Why Do Real Estate Brokers Have Escrow Accounts?
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In terms of a real estate sales agreement, an “escrow” or trust account is typically an account operated by a real estate broker which is used to hold buyer deposits until closing. Example: Buyer Smith makes an offer to purchase a home. With the offer is a $10,000 deposit. That deposit is held by Broker Jones, who represents the owner, in an escrow account.
The money in a broker’s escrow account is typically a credit to the buyer at closing. If the sale does not close, however, then several alternatives are possible: First, buyer and seller may agree to return the escrow money to the purchaser. Second, buyer and seller may agree to give the money to the seller to resolve claims that the buyer did not perform as agreed under the sales contract. Third, buyer and seller may dispute how the funds should be distributed. In this situation, the money is usually turned over to a court or, in at least one jurisdiction, the state real estate commission.
In the event of an escrow dispute, please consult with an attorney or legal clinic for specific information.
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