Whoa! This is a good one:
From Inman News, by way of the Boston Globe:
DEAR BOB: We had a sales contract to sell our house. The buyer was supposed to pay a deposit into a trust account with the realty office representing the buyer. We expected to close with no problem.
But a few days after the scheduled closing date, the buyer’s agent told us the buyer is a “fraud” and passed forged checks for the deposit and the down payment.
The agent cannot locate the buyer. Does the buyer’s agency have any obligation to us to pay the deposit, which was supposed to be in a trust account? — Charles
What the devil happened here???
Here’s the typical way it works.
When a buyer makes an offer to purchase, you usually accompany the offer with a $1,000 check. This check is a “good-faith” deposit on the purchase (it can be any amount, of course). Once the offer is accepted, the $1,000 check is deposited in an escrow account. The escrow account can be an account set up by the buyer’s broker, the seller’s broker, or an attorney or at a title company, etc. The money is put into escrow so that neither the buyer or seller can access it, unless the other side agrees.
When the buyer and seller sign the purchase and sale contract, usually 10 days later, an additional amount is usually deposited, usually 5% of the purchase price (at least here in Boston).
Again, the money is held in an escrow account, so that no one can touch it. So, if things go terribly wrong and the buyer and seller end up suing each other, neither one can take the money and run. The other side has to okay it. (The 5%, and the initial $1,000 go toward the purchase price, of course.)
All moneys are required to be deposited within 24-hours, at least in Massachusetts.
I think “Charles” in the story above must have left out a lot of the story. Almost always, the money is deposited into escrow right away. Therefore, any checks written would have already hit the bank and bounced (the writer says the agent told them the checks bounced, but I just can’t believe he held onto this information – something else must have happened).
If the time between offer and closing is short, most agents will advise their clients to require the money be drawn using a bank check, to make sure it’s good funds and has time to clear, prior to closing.
Nasty, nasty situation.
The guy who answers Charles’ question says not to sue the buyer’s agent. Oh, no, I’d sue.
The buyer’s agent should be lucky the buyers didn’t drop by and give him/her a knuckle sandwich.
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