1. Definition of
"Earnest Money Deposit"
As used in this Section, the term "earnest money deposit"
includes earnest money deposits and all other money held by the real estate
brokerage agency for clients or other persons for purposes related to a real
estate brokerage transaction.
2. Various Forms of Real Estate Trust
Accounts
A real estate trust account shall be in the form of a
checking or savings account and may accrue interest on an earnest money deposit
provided that the accumulated interest is properly disbursed. If the parties to
the transaction agree to place the earnest money deposit in something other
than a real estate trust account, the real estate brokerage agency shall not
hold the funds or act as trustee.
3. Opening a Real Estate Trust Account
The real estate trust account checks and bank statements must
contain the real estate brokerage agency's trade name as licensed by the
commission and must be imprinted with the words "real estate trust
account."
4. Making Earnest
Money Deposits
An earnest money deposit received by a designated broker, as
trustee, shall be deposited within 5 business days of acceptance of the offer.
Other earnest money deposits received by the trustee shall be deposited within
5 business days of the trustee's receipt of such earnest money deposits.
5. Restrictions on Earnest Money
Deposits in Real Estate Trust Accounts
A designated broker shall not commingle the earnest money
deposit of buyers or sellers in a real estate transaction with:
A. Funds belonging to the real estate
brokerage agency. This provision shall not be construed to limit deposits made
by the real estate brokerage agency of an amount sufficient to maintain the
account, but such amount shall not exceed $500; or
B. Funds held for persons that do not involve
the sale, purchase or exchange of real estate.
An earnest money deposit shall not be utilized prior to a
closing for selling or buying expenses such as a title fee, survey, etc.,
unless agreed to in writing by all parties in the transaction. There shall be a
proper accounting for all monies held by the real estate brokerage agency and
any remittance shall be made within a reasonable time, but not more than 30
days, after the conclusion of the transaction.
6. Maintaining Real Estate Trust Account
Records
The designated broker shall maintain records and supporting
documents sufficient to verify the adequacy and proper use of the real estate
trust account. The records and supporting documents shall be maintained for a
period of at least 3 years after the date set forth in Section 7(G) of this
chapter.
7. Information
Included in Minimum Real Estate Trust Account Records
Minimum real estate trust account records shall include a
ledger or journal which records in chronological order all receipts and
disbursements of funds in the real estate trust account and provides the
following information:
A. The date the
earnest money deposit is received by the real estate brokerage
agency;
B. The date the earnest
money deposit is received by the banking institution;
C. The purpose of the earnest money deposit
and from whom received;
D. The
purpose of the withdrawal and to whom paid;
E. The amount of the earnest money
deposit;
F. The current running
balance of funds held by the real estate brokerage agency; and
G. The closing date of a transaction, if any,
or the date the earnest money deposit was disbursed.
8. Real Estate Trust Account Supporting
Documents
Real estate trust account supporting documents shall
include:
A. Bank statements;
B. Canceled checks;
C. Copies of contracts;
D. Closing statements, if
available;
E. Correspondence;
and
F. Additional items necessary
to verify and explain record entries.
9. Disbursement of Undisputed Earnest Money
Deposits Held in Trust
Disbursement of an undisputed earnest money deposit may occur
by one of the two following procedures:
A. Authorization, in writing, from the
parties to a real estate brokerage transaction agreeing to the disbursement;
or
B. Authorization by the
designated broker who, in reasonable reliance on the terms of the purchase and
sale agreement or other written documents signed by both parties, determines
the appropriate disbursement of the undisputed earnest money deposit. The
designated broker may, at the designated broker's own discretion, make such
disbursement to release the undisputed earnest money deposit no sooner than 5
business days after notifying both parties of the designated broker's proposed
decision to release the undisputed earnest money deposit. The earnest money
deposit shall not be disbursed under this Section if prior to disbursement the
designated broker receives actual knowledge of a dispute as provided in Section
2(10) of this
chapter.
10. Disputed
Earnest Money
A. Any time that more than one
party to a transaction makes demand on the earnest money deposit for which the
real estate brokerage agency is acting as trustee, the designated broker shall:
(1) Notify each party, in writing, of the
demand of the other party; and
(2)
Keep all parties to the transaction informed of any actions by the designated
broker regarding the disputed earnest money deposit, including retention of the
earnest money deposit by the designated broker until receipt of written release
from both parties agreeing to the disposition of the earnest money deposit or
agreeing that the dispute has been properly resolved.
B. After notice as provided in Section
2(10)(A)(1) of this
chapter, the designated broker may reasonably rely on the terms of the purchase
and sale agreement or other written documents signed by both parties to
determine the disposition of the disputed earnest money deposit and may, at the
designated broker's own discretion, make such disbursement no sooner than 5
business days after notifying both parties of the designated broker's proposed
disbursement of the earnest money deposit. This discretionary disbursement by
the designated broker is not a violation of license law, but may not relieve
the designated broker of civil liability.
C. The designated broker may hold the earnest
money deposit until ordered by a court of proper jurisdiction or agreement of
the parties to make a disbursement. The designated broker shall give all
parties written notice of any decision to hold the earnest money deposit
pending a court judgment or agreement of the parties for
disbursement.
D. Absent written
authorization from the party to be charged, the designated broker is not
entitled to withhold any portion of the earnest money deposit when a real
estate transaction fails to close even if a commission is earned. The earnest
money deposit must be disposed of as provided by Section
2(10) of this
chapter.
