The lawyer or law firm specializing in real estate plays a fundamental role in purchasing and selling a home. In addition to assuming all the legal procedures, advising, and safeguarding each party’s processes, they can also fulfill the escrow agent or account custodian role.
The escrow account is a type of account used to “hold” the money destined for the acquisition of the house together with the important documents, such as the purchase-sale contract and the papers given to the property owner. The objective of this procedure is to safeguard the important aspects of the transaction to avoid inconveniences and to keep them in the hands of an impartial person. If you want to know more about the lawyer holding money in escrow, here we prepared this guide.
What is an escrow agent, and what do they do?
The escrow agent, also known as an escrow agent, is a professional who fulfills the objective of safeguarding the funds for the purchase of the house, the contract, and the title papers of the property—creating the figure of this professional to provide security and confidence to the process of buying and selling a house.
A real estate lawyer or mortgage broker can cover the role of the escrow agent. Their main function is to provide security and verify that each agreement established in the contract to purchase the property is fulfilled.
What are the responsibilities of an escrow agent?
The escrow agent plays a key role in purchasing and selling a home. When the interested parties use an escrow account to hold the money, the attorney plays a leading role in the exchange of the property and closing the process. While the process is in progress, the real estate attorney performs these functions:
When the purchase and sale contract is established between the parties, where the property’s value is fixed, the first step is to check that the buyer and seller agree with the promised clauses.
This intermediary is in charge of “holding“ the contract, the property title, and the funds destined for a housing payment. This holding is done in a bank account designated solely for the property money called an escrow account and should not be mixed with a personal bank account. Like the money, the documents also remain in the hands of the attorney.
The responsibility of safeguarding the funds and documents requires a lot of ethics and professionalism on the lawyer’s part. It is highly recommended to leave the escrow with a professional or law firm with experience and a good reputation in the business.
The escrow agent is also responsible for monitoring all the dates defined in the contract and verifying that each agreement is fulfilled under the specified conditions. They remain in this activity until the day of signing and termination of the contract.
The lawyer is in charge of bringing both parties together. He verifies that all the clauses were fulfilled, and, finally, he transfers the funds to the seller’s bank account and delivers the title deed to the buyer. Upon completion of this process, he concludes his duties.
What are the duties of an impartial agent?
Just as he has great responsibilities in buying and selling a home, all actions contrary to those explained would be considered a fault. Here is a list of things an escrow agent should not do:
- Failed to send the funds to the seller and deliver the title to the buyer after fulfilling the contract agreements
- Send the funds to the seller and the title to the buyer before completing the process
- It is losing the money or part of it and the documents. It is a violation and requires a penalty for losing the clients’ money
- You are using the money or property for personal gain while in your custody
What are the most frequent irregularities?
With so much money and important documents, it is always possible to commit a crime. In this situation, it is recommended to hire the services of a professional who can provide the security you need. But, we invite you to be alert to these circumstances:
- Mixing funds: It is not legal, under any context, for the lawyer or law firm to transfer money to a personal or company account. If you do so, you risk commingling personal finances with the fund
- Using the money for personal purposes: If the lawyer or the firm where they work uses it for personal purposes or investments, they are also committing a crime and can be sanctioned
- Breach of contract: Failure to deliver the money to the seller and the papers to the buyer is a breach of your responsibilities
- Fraud: To avoid this type of risk, it is recommended to request a regular audit of the lawyer, where he must give proof that the money is kept in a single account and is not in use
What to do if the lawyer fails to comply with his duties?
If the lawyer performs any activities mentioned in the previous list, the affected party or parties have the right to sue the lawyer. In most cases, the escrow agent must pay the money they spent – if this is the crime – and pay additional compensation for the damages incurred.
Penalties also vary depending on the state where the violation occurred. We encourage you to be alert to any suspicious activity and to keep a clear account report.
How long can a lawyer hold money in escrow?
This is one of the most frequently asked questions related to the subject. The reality is that the answer is ambiguous and does not have a specific number of days or weeks. In principle, the lawyer is estimated to hold the money for thirty days. Still, it is also possible to add 30 days, which vary according to many factors.
Considering the schedule of activities, as well as the agreements established in the contract, it is fundamental to know how long will withhold the funds.
It is important to mention that they cannot release the money during this time unless both parties agree that they wish to remove it early but cannot force it. The attorney must be involved in this process if the early release is desired.