Who should hold the money while we are getting ready for a completed sale? The Far Bar As-Is has two deposits that are TYPICALLY made by the Buyer, one initial and one secondary. Collectively these are the Deposit. The first page of the Contract specifies who should act as the Escrow Agent. This is the person/entity which will collect, deposit and hold the Deposit up to a few days before the Closing.
This one does not get the attention it should because yes, it matters. These days most of the time this will be XYZ Title Co. This is because most large brokerages have affiliated business relationships with a title company. That title company is hoping to become the Title Agent and Closing Agent chosen to close the sale. They will thus act as all 3, Escrow Agent, Title Agent and Closing Agent BUT they do not HAVE to. Should they be the Escrow Agent? What are the options? R&R Realty DOES maintain an escrow account but again, many real estate companies do not. An other option often chosen is if there is a lawyer involved, representing either the Buyer or the Seller, they might hold the escrow in the “trust” account for their law firm. The choices include:
- Florida licensed real estate BROKERAGE.
- Title Agency qualified by a state licensed Title Agent.
- Title Agency qualified by a lawyer.
- Lawyer (or firm) escrow account.
However, there is nothing in the FAR BAR contract which says it must be any one of these. Also, the Closing Agent also acts as the Escrow Agent at the end of the transaction. In preparation for a Closing the Escrow Agent, who collected the funds held, transfers those funds to the Closing Agent in anticipation of a Closing.
HERE’S WHAT YOU SHOULD REMEMBER. Only the Florida Licensed Real Estate firm has the OPTION of requesting an Escrow Dispersal Order (EDO) from the Florida Real Estate Commission (FREC). Section 61J2-10.032(1)(a) of the Florida Administrative Code requires a Florida licensed broker to notify FREC within 15 business days after receiving conflicting demands on funds in the brokers account. However, this provision does NOT apply to title companies or anyone other than Real Estate firms. After a period of time where they try to get the parties to agree on who should get the Escrow Funds others will MOST LIKELY “interplead” or transfer the funds to the local clerk of courts where either party would sue the other to be awarded these funds. This is a tough thing to do in real estate transactions where the escrow funds may not be significant in comparison to legal bills to recover same. Or, the escrow funds are needed by the Buyer to use as equity for their purchase. Thus, if it takes a year to sue the Seller to get their escrow funds returned then this is a year where they can not buy a property.
This is Paragraph 13 of the FAR BAR as-is…
ESCROW AGENT: Any Closing Agent or Escrow Agent (collectively Agent) receiving the Deposit, other funds and other items is authorized, and agrees by acceptance of them, to deposit them promptly, hold same in escrow within the State of Florida and, subject to COLLECTION, disburse them in accordance with terms and conditions of this Contract. Failure of funds to become COLLECTED shall not excuse Buyers performance. When conflicting demands for the Deposit are received, or Agent has a good faith doubt as to entitlement to the Deposit, Agent may take such actions permitted by this Paragraph 13, as Agent deems advisable. If in doubt as to Agents duties or liabilities under this Contract, Agent may, at Agents option, continue to hold the subject matter of the escrow until the parties agree to its disbursement or until a final judgment of a court of competent jurisdiction shall determine the rights of the parties, or Agent may deposit same with the clerk of the circuit court having jurisdiction of the dispute. An attorney who represents a party and also acts as Agent may represent such party in such action. Upon notifying all parties concerned of such action, all liability on the part of Agent shall fully terminate, except to the extent of accounting for any items previously delivered out of escrow. If a licensed real estate broker, Agent will comply with provisions of Chapter 475, F.S., as amended and FREC rules to timely resolve escrow disputes through mediation, arbitration, interpleader or an escrow disbursement order. Any proceeding between Buyer and Seller wherein Agent is made a party because of acting as Agent hereunder, or in any proceeding where Agent interpleads the subject matter of the escrow, Agent shall recover reasonable attorneys fees and costs incurred, to be paid pursuant to court order out of the escrowed funds or equivalent. Agent shall not be liable to any party or person for mis-delivery of any escrowed items, unless such mis-delivery is due to Agents willful breach of this Contract or Agents gross negligence. This Paragraph 13 shall survive Closing or termination of this Contract.
And paragraph 18(J)
ESCROW CLOSING PROCEDURE: If Title Commitment issued pursuant to Paragraph 9(c) does not provide for insurance against adverse matters as permitted under Section 627.7841, F.S., as amended, the following escrow and closing procedures shall apply: (1) all Closing proceeds shall be held in escrow by the Closing Agent for a period of not more than 10 days after Closing; (2) if Sellers title is rendered unmarketable, through no fault of Buyer, Buyer shall, within the 10 day period, notify Seller in writing of the defect and Seller shall have 30 days from date of receipt of such notification to cure the defect; (3) if Seller fails to timely cure the defect, the Deposit
and all Closing funds paid by Buyer shall, within 5 days after written demand by Buyer, be refunded to Buyer and, simultaneously with such repayment, Buyer shall return the Personal Property, vacate the Real Property and reconvey the Property to Seller by special warranty deed and bill of sale; and (4) if Buyer fails to make timely demand for refund of the Deposit, Buyer shall take title as is, waiving all rights against Seller as to any intervening defect except as may be available to Buyer by virtue of warranties contained in the deed or bill of sale.
