Do all contracts have to identify an escrow agent?
QUESTION: It is fairly common for listing agents in my area to receive offers that do not identify an escrow agent. Instead, buyer agents are inserting the abbreviation “TBD” (meaning To Be Determined) in the blank space provided in paragraph 1(f) of the Offer to Purchase and Contract. Is a contract that fails to identify an escrow agent enforceable?
ANSWER: While the failure to identify an escrow agent may not render the entire Offer to Purchase and Contract unenforceable, inserting “TBD” as the escrow agent is a bad idea. We strongly recommend that agents not follow that practice in the future.
The identity of the escrow agent is an important term that absolutely should be agreed upon at the time the contract is signed. If the parties sign a contract with the identity of the escrow left “to be determined,” it is conceivable that they may not be able to agree on the identity of the escrow agent in the future. Without an escrow agent identified, it will be impossible for the buyer to deliver the Initial Earnest Money Deposit and the failure to make that delivery would constitute a breach of contract.
To avoid this predicament, the buyer should always include the name of an escrow agent in paragraph 1(f). Buyer agents should keep in mind that the Agreement to Amend Contract (Standard Form 4-T) provides an easy mechanism for changing the Escrow Agent if the parties agree to do so.
Listing agents who receive an offer with “TBD” inserted in paragraph 1(f) have several options. One possibility, if the listing firm maintains a trust account, is to insert the name of that firm in paragraph 1(f). Alternatively, the listing firm can demand that the buyer insert a name in paragraph 1(f). In either event, the listing agent should remind the buyer’s agent of the need for the parties to agree on all of the terms of their contract at the time that contract is signed.
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