Rules Regarding Real Estate Escrow Accounts and Deposit Checks

Question:

I’m the listing agent and I received a $1,000 deposit check in connection with a fully executed contract on residential property.  My broker is out of town, what do I do?

Answer/Recommendation:
You go to Vegas and double down.

Okay, not really.  (Definitely “not really”!!)

According to Louisiana Real Estate Commission Rules and Regulations Chapter 27, Section 2701, “A resident broker who accepts any funds on behalf of clients in a real estate sales transaction shall open and maintain a sales escrow checking account in a financial institution in the state of Louisiana.”  So, your broker should already have an open escrow account.

Additionally, as stated in the Louisiana Real Estate Commission Rules and Regulations Chapter 27, Section 2701, “funds received by a broker in connection with the sale of real estate shall be deposited in (the escrow) account when there is a written contract to buy and sell real estate that has been fully executed and accepted by both buyer and seller.”

So long as the parties have not agreed otherwise in writing, then all you need to do is deposit the $1,000 into your broker’s escrow account in compliance with Louisiana Real Estate Commission Rules and Regulations Chapter 27, Section 2701 and 2717.

But this begs the question:  are you an authorized signatory on the account?  According to Louisiana Real Estate Commission Rules and Regulations Chapter 27, Section 2708, a broker may add his or real estate agent(s) as authorized signatories on the escrow checking account.  Some brokers add their agents as authorized signatories; some brokers do not.

Hopefully, there is someone at your broker’s office that can confirm whether you are an authorized signatory on the account.  If you are an authorized signatory on the account, then deposit the $1,000 into your broker’s escrow account.

If you are unsure whether you are an authorized signatory on the account, it’s probably okay to store the deposit check in a safe place at your broker’s office until your broker returns so long as your broker is going to return within the near future and prior to closing.  Just make sure you communicate with your broker that there is a deposit check waiting to be deposited into the broker’s sales escrow checking account.

If your broker will not return and deposit the check prior to closing, then reach out to the buyer’s agent to advise them of the scenario and request the buyer confer with his or her lender regarding whether the loan for which the buyer is approved will need the check to clear prior to closing in order to obtain loan approval.  (Some loan programs require deposit funds to be accounted for prior to closing).

So long as there is open dialogue between the parties, the parties can usually come to a positive conclusion regarding this scenario prior to closing.  (Make sure you document all conversations in writing!).

For any questions concerning this email, please do not hesitate to contact me at rye@tutentitle.com.

H.L. “Rye” Tuten, III, is a Title Attorney/Real Estate Closing Attorney and Owner of Tuten Title & Escrow, LLC. Formerly assigned by RICE Insurance to defend real estate agents throughout Acadiana, much of his more than nine years’ litigation experience is with real estate concerns.

The information contained herein is simply for informational purposes only and not intended to provide legal advice or create an attorney-client relationship.