It is ethical or legal for the agent or developer of a condo complex to use escrow money before the sale is completed or the unit is finished ?

Asked by Bill1549, Manahawkin, NJ Sun Jan 29, 2012

Is it unusual for a builder to deny access to the buyer of a house or condo during construction?
Ex: to check on progress of unit being built. What is your opinion of the builder asking to "reserve" a unit prior to construction for approx $ 5K.

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Ron Thomas, Agent, Fresno, CA
Sun Jan 29, 2012
The DEPOSIT should have been in an Escrow Account, not given to the builder.
If it was in an Escrow, it couldn't be touched until the Escrow closed.
Deposit money can be held in a Broker's Trust account until the Title Company needs it;
but if the Broker "co-mingles" those funds with other monies, they could be indicted, or at least lose their license.
If the Buyer writes the check to anyone other than the Title Company or a Trust account, then they screwed up and can't claim ignorance; not in this day and age.

Good luck and may God bless
1 vote
William Troy, Agent, Toms River, NJ
Sun Jan 29, 2012
Hey Bill, you should check with your attorney regarding this, I am not sure if you are in contract or not. But there are builders that use deposit money towards building the home if that is what you are asking. But anytime they want to do that it is fully disclosed in any contracts you would sign. In terms of access, every builder is different. Typically I would say most that I have dealt with allow access as long as they are there and it is arranged for insurance purposes. Good luck.
1 vote
Kelly Gabriel, Agent, Toms River, NJ
Thu May 24, 2012
I personally would not do business with anyone under those circumstances. Escrow is there for a reason. Check with your attorney for the legality. I would stay clear of this.

I would not hire a builder that denied me access. It is fair for a builder to limit access due to insurance and flow of construction but to deny is unacceptable.

A non-binding deposit for pre construction enables the builder to obtain financing to proceed with the project and is perfectly acceptable but you could also request that YOUR attorney hold the deposit rather than the builder.
0 votes
Steve Vennem…, Agent, Pine Springs, MN
Sun Jan 29, 2012
Most of the time they can if they put it in the contract. Search your contract.
0 votes
John Sacktig, Agent, New Jersey, NJ
Sun Jan 29, 2012
Bill -

Of course, your attorney should be guiding you here.

But, I have seen.. escrow money held in an escrow account until closing either the Realtor brokerage account, the buyers attorney account or the seller (builder) attorney account.. it would be written into the contract.
What also will be in the contract is things that are you may want in your property that will be your expense and funds that could/would be used for that reason. (this would be in the contract also) If you wanted the baths with imported tile.. it may be written someplace that you pay for these upgrades to be installed and if you back out and these are installed, you would lose that money.
It could be that your down payment could be applied to your upgrades… again.. it may be in the contract.

It may be a hazard for the buyer to enter a property during construction and you may not be allowed to enter the premises for safety reasons at your leisure. I would think that an prearranged tour of the job site would be arranged.

By your final question it sounds as though you want to go to a builder and say I want to buy a place and you want the builder say "o.k" its yours.. no money down, nothing. That probably will not happen.
0 votes
Roland Vinya…, Agent, Sprakers, NY
Sun Jan 29, 2012
Escrow means that neither party have access to it. Even if permitted, it is a poor idea to use money that is designed to be dispersed at the closing. Suppose it doesn't close and the buyer wants his money back - only you have already spent it?

If a builder would not let me look at a home during the build process, I would be highly suspicious. It is a red flag to me. Maybe he doesn't want to be bothered or is afraid you will want changes made.

If you have not contracted to buy from him, that's a different story and may explain the "reserve". The red flag is still present, just pinkish now.
0 votes
Wayne Odenbr…, Agent, Mountain Lakes, NJ
Sun Jan 29, 2012
Laws vary by state, but in most circumstances, Escow Money is set aside, to be distributed at closing. In NJ, if escrow money is used or mingled with an other money, or used for any other purpose, the Attorney, or Realtor will be in BIG TROUBLE
0 votes
Marge Bennett, Agent, Fort Myers, FL
Sun Jan 29, 2012
your contract with the builder should spell that out. Escrow would be held, but a deposit might not be, depending on the wording of the contract.
0 votes
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