Hold on to those Escrow Monies Until all Parties Agreed to Distribute.
As the listing broker, if you’re serving as the escrow agent in the transaction, the transaction falls apart and both parties are demanding you turn over the sizable deposit to them, what should you do? What are your responsibilities to the parties?
Escrow Disputes are an unfortunate by product to even the most successful real estate firms. The good news is that several years ago, at the urging of the Massachusetts Association of REALTORS® and Greater Boston Real Estate Board, the state legislature amended the General Laws to include a provision that protects escrow agents (the broker holding the funds) from being named as defendants in disputes between buyers and sellers where the accepted Offer or Purchase and Sales Agreement authorizes them to continue to hold the funds in the event of a dispute. To view a copy of this statue please visit: http://www.mass.gov/legis/laws/mgl/184-17a.htm. Most standard real estate contracts contain the necessary information in the escrow paragraph on the form, and many will allow you to hold the funds until the parties mutually agree to distribution. If you choose to distribute to one part over the other, you may be found liable to pay the other/correct party if a court finds you erred in your distribution. So, holding large or very small amounts of deposit monies until you receive directions from both the parties or a court order, while it may be a nuisance to keep them in your escrow account, it may be the better course of action to protect you from future liability.