Can an escrow agent release an Earnest Money Deposit without the seller’s written consent?
QUESTION: My firm represented a buyer who went under contract to purchase a property. The buyer made a substantial Earnest Money Deposit (the “EMD”) that was sent to a local law firm that was identified in the contract as the escrow agent. Our client elected to terminate the contract during the Due Diligence Period. We sent Standard Form 350-T to the listing agent but the seller never signed page 2 of that form to acknowledge that our client is entitled to a refund of the EMD. Although the seller has never disputed our client’s entitlement to the EMD, the escrow agent is refusing to disburse the EMD without something in writing from the seller. Is the seller’s signature required? If not, what should we do?
ANSWER: If a seller disputes the buyer’s entitlement to the EMD, even if the dispute has no basis, paragraph 1(f) of Form 2-T spells out the obligations of the escrow agent. The escrow agent must retain the money in its trust account until (a) the agent obtains a written release from the parties, (b) disbursement is ordered by a court, or (c) the funds are deposited with the clerk of court in accordance with the provisions of N.C.G.S. §93A-12.
However, if the seller has not disputed the buyer’s entitlement to the EMD, but has merely not responded to a request for a written acknowledgement, the rules are different. The Real Estate Commission has written (in its BICUP materials from 2015-2016) that Rule A.0116(e) only requires the parties’ signatures in the event of a dispute.
While our strong recommendation is that brokers should always attempt to obtain the written consent of both parties when a contract is terminated, the fact is that such consent is not required unless there is an actual dispute. If a seller disappears once a contract is terminated, or is unresponsive to requests for written consent, the buyer agent should send an email to the listing agent stating that if the seller does not dispute the buyer’s entitlement to the EMD within 48 hours, the seller’s silence will be considered an acknowledgement that the escrow agent is authorized to disburse the entire EMD to the buyer.
Release Date: 04/04/2024
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