Buyer Fails to Bring Earnest Money to Escrow Until Day of Closing

Question Buyer failed to bring earnest money to escrow until the day of closing - believing that was when it was due. The escrow agent took the earnest money check and changed the purchase agreement to indicate that there had been no earnest money. Both parties initialled. The listing agent is very upset and said that this should not have been handled this way. How should it have been handled differently? Answer In a perfect world, either the listing agent, the seller, the buyer's agent or the escrow agent would have determined that the earnest money had not been paid in a timely manner and would have done something about it long before the transaction reached closing. Failing that, however, it appears that the escrow agent's approach was reasonable. This answer does not consider the technicality of the escrow agent physically altering the purchase agreement, if that is what happened, but addresses the substance of how this problem should have been addressed at closing. The fact of the matter was that buyer's earnest money was significantly late and as a result of that, buyer was in breach of the purchase agreement. Had seller wanted to do so, seller probably could have terminated the purchase agreement. But, both parties clearly wanted to proceed to closing and the escrow agent found a way to make that happen. The escrow agent revised the purchase agreement so that it reflected the reality that buyer brought an extra $1000 (or whatever the amount of the earnest money was) to closing but did not pay earnest money at the time of mutual agreement. This did not change the amount of cash that buyer was putting into the transaction and it did not change the amount of seller's proceeds. All that changed was when buyer would pay a portion of his cash upfront - and buyer had made that change already - by his actions. The escrow agent was only documenting the reality of what had actually happened. Listing agent was probably upset over the fact that the earnest money had not been paid timely and that her seller was exposed throughout the transaction as a result. Nevertheless, by the time the parties are sitting at escrow, signing closing docs, the important goal is getting the transaction closed - so long as that is what both parties want. It is conceivable that even after signing, the sale could fail and buyer could breach the agreement. In that case, seller would be entitled to earnest money and if the purchase agreement had been changed to indicate that there was no earnest money then seller would have nothing to recover. To avoid that consequence, the purchase agreement could have been altered to indicate that earnest money was still being paid but it was being paid at closing rather than at mutual acceptance. For the protection of the seller, that would have been a superior approach. Hotline Attorney Annie Fitzsimmons writes the Legal Hotline Question and Answer of the Week.  The Legal Hotline lawyer does not represent Washington Association of REALTORS® members or their clients and customers.

by Colleen Laneby Colleen Lane
The Lane Real Estate Team
(509) 438-9344 - Colleen cell
Feel free to call or text!
lanerealestate@gmail.com


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