The escrow agent will rely on what document when deciding how to disburse the funds?

References

NAR Library & Archives has already done the research for you. References (formerly Field Guides) offer links to articles, eBooks, websites, statistics, and more to provide a comprehensive overview of perspectives. EBSCO articles (E) are available only to NAR members and require the member's nar.realtor login.

Is Earnest Money Refundable?

Is Earnest Money Refundable? Here’s What to Know (Realtor.com®, Aug. 1, 2022) 

There are several scenarios when a buyer could face forfeiting their earnest money. If a buyer waives contingencies, ignores timelines, or gets cold feet, it could mean losing the earnest money deposit. "When it comes to real estate, a case of buyer’s remorse could be even more painful than a lost deposit. To avoid both, really make sure the home you’re bidding on is “the one.”"

10 Ways Earnest Money Is Not Refundable:

1. Failing to Meet Deadlines
2. Getting Caught Up in a Bidding War
3. Agreeing to a Non-Refundable Earnest Money Deposit
4. Waiving Contingencies Prematurely
5. Failing to Do Due Diligence
6. Failing to Understand As-Is Buying
7. Voiding a Contract Without a Refund
8. Deciding the Home Isn’t “The One”
9. Developing “FOMO” Over Another Home
10. Bailing on a Transaction for Personal Reasons

Source: 10 Ways to Lose Your Earnest Money Deposit (Endpoint, Apr. 14, 2022)

Escrow Real Estate Accounts and Administration

Types of Escrow Accounts (The Balance, Jan. 30, 2022)

“An escrow account is an account designed to hold funds temporarily in safekeeping. The escrow provider should be a disinterested third party with no preference about who ultimately receives funds from the account.1 For example, in a real estate transaction, the escrow account does not favor the buyer or seller—they just follow the rules that buyers and sellers agree to.”

What is Escrow? (The Balance, Dec. 14, 2021)

According to The Balance, escrow is a financial agreement in which a third party controls payments between two transacting parties and only releases the funds involved when all of the terms of a given contract are met. Escrow is most commonly used when purchasing a home, though can be used in any financial transaction where a third party is necessary. 

Clearing Up the Confusion on Real Estate Escrow Accounts (The Washington Post, Mar. 31, 2021)

Our second reader points out that once you pay off your loan, the lender may have unused funds in the escrow account that must be returned to you within 30 days (or so) from the date you made the loan payoff. Once you pay off the loan, you — the homeowner — must make sure to pay your own real estate taxes and your homeowners insurance premium on time.”

Earnest Money Deposits

The Earnest Money Deposit: How It Helps Buy a Home (realtor.com®, May 19, 2022)

“Assuming that all goes well and the buyer’s good-faith offer is accepted by the seller, the earnest money funds go toward the down payment and closing costs. In effect, earnest money is just paying more of the down payment and closing costs upfront. In many circumstances, buyers can get most of the earnest money back if they discover something they don’t like about the home.”

Understanding the Escrow Process and Requirements (Investopedia, Mar. 23, 2022)

“Earnest money deposits can be anywhere from 1–10% of the sales price, depending mostly on market interest.”

What an Earnest Money Deposit Is (And How to Protect It) (The Balance, Sep. 1, 2021)

“Earnest money is a good faith deposit that is part of the down payment, but it is not the same as a down payment. It is like the buyer saying to the seller, "Yes, I am serious enough about buying your house that I'm willing to put my money where my mouth is."

How to Talk to Homebuyers About Digital Earnest Payments (RIS Media, May 6, 2021)

“While digital earnest payments are not wires, they may feel just as risky to some homebuyers. If your clients are wary about going digital, educating them on your digital earnest platform’s account verification process lets buyers know their savings are safe. A good digital earnest partner will verify all accounts on the front end, which means funds end up in the correct account every time.”

Escrow Fraud and Real Estate

Propy to Integrate Title and Escrow Services (Real Trends, May 20, 2022)

“We have had many requests from title insurance companies and from counties to bring all the historical data onto blockchain. The majority of records have all been digitized, but they are still at risk for hacking and fraud,” she said. “Blockchain will transform anything that relates to property rights and ownership transfer. I think that this industry will become more efficient and that it will be more understandable for the consumer.”

What is Escrow Fraud and How Can You Protect Yourself from Mortgage and Escrow Scams? (Rocket Mortgage, Feb. 28, 2022)

“Essentially, escrow fraud occurs when a thief convinces a potential homeowner that they are in fact a legitimate entity. Once convinced, the homeowner wire transfers the funds that were intended to be held in escrow. Escrow fraud is a devastating trick played on soon-to-be homeowners. Typically, you will be responsible for wiring the money you saved for a home. This might include the down payment, closing costs and any other money spent toward finding and purchasing a home.”

Real Estate Wire Fraud Has Been a Big Pandemic Problem (Money, Jul. 2, 2021)

“The scam works like this: A fraudster gains access to an email account involved in the home sale — a real estate agent, a lender, a title agent or even the buyer — usually through some sort of phishing attempt. They then monitor emails, watch the transaction progress, and insert themselves at just the right time. That’s when they ask the buyer — using a very legitimate-looking email — to wire funds to an alternate bank account.”

Case Summaries - Escrow Mishandling

Broker-Dealer Settles FINRA Charges for Mishandling Escrow Account (Mondaq, Nov. 24, 2021)

“In a Letter of Acceptance, Waiver and Consent, FINRA found that, while acting as a placement agent for an issuer, the broker-dealer and its principal failed to (i) deposit investor funds with a bank instead using a law firm as the escrow agency, (ii) use the standard escrow agreement per its procedures and (iii) properly calculate the required minimum contingency by including a non-bona fide investment to meet the threshold. FINRA also found that, when acting as a placement agent for another issuer, the broker-dealer and principal failed to obtain timely positive consent from investors to extend or return funds when the offering did not meet its minimum contingency.”

Mortgage Company Mistakenly Billed Some NC Customers Up to Eight Times (WCNC, May 28, 2021)

“Mr. Cooper, formerly Nationstar Mortgage, blamed the error at the end of April on its vendor accidentally drafting incorrect mortgage payments while testing its system. Mr. Cooper says the company has since reimbursed overdraft fees and worked to make sure customers' money is back in their bank accounts, but consumer complaints filed with the North Carolina Attorney General's Office show some want the government to take action against Mr. Cooper.”

eBooks & Other Resources

The following eBooks and 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)

Have an idea for a real estate topic? Send us your suggestions.

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