A VAR Broker Sales Meeting Kit

EARNEST MONEY DEPOSITS (EMD)

Brokers, c l ick the l ink below to access a re la ted onl ine v ideo.

h t t p : / / www. va r ea l to r. com / SM K- EM D

1VIDEO COMPONENT

http://www.varealtor.com/SMK-EMD

Next , we’ l l go through a ser ies of three Q&As to see how much you know about the topic .

2Q&A/QUIZ COMPONENT

??When does an EMD have to

be deposited?

Q:

5 days

The deposit must occur within five business banking

days following ratification unless otherwise agreed to in

writing by the parties.

A:

??

When dealing with a short sale, the seller and buyer

want to delay depositing the EMD until the lender approves

the deal. Is that OK?

Q:

Yes, if…

Yes, remember parties can agree to a deposit date other

than the standard five business banking days

following ratification.

A:

VAR’s Short Sale Addendum to Residential Contract of Purchase contains language below to meet the preference from the previous Q&A:

The parties agree that the earnest money deposit will be deposited in Escrow Agent’s escrow account (check one):

 

___ within five (5) business banking days after the date this Contract is fully ratified by Purchaser and

Seller; OR

___ within ___ days after delivery by Seller to Purchaser of notice of lien-holder approval of this

Contract.

VAR RESOURCE

http://www.VARealtor.com/StandardForms

??

I am the principal broker escrow agent; what if my

agent forgets to give me the EMD within five business

banking days? In other words, funds are not deposited until

the 6th day?

Q:

Uh-oh.

This violation must be reported to the Real Estate Board within three business

days. In fact, any escrow violation must be reported.

A:

Mary Smith represents the buyer and is holding the earnest money deposit (EMD) for the buyer and seller. An addendum to the purchase contract states:

Buyer has 30 days to conduct any inspections he wants and may terminate this contract for any reason if he finds something he does not like within those 30 days. If the buyer terminates pursuant to this provision, the escrow agent shall immediately disburse the earnest money deposit to the buyer with no necessary signatures from either party.

The buyer found something he didn’t l ike, terminated the contract, and demanded that Mary give him the EMD. Mary fol lowed the contract and cl ient instructions and released the funds to the buyer. No 30-day letter was involved and no signed release was obtained.

Was this an appropriate action by Mary? Please discuss.

This is where the rubber meets the road. Let ’s ta lk about how to apply topic knowledge to a real -wor ld s i tuat ion.

3 SCENARIO COMPONENT

No, Mary likely violated Real Estate Board Regulations.

A licensee holding the EMD is bound by the REB’s regulations that provide, in a nutshell, the no matter what anybody says, you may not disburse without either the written consent of the buyer or seller, or a court order.

The contract language does not trump Mary’s duties as a real estate licensee to hold on to the EMD until she has obtained a written release as to the funds signed by both parties or a court order.

SCENARIO ANSWER

Vis i t t he VAR webs i t e f o r a g r ow ing l i b r a r y o f v ideos and o t he r t oo l s t o he lp you be success f u l AND law f u l and e t h i ca l i n you r r ea l es t a t e p r ac t i ce .

w w w. VARea l t o r. com

WANT MORE?

Your Virginia Association of REALTORS ® has lots of great legal information for you:

VARealtor.com/LegalResources VARealtor.com/LegalVideos VARealtor.com/EthicsCenter VARealtor.com/StandardForms VARealtor.com/Commonwealth

And look for more Blake in VAR’s Commonwealth Online e-newsletter, at VAR’s annual conferences, and at your local association.