Escrow/Deposit Problems in Florida Residential Real Estate Closings

Posted By on May 5, 2015

Last Update: 08/01/16

When you are buying a home here in South Florida, or you are trying to sell a house or condo somewhere in the Miami – Palm Beach – Fort Lauderdale area, there are certain steps that are automatic in every residential transaction. The buyer makes an offer and the seller either counters or accepts. A purchase agreement gets signed. A deposit is given to an escrow agent, and a mortgage is sought.

An Escrow account, is part of nearly every Florida residential real estate transaction. And like most things, escrow deposits go smoothly … until they don’t. And when there are problems with a Florida escrow account, it often takes a Florida real estate lawyer to help fix things and either get the deal closed or help the buyer (or seller) walk away from a bad deal without getting harmed in the process.
 

 

What is an Escrow Account?

An escrow account is a bridge of sorts between the buyer and seller whenever a Florida home or condo is being bought and sold. It is an account where the good faith money that is being offered by the buyer to seller is held. The “escrow agent” oversees the account, and is responsible not only for the money itself but also the documentation that relates to the money.

Funding Escrow in a Residential Real Estate Transaction: Earnest Money

When someone is purchasing a Florida home or condo, they begin by providing a sum of money that is defined in the purchase agreement as the “earnest money” deposit. The earnest money is given by the buyer as evidence that the buyer is serious about buying the real estate; earnest money allows the seller to remove that property from the open marketplace (and from the possibility of other buyers making offers) because the buyer is serious about purchasing the house.

The buyer doesn’t hand over the earnest money to the seller. The buyer hands over the earnest money to the escrow agent who puts it into an escrow account.

Usually, buyers will put up to 10% of the asking price of the home as a deposit towards the purchase. It’s this earnest money – a sum that demonstrates to the seller that the buyer is “earnest” or in good faith about wanting to buy the property – that goes into the hands and control of the escrow agent until the closing is completed and ownership of the real estate transfers from the seller to the buyer.

Other Things That Go Into the Escrow Account

The buyer’s earnest money isn’t the only thing that can gets deposited into the escrow account. Other things that may be held in escrow include things like:

  • The buyer’s additional deposits;
  • Closing costs to be paid by the buyer;
  • Closing costs to be paid by the seller;

Can The Buyer Get Back Their Escrow Money?

Once the escrow account has the earnest money deposit, it stays there until closing. The buyer just can’t say “oops” and get it back. However, there are times when the escrow agent must return the earnest money to the buyer; these instances include:

1. An Inspection reveals problems with the property and a contingency clause in the purchase contract allows the buyer to get their deposit back and walk away; or

2. The Appraisal comes back lower than the purchase price and again, there is a clause in the purchase agreement that allows the buyer a refund of their earnest money and the choice to walk away (if they don’t want to renegotiate for a lower price).

Problems With Escrow Caused By Real Estate Agents and Brokers

Often, real estate professionals (agents, brokers) act as escrow agents in Florida residential real estate sales. One of the most common problems with escrow accounts in Florida is a discrepancy that occurs between the money entrusted to the real estate agent and the money that actually goes into their real estate broker’s account. More common problems caused by real estate agents or brokers holding deposits, include situations where:

1. The agent doesn’t make sure that the buyer’s money is actually in the escrow account, then the deal goes south (i.e. the buyer has breached the contract), the seller not only losses the sale of the home or condo, but also losses the earnest money deposit that was supposed to help make the seller whole in this very situation. Here, the seller may have not only a breach of contract claim against the buyer but also a complaint about the broker with the licensing board  (as well as a legal claim against the broker).

2. Even if the real estate agent and the real estate broker are careful to get the buyer’s deposit check, if the escrow account cannot be fully reconciled down to the penny, then there’s a problem. Escrow accounts should start with the sum of zero, before anything is deposited in it, and it should end with zero, after all the money has been distributed at the closing table. (Real estate brokers in Florida are required by law to check on escrow accounts every month to make sure that everything is okay. See, Florida Administrative Code rule 61J2-14.012.) If the money in the account doesn’t balance at the closing table, then there may be a claim against the escrow agent / real estate broker.

3. Lots of real estate lawyers receive calls about this scenario — The escrow agent willfully breaches the contract or is grossly negligent for mis-delivering the deposit to the buyer or the seller when there is a dispute i.e. there are conflicting demands for the deposit because the transaction has or is falling apart.

Are You Having a Problem with a Deposit Being Held By a Real Estate Broker or Other Escrow Agent?

If you are in the process of buying a home or condo here in South Florida, or if you are a seller who is concerned that the sale of your residential real estate is about to fall apart, then getting the help and guidance of a Florida real estate lawyer can be invaluable to you. Florida attorneys with experience in residential closings may not only be able to get the deal completed, but they may be able to resolve any dispute quickly and without the buyer or the seller enduring any unnecessary stress.  (They can also help with mediation when there is a default, which most real estate contracts require to resolve escrow money disputes.)

A good piece of advice if you are having a problem with an earnest money deposit, is to at least speak with an experienced Florida real estate lawyer to learn about your rights. Most real estate lawyers, like Larry Tolchinsky, offer a free initial consultation (over the phone or in person, whichever you prefer) to answer your questions.

Related:

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Picture of Larry Tolchinsky

Do you have questions or comments? Then please feel free to send Larry an email or call him now at (954) 458-8655.

 
 
 
 
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Comments

16 Responses to “Escrow/Deposit Problems in Florida Residential Real Estate Closings”

  1. Roxana Argueta says:

    Hello

    I need to post a claim on the deposit for a contract of sale of XXXX, Tampa FL 336XX. The buyer decided to cancel it and in addition to canceling it he recorded a document in the public record that prevents me from selling it. I need to file a complaint so that he releases the deposit which is being held by the title company and also that he removes the recorded document from the public record. I do not what documents to file in court. Please advise. Thanks

  2. Hi Roxana,
    We cannot answer personal queries in blog post comments, so we’ve edited your comment to protect your personal information and ask that you give our office a call (see the toll free number above?) for a chat.

    Thanks,
    Larry

  3. Berenice says:

    Hi! We are about to close in a new home here in Tampa. We just found that we were told about a drainage in the propertie. But never were awarded about the big dimension of a drained easement. We didn’t know it was and what will be the problems of building a Swimmin pool. We spoke with our Realtor, and builder about it. They lie to us and they knew about it. But they are denying it. We are left alone, trying to walk away from this contract. Realtor is working on behalf builder. And addition to all this, now appraisal is $40,000 less than purchase price. Builder refuse to any negotiation or cancelation of contract,

  4. Hi Berenice,
    Sorry if this is frustrating! However, we’re not allowed to answer personal queries in blog post comments, so we ask that you give our office a call (see the toll free number above?) for a chat.
    Thanks,
    Larry

  5. Michael Reimer says:

    Does Florida law or Florida Realtors limit the amount of funds placed in escrow…..

  6. Hi Michael,
    Sorry if this is frustrating! However, we’re not allowed to answer personal queries in blog post comments, so we ask that you give our office a call (see the toll free number above?) for a chat.
    Thanks,
    Larry

  7. Mimi says:

    Hello,

    My contact has financing contingency. However my lender provided the loan commitment letter ….

  8. Sorry if this is frustrating! However, we’re not allowed to answer personal queries in blog post comments, so we ask that you give our office a call (see the toll free number above?) for a chat. (Your oomment has been edited to protect your privacy.)
    Thanks,
    Larry

  9. Jeff says:

    How long does the seller have to sgin a withdraw letter.

  10. Sorry if this is frustrating! However, we’re not allowed to answer personal queries in blog post comments, so we ask that you give our office a call (see the toll free number above?) for a chat.
    Thanks,
    Larry

  11. Lenny Bobrow says:

    Can a Florida real estate broker keep part of the earnest money deposit if buyer defaults?

  12. Hi Lenny,
    Sorry if this is frustrating! However, we’re not allowed to answer personal queries in blog post comments, and this seems to be a personal question (maybe?) so we ask that you give our office a call (see the toll free number above?) for a chat about your situation.
    Thanks,
    Larry

  13. Garrett says:

    Regarding the 45 day finance contingency, if the 45 day contingency ends on the closing date does the buyer still have 45 days, up to closing, to obtain a loan commitment? ….

    Thanks!

  14. Sorry if this is frustrating! However, we’re not allowed to answer personal queries in blog post comments, so we ask that you give our office a call (see the toll free number above?) for a chat about your situation. Your comment has been edited to protect your privacy.
    Thanks,
    Larry

  15. An FHA deal fall apart because buyer’s loan application was denied even after extension of financing contingency. There is now a conflicting demand for deposit. Seller’s claim is based on expired financing contingency. Buyer’s claim is based on lower appraised value by $9,000. Should the buyer gets his depsit back?

  16. Sorry if this is frustrating! However, we’re not allowed to answer personal queries in blog post comments, so we ask that you give our office a call (see the toll free number above?) for a chat about your situation.
    Thanks,
    Larry

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