When it comes to real estate transactions, the earnest money deposit (EMD) or simply the deposit is an essential component. The deposit is made by the buyer to show their commitment to closing the deal and is usually a percentage of the purchase price. But what should the buyer’s agent do with this deposit given with a purchase agreement? Let’s explore below.
1. Deposit the Funds in a Segregated Account
The first and foremost duty of the buyer’s agent is to deposit the funds in a segregated account. The account should be separate from their personal account to ensure the funds are not mingled with other funds. This also helps in tracking the funds and prevents any unauthorized use.
2. Follow the Contractual Terms
The buyer’s agent should follow the contractual terms laid out in the purchase agreement. Usually, the agreement will specify a timeframe for when the deposit should be made and the conditions under which it can be forfeited. The buyer’s agent should ensure they are in compliance with these terms to prevent any legal issues.
3. Disclose Any Material Facts
The buyer’s agent should disclose any material facts related to the deposit. This includes any issues or contingencies that could affect the deposit such as pending inspections or appraisals. This disclosure is necessary to avoid any potential legal action against the agent.
4. Release the Deposit as Per the Agreement
Once the conditions of the purchase agreement are met, the buyer’s agent should release the deposit. This could include sending the funds to the closing attorney or escrow agent, depending on the terms of the agreement. The agent should ensure that all the necessary paperwork is completed before releasing the funds.
5. Maintain Accurate Records
Lastly, the buyer’s agent must maintain accurate records of the deposit. This includes keeping track of the deposit throughout the transaction, any changes or updates to the agreement, and the release of the funds. Proper record-keeping is necessary to protect the agent from any legal disputes in the future.
In conclusion, the buyer’s agent should follow these essential steps to handle the earnest money deposit or deposit given with a purchase agreement. By doing this, the agent can ensure a smooth and successful transaction for everyone involved.