References
has already done the research for you. References (formerly Field Guides) offer links to articles, eBooks, websites, statistics, and more to provide a comprehensive overview of perspectives. EBSCO articles (E) are available only to NAR members and require the member's nar.realtor login.
Is Earnest Money Refundable?
Is Earnest Money Refundable? Here’s What to Know(Realtor.com®, Aug. 2, 2022)
There are several scenarios when a buyer could face forfeiting their earnest money. If a buyer waives contingencies, ignores timelines, or gets cold feet, it could mean losing the earnest money deposit. "When it comes to real estate, a case of buyer’s remorse could be even more painful than a lost deposit. To avoid both, really make sure the home you’re bidding on is “the one.”"
10 Ways Earnest Money Is Not Refundable:
- Failing to Meet Deadlines
- Getting Caught Up in a Bidding War
- Agreeing to a Non-Refundable Earnest Money Deposit
- Waiving Contingencies Prematurely
- Failing to Do Due Diligence
- Failing to Understand As-Is Buying
- Voiding a Contract Without a Refund
- Deciding the Home Isn’t “The One”
- Developing “FOMO” Over Another Home
- Bailing on a Transaction for Personal Reasons
Source: 10 Ways to Lose Your Earnest Money Deposit (Endpoint, Apr. 14, 2022)
Escrow Real Estate Accounts and Administration
What is Escrow and How Does It Work? (Credible, Mar. 21, 2023)
Escrow accounts function in two ways. While going through the steps of a real estate transaction, your escrow account will safely hold and protect any funds, like your earnest money deposit. Once the transaction is complete and the property has been purchased, your escrow will be used to collect and disperse funds to pay for property taxes, mortgage insurance, etc.
What is Escrow? (The Balance, Jun. 30, 2022)
According to The Balance, escrow is a financial agreement in which a third party controls payments between two transacting parties and only releases the funds involved when all of the terms of a given contract are met. Escrow is most commonly used when purchasing a home, though can be used in any financial transaction where a third party is necessary.
Types of Escrow Accounts (The Balance, Jan. 30, 2022)
“An escrow account is an account designed to hold funds temporarily in safekeeping. The escrow provider should be a disinterested third party with no preference about who ultimately receives funds from the account.1For example, in a real estate transaction, the escrow account does not favor the buyer or seller—they just follow the rules that buyers and sellers agree to.”
Earnest Money Deposits
What is Earnest Money and How Much Should You Pay? (Entrepreneur, Feb. 9, 2022)
“Put simply, earnest money is a deposit made before closing on a house purchase. In essence, earnest money works as a way of showing that a homebuyer is serious about buying the house and isn't just trying to cut out any competition/competing bids. Also called a good faith deposit, an earnest money deposit is often required or requested by a home seller if they are expected to take a house off a competitive market.”
The Earnest Money Deposit: How It Helps Buy a Home (realtor.com®, Oct. 5, 2022)
“Assuming that all goes well and the buyer’s good-faith offer is accepted by the seller, the earnest money funds go toward the down payment andclosing costs. In effect, earnest money is just paying more of the down payment and closing costs upfront. In many circ*mstances, buyers can get most of the earnest money back if they discover something they don’t like about the home.”
Earnest Money: What It Is, and How Much It Is in Real Estate(Investopedia, Aug. 10, 2022)
“Earnest money deposits can be anywhere from 1–10% of the sales price, depending mostly on market interest.”
Escrow Fraud and Real Estate
Mortgage Escrow Fraud: What Homebuyers Need to Know (Bankrate, Sep. 22, 2022)
“Escrow fraud preys on ignorance and hastiness as it relies on fake email accounts to execute the scam. One way this scam works is when the fraudsters hack into a title company’s system to retrieve emails and information about upcoming home purchases. They’ll often set up a fake website under a name similar to the title company you’re working with. For example, if the name of your title company is “Johnson and Sons” the fraudsters might make “sons” singular, so the website and email address reads: Johnson and Son.”
Online Escrow Fraud Questions and Answers (California Department of Financial Protection & Innovation)
“Escrow providers help prevent fraud by acting as independent third parties between buyers and sellers. After the escrow company receives the buyer’s check, money order or credit card payment, the company notifies the seller to ship the purchase to the buyer. The escrow company does not forward the buyer’s payment to the seller until the buyer receives the item. Buyers usually pay the escrow service fees, which are generally a percentage of the purchased item’s cost”
Propy to Integrate Title and Escrow Services (Real Trends, May 20, 2022)
“We have had many requests from title insurance companies and from counties to bring all the historical data onto blockchain. The majority of records have all been digitized, but they are still at risk for hacking and fraud,” she said. “Blockchain will transform anything that relates to property rights and ownership transfer. I think that this industry will become more efficient and that it will be more understandable for the consumer.”
Case Summaries - Escrow Mishandling
Roswell Real Estate Escrow Manager Pleads Guilty to Fraud (KRQE, Apr. 27, 2023)
“A local business owner has pled guilty to fraud in a federal court. The 44-year-old Christopher Adam Jensen-Tanner admitted to misusing tens of thousands of dollars worth of business funds.
Jensen-Tannerowned and operated Roswell Escrow Services, Inc. The business appeared to help customers make real estate purchases, according to an indictment filed in federal court. But Jensen-Tanner re-directed funds for personal use, according to his plea.”
Broker-Dealer Settles FINRA Charges for Mishandling Escrow Account (Mondaq, Nov. 24, 2021)
“In a Letter of Acceptance, Waiver and Consent, FINRA found that, while acting as a placement agent for an issuer, the broker-dealer and its principal failed to (i) deposit investor funds with a bank instead using a law firm as the escrow agency, (ii) use the standard escrow agreement per its procedures and (iii) properly calculate the required minimum contingency by including a non-bona fide investment to meet the threshold. FINRA also found that, when acting as a placement agent for another issuer, the broker-dealer and principal failed to obtain timely positive consent from investors to extend or return funds when the offering did not meet its minimum contingency.”
Mortgage Company Mistakenly Billed Some NC Customers Up to Eight Times (WCNC, May 28, 2021)
“Mr. Cooper, formerly Nationstar Mortgage,blamed the errorat the end of April on its vendor accidentally drafting incorrect mortgage payments while testing its system. Mr. Cooper says the company has since reimbursed overdraft fees and worked to make sure customers' money is back in their bank accounts, but consumer complaints filed with the North Carolina Attorney General's Office show some want the government to take action against Mr. Cooper.”
eBooks &Other Resources
The following eBooks and audiobooks are available to NARmembers:
American Mortgage - Everything You Need to Know About Purchasing and Financing A Home (eBook)
Busted - Life Inside the Great Mortgage Meltdown (Audiobook)
Chain of Blame - How Wall Street Caused the Mortgage and Credit Crisis (eBook)
The Complete Idiot’s Guide to Mortgages (eBook)
Decoding the New Mortgage Market (eBook)
Fast Track Your Mortgage (eBook)
How to Save Thousands of Dollars on Your Home Mortgage (eBook)
How to Sell a House When It is Worth Less than the Mortgage (eBook)
Insider Secrets to Financing Your Real Estate Investments (eBook)
The Insider's Guide to Home Equity Borrowing (eBook)
An Insider's Guide to Refinancing Your Mortgage (eBook)
The Little Black Book of Wealth Building Mortgage Secrets (eBook)
The Mortgage Answer Book - Choosing the Right Loan for You (eBook)
The Mortgage Encyclopedia (eBook)
Mortgage Myths - 77 Secrets that will Save You Thousands on Home Financing (eBook)
Mortages 101 (eBook)
The new rules for mortgages (eBook)
The Pocket Mortgage Guide (eBook)
Reverse Mortgages for Dummies (eBook)
Salomon Smith Barney Guide to Mortgage-Backed and Asset-Backed Securities (eBook)
Have an idea for a real estate topic? Send us your suggestions.
The inclusion of links on this page does not imply endorsem*nt by the National Association of REALTORS®. NAR makes no representations about whether the content of any external sites which may be linked in this page complies with state or federal laws or regulations or with applicable NAR policies. These links are provided for your convenience only and you rely on them at your own risk.
