A. Escrow: Funds held by a neutral/disinterested third party (real estate agent in most cases) until completion of the instructions by both parties (seller and buyer) has been finalized
- Must be placed in a special bank account
- Cannot be unilaterally revoked
- Can only be amended, changed or revoked by agreement by both seller and buyer
- Typically starts when "Offer" or "Purchase and Sales" Agreement which is accompanied by a deposit and is signed by both the Seller and Buyer
- Escrow belongs to Consumer and not the Escrow Agent
- Maybe a non-interest bearing account or an interest bearing account which is chosen by the Escrow Agent
B. Escrow Agents: Third Parties holding Escrow Funds accountable by law and perform their duties in a timely manner.
- Real Estate Agents:
- Only Licensees holding a Broker License may have an Escrow Account
- Account is for Deposits/earnest money deposits
- Since Agent may be earning a Sales Commission in the Transaction, they cannot be considered a neutral or disinterested party
- Agent delivers funds to Closing Attorney at the time of the closing
- Monies "held back" by Closing Attorney for unfinished work is placed in Closing Attorney's "Escrow Account" and not the Real Estate Agent Account
- Lending Institutions:
- Account is for Annual Taxes
- Insurance Premium
- Completion of Building/renovations
C. Massachusetts Law 254 CMR 3:00 Professional Standards of Practice:
- Client Funds:
- Escrow Accounts
- Record Keeping
- Salespersons Prohibited from Holding Funds
D. Chapter 103 of the Acts of 2000: An Act Prohibiting Certain claims against Escrow Agents:
- Section 17A of Chapter 184 of the General Laws as amended
- Approved June 15, 2000
E. Escrow Companies:
- Licensed by State in which they are located
- Company acts as a Fiduciary for both parties (seller and buyer)
- Follows instructions given by both parties (seller and buyer) in escrow agreement
- Company is not required to disclose any defects in the transaction (does not act in the capacity as an attorney to the transaction)
- Company works in a confidential manner
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