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Real Estate Legal Tip

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Handling Earnest Money

Agents should know the laws, real estate commission guidelines, and their own office policies about turning in the Earnest Money for deposit when a contract becomes binding.  These deadlines must be met.

The GAR contract form shows the holder of the Earnest Money (usually one of the real estate brokers).

Things to remember about Earnest Money:

1.        If the contract involves an REO (real estate owned) seller such as a bank, HUD, or FNMA, the counteroffer from the seller may require that the EM be held by the listing agent or even the law firm representing the seller.  If this is a change from the original offer, the agents need to get a contract addendum signed to show who is holding the EM.

2.        Many REO contracts require a large EM deposit, sometimes up to 10-15% of the sales price.  In most cases this is more than the eventual commission, so the closing attorney and agents must make arrangements to have the excess EM wired to the closing attorney prior to closing.

3.        If the closing date is very close to the binding date of the contract, the EM should be a cashier’s check rather than a personal check, so that there is no waiting time for a check to clear.  This is especially important if the real estate broker must refund all or part of the EM in preparation for closing.

Presented by Leigh Clack, Attorney

Neel & Robinson Attorneys at Law, LLC

Leigh.clack@neelandrobinson.com

404-705-3690            fax 404-459-0704

5555 Glenridge Connector, Suite 400. Atlanta, GA 30342

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