Home Buying in Vallejo>Question Details

jeanmunoz32, Home Buyer in Vallejo, CA

Is a seller allowed to cash a possible buyers good faith deposit before going to closing?

Asked by jeanmunoz32, Vallejo, CA Tue Apr 30, 2013

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I agree with Eddie - an escrow company whose owner has a stake in a closing by also profiting from a broker commission has an undeniable conflict of interest.
0 votes Thank Flag Link Tue Apr 30, 2013
For protection of both the Buyers and Sellers, a good faith deposit should be deposited with a reputable escrow company that is disinterested to all parties. This is where I may upset some Realtors/Brokers, keyword disinterested. Certain Real Estate Brokers own their own escrow companies and although they operate "separately" (in the same building sometimes) so in my opinion that is not disinterested. Either way the reason escrows exist is to make sure all parties fulfill their promises in the contract and only when everything is fulfilled thats when everyone receives their money.

If a Realtor or Broker did you wrong, by all means file a complain with the California Department of Real Estate.

Respectfully,

Eddie W. de Leon
951-210-2101
NMLS #238369
DRE #01393751
0 votes Thank Flag Link Tue Apr 30, 2013
Thank you; now I have another entry in the Journal listing the reasons for not working without a Realtor.
0 votes Thank Flag Link Tue Apr 30, 2013
No..The seller should not even have the good faith deposit - it should be in escrow. While escrow will cash the check, the funds are not given to the sellers until the close of escrow or in the case of a breached contract.
0 votes Thank Flag Link Tue Apr 30, 2013
Is the check cashed by the escrow company as soon as the contract is signed? YES - and the money remains in the escrow company's bank account until the transaction closes.
Does the seller get that money before escrow closes? MAYBE.
In most standard sales, the answer is NO. The cash remains in escrow's bank account and nothing goes to the seller until escrow closes.
HOWEVER, there is a contract provision called a "non-refundable, pass through deposit" that I suggest sellers have in the purchase contract when the buyer wants an unusually long escrow period (let's say more than 120 days). With a "pass through deposit", all or part of the initial deposit - or of an additional deposit - may be released to the seller prior to close of escrow. Those releases are usually stipulated to occur a certain number of days after escrow opens or when inspections are complete.
0 votes Thank Flag Link Tue Apr 30, 2013
Jean, Whomever that is holding your "Good Faith", "Earnest Money", "Escorw" is not the Seller it is an Escrow Agent. They deposit in an account and to be used however the contract reads for your funds to be dispersed. Usually it is a Title Company that is your Escrow Agent. They take all the monies and disperse them at the time of closing to Seller, Lender (pay of existing note", inspectors, tax enitities and so forth...
0 votes Thank Flag Link Tue Apr 30, 2013
Whom ever is the holder of the escrow will cash this deposit to ensure the funds are in the escrow account.

Go over the ins-and-outs of escrow with your Realtor, they can explain in more detail.
0 votes Thank Flag Link Tue Apr 30, 2013
Hi jeanmunoz32,

Once the buyers offer is accepted and escrow is opened, the earnest money deposit check needs to be to escrow within 3 business days of acceptance of the offer (once contract is signed by all parties). Escrow will cash the check and hold the funds in trust. If for some reason the deal falls apart (doesn't close) the buyer will get their earnest money deposit money back if the reason for not closing is 'allowable' per the signed contract - all parties have to sign the release of the earnest money back to the buyer.

Shanna Rogers
SR Realty
http://www.RealtyBySR.com
0 votes Thank Flag Link Tue Apr 30, 2013
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