REALTOR® Magazine, Mar. 2005)

Escrow Accounts

Homebuying Process (link is external), (FannieMae, 2017)

FAQs About Escrow Accounts for Consumers (U.S. Department of Housing and Urban Development, 2017)

Common Closing Costs for Buyers, (REALTOR® Magazine, Handouts for Consumers, 2017)

How the Term Escrow Relates to Your Real Estate Transaction, (, 2017)

Escrow Account—Everything You Need to Know (link is external), (Mortgage-x Blog, 2017)

What’s in Your Escrow Account? (link is external), (Ohio Land Title Association, Sept. 1, 2013) E

Escrow Accounts - What's the Deal? (link is external), (HouseLogic, Oct. 10, 2010)

7 Tips for a Profitable Home Closing (link is external), (HouseLogic, Feb. 10, 2010)

7 Steps for a Stress-Free Home Closing (link is external), (HouseLogic, Feb. 10, 2010)

Escrow Accounts—How They Are Used in Your Real Estate Transaction (link is external), (EzineArticles, Mar.  24, 2006)

Escrow Administration

What is Escrow Management?, (wiseGEEK, 2017)

Realtors FCU Lobbies Successfully for Real Estate Escrow Accounts, (Credit Union Journal, Mar. 16, 2016) E

I’m about to pay off my mortgage. Do I have to notify the lender? What about the escrow account?, (Kiplinger’s Personal Finance, Feb. 2, 2016) E

What’s in your escrow account? (link is external) (Ohio Land Title Association, Sept 1, 2013) E

Is outsourced servicing really cheaper? (link is external), (Mortgage Banking, Jan. 2010) E

Earnest Money Deposits

Suddenly, the seller won’t sell!  Not to you. What do you do? (link is external) (The Washington Post, June 23, 2016) E

Stack of Documents Often Goes Unread at Home Closings (link is external), (The Philadelphia Inquirer, May 19, 2011) E

The earnest money deposit (link is external), (RealEstateABC, 2013)

Earnest money deposits - protect your good faith deposit (link is external), (The Balance, 2013)

In Earnest (link is external), (Tierra Grande, Oct. 2010)

Questions and answers on earnest money deposits (link is external), (North Carolina Real Estate Commission, 2007)

First-house buys can knock you off your foundation (link is external), (Washington Business Journal, Apr. 21, 2006)

Escrow Fraud and Real Estate

Mortgage scams: real estate closing fees kickback scams (link is external), (Fraud Guides, 2017)

Don't be a victim of loan fraud (link is external), (U. S. Department of Housing and Urban Development, 2014)

Preventing fraud and deception (link is external), (The Appraisal Journal, Spring 2009) E

Growing ownership makes Hispanics target for predatory lending (link is external), (The Business Journal of the Greater Triad Area, Oct. 20, 2006)

Title companies investigated, again (link is external), (Realty Times, Mar. 1, 2005)

Case Summaries - Escrow Mishandling

Broker wins lawsuit over escrow retention, Estate of Kupperstein v. Baum, No. 1147SC0518, (National Association of REALTORS®, Legal Case Summaries, Mass. Dist. Ct., Mar. 5, 2013)

Escrow company liable for attorney’s fees, Kangarlou v. Progressive Title Co., Inc., 27 Cal. Rptr. 3d 754 (Cal. Ct. App. 2005)

Seller's creditor cannot garnish escrowed funds, General R.A.C., Inc. v. Coldwall Banker Residential Real Estate, Inc., 876 So. 2nd 606 (Fla. Dist. Ct. App. 2004)

Broker liable for failing to follow escrow agreement, Int'l Capital Corp. v. Moyer, No. 1-02-2401, 2004 WL 438976 (Ill. App. Ct. Mar. 10, 2004)

Real estate commission reversed, Djokic v. Dep't of Bus. & Prof'l Regulation, Div. of Real Estate, 875 So. 2nd 693 (Fla. Dist. Ct. App. 2004)

Licensee punished for withholding escrowed funds, Hayber v. Dep't of Consumer Prot., No. CV020513973S, 2004 WL 574662 (Conn. Super. Ct. Mar. 8, 2004)

Filing disciplinary complaint does not violate bankruptcy protections, McMullen v. Sevigny (In re McMullen), 386 F.3d 320 (1st Cir. 2004)

Lawsuit against escrow agent over depository bank failure proceeds, Bazinet v. Kluge, No. 110143/01, 2003 WL 21361746 (N.Y. Sup. Ct. May 29, 2003)

Escrow company liable for attorney's fees, Kangarlou d v. Cleveland, No. 02AP-485, 2002 WL 31870134 (Ohio Ct. App. Dec. 24, 2002)

No breach of fiduciary duty by buyer's representative who did not pay deposit to seller, Ballard v. Cleveland, No. 02AP-485, 2002 WL 31870134 (Ohio Ct. App. Dec. 24, 2002)

In Alabama, appraisers can be liable to third parties for negligent misrepresentation, Fisher v. Comer Plantation, Inc., 772 So.2d 455 (Ala. 2000)

New York broker stripped of license for claiming an unearned commission, In the Matter of Emil T. Pagano and Irene F. Baker Real Estate Agency, 77 D.O.S. 99 (Apr. 12, 1999)

Release contained in cancellation agreement is invalid, Johnson v. Maki & Assoc. , 289 Ill. App. 3d 1023, 682 N.E.2d 1196 (Ill. Ct. App. 1997)

eBooks & Other Resources

The following eBooks and digital audiobooks are available to NAR members:

American Mortgage - Everything You Need to Know About Purchasing and Financing A Home (eBook)

Busted - Life Inside the Great Mortgage Meltdown (Audiobook)

Chain of Blame - How Wall Street Caused the Mortgage and Credit Crisis (eBook)

The complete idiot’s guide to mortgages (eBook)

Decoding the New Mortgage Market (eBook)

Fast Track Your Mortgage (eBook)

How to Save Thousands of Dollars on Your Home Mortgage (eBook)

How to Sell a House When It is Worth Less than the Mortgage (eBook)

Insider Secrets to Financing Your Real Estate Investments (eBook)

The Insider's Guide to Home Equity Borrowing (eBook)

An Insider's Guide to Refinancing Your Mortgage (eBook)

The Little Black Book of Wealth Building Mortgage Secrets (eBook)

The Mortgage Answer Book - Choosing the Right Loan for You (eBook)

The Mortgage Encyclopedia (eBook)

Mortgage Myths - 77 Secrets that will Save You Thousands on Home Financing (eBook)

Mortages 101 (eBook)

The new rules for mortgages (eBook)

The Pocket Mortgage Guide (eBook)

Reverse Mortgages for Dummies (eBook)

Salomon Smith Barney Guide to Mortgage-Backed and Asset-Backed Securities (eBook)

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