Home Buying in Elizabeth>Question Details

Kpryce, Home Buyer in Elizabeth, NJ

Do I need to submit an deposit to the agent during a short sale that has not yet been approved by the bank?

Asked by Kpryce, Elizabeth, NJ Tue Jun 2, 2009

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absolutely! you must give a "good faith" deposit to show you are motivated and have the financial means to move forward should the bank agree to the terms. In New Jersey the money must be deposited into an escrow account within three business days of the check date. Either your attorney or the agent can hold the funds.

Camille Miller
Just Jersey Properties
1 vote Thank Flag Link Tue Jun 2, 2009
Good catch, I didn't even see Bobs comment...

Yikes, heck no.... Brokers have a fiduciary duty to their clients and mishandling of escrow funds is the #1 reason brokers lose their licenses and get fined or worse.

Funds must immediately be deposited into the escrow accounts, sales-persons must hand over the funds to their brokers immediately and then the brokers have to record the receipt of the funds into their escrow book or tracking software and then deposit those funds right away. They can't just throw an escrow check into a desk drawer, that is a severe mishandling of funds and does not safeguard the clients funds.

If the escrow deposit were to get stolen and cashed the broker would be responsible and when an offer is written, that contract states that so much money has been received and deposited into the brokers escrow account for which the contract is a receipt for. If the check should bounce, the broker must inform all parties right away.
0 votes Thank Flag Link Mon Jun 8, 2009
As stated before, the deposit money (usually $1000) is to show that you are serious about buying the home. It gets deposited into your broker's escrow account and unless otherwise negotiated through the attorneys, you don't see it again until the closing day when your agent will bring it to the closing table. It becomes part of the down payment. If the deal falls apart, you will get the money back, or you may have it used again as "good faith money" in a transaction on another home. In New Jersey, your broker has 5 days to deposit that money into the escrow account or they may be fined, so what Bob from Ohio said is incorrect.

If you are talking about the second deposit (typically happens 7-10 days after attorney review, but may vary by area) then this happens once you are under contract and the offer has been accepted by the bank.

Hope this helped and I wish you good luck with your deal.
0 votes Thank Flag Link Mon Jun 8, 2009
I agree with Camille Miller, in addition a short sale is the same procedures for a buyer as with any other purchase.

The seller is still the owner and everything must be agreed upon with them, its just an added step that the bank must approve the sale terms because they are the ones that must agree to be shorted on the repayment of their money for the sale to go through thus is why they call it a short sale because they are being short changed.
0 votes Thank Flag Link Mon Jun 8, 2009
Your agent should have asked for some form of earnest money.
Generally, earnest money is not deposited until all parties to the sale have agreed upon a price and terms.

Particularly since a short sale often takes weeks to get a response, your earnest money check should be held by the broker, but not cashed until and unless you come to terms.
0 votes Thank Flag Link Tue Jun 2, 2009
I would recommend submitting a Promissory Note for Earnest Money. The Note should state that if the sale is approved, a check for the Earnest Money would be submitted within a specific period. E.G, 72 hours.
Alternatively, a photocopy of the check should be sufficient.
I would be very reluctant to submit a live check in a short sale situation. .
0 votes Thank Flag Link Tue Jun 2, 2009
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