When real estate deals fall through in Massachusetts, it can be an emotional and stressful process. One of the many questions you have may relate to the escrow deposit. Here’s what you should know about escrow funds from cancelled real estate contracts.
Location of Funds
Typically, the listing real estate brokerage holds the buyer’s deposit money in their escrow account. The account must be within a Massachusetts bank. Upon successful closing, these funds are credited back to the buyer. However, when deals fall through, the listing agency will be looking for directions on who should receive those funds.
Release of Funds
Real estate brokerages in Massachusetts will not release escrow funds from cancelled real estate contracts unless they receive a release signed by both buyers and sellers or are instructed by the courts. Why? The funds are technically that of the buyer but they are held on behalf of the seller (so that buyers need not give sellers funds directly before closing).
When deals fall through, it’s not always clear who should receive those funds. If it’s related to a contingency, then the buyer normally receives it (although this doesn’t prevent the seller from contesting). For other reasons, sellers may argue that they are due those funds as damages per the terms of the P&S agreement. Regardless of the situation, it’s not the job of the real estate broker to make the decision. Therefore, they will not release funds unless both parties agree to it or a mediator/judge instructs them to do so.
Disputes over Escrow Funds from Cancelled Real Estate Contracts
When a dispute arises over escrow funds, one or more parties typically files a lawsuit of some sort. In this case, you have the right to hire an attorney to represent you in the matter. With escrow deposits in the Boston area averaging around 5% of the purchase price, there can be significant funds at risk. Be sure to select an attorney who specifically practices real estate law. This will ensure that you are properly represented.