Occasionally, however, there is a dispute over the return or disbursement of earnest money. It is the responsibility of the broker to then notify the FREC within 15 business days from the last party's demand. There are three exceptions to this rule: if it is a property utilizing HUD (Department of Housing and Urban Development ) if the buyer of a condominium unit delivers written notice to cancel as provided under the Condominium Act if the buyer is unable to satisfy a financing contingency within the time frame provided by the contract
In these cases, the broker may disburse the funds according to the guidelines of each situation. Otherwise, if the broker has a good-faith doubt (meaning the broker honestly doubts the claim of a party), the broker reports the situation to the FREC. The broker has 30 days from the last party's demand to implement one of the procedures set up for escrow disputes. These are Escrow Disbursement Order, Mediation, Arbitration, Litigation. End of Page 14 . Four Settlement of Escrow Dispute Procedures After the broker notifies the FREC of the problem, the broker may wish to request: An Escrow Disbursement Order (EDO) from the FREC. Once the EDO is requested, the broker must follow the instructions of the FREC. If the EDO is overturned on appeal, the broker may be liable for civil damages in a civil suit. However, if the broker has followed the EDO, damages to the broker can be reimbursed from the Real Estate Recovery Fund without jeopardy to the broker's license, and the broker is not required to repay the Fund. The FREC may refuse to issue a Disbursement Order, in which case the other procedures must be used. Mediation: Both parties agree in writing to mediation by a mediator. If the issue is not solved within 90 days , the licensee must use the other types of dispute procedures. Arbitration: If the buyer and seller cannot agree, the issue is submitted to arbitration and a third party (arbitrator) makes a decision for one party or the other. If this fails, the parties go to Litigation. Litigation: is simply a law suit, asking the courts through a process called Interpleader to determine the rightful owner of the disputed escrow. The court issues a declaratory judgment which is a binding determination of the rights and status of the parties. Once the dispute is settled, the broker must notify the FREC within 10 days that the dispute is over.
A situation that is considered good faith doubt is when one party to the dispute does not respond to the broker's correspondence about the escrow money when a transaction fails to close on time or if the buyer (or his spouse) refuses to close at all. End of Page 15 . Rental Lists and Rental Companies When a broker provides a list of rental property for a fee and acts as an information broker to a tenant, the FREC requires that the broker give the tenant a contract that specifies that the tenant has the right to: Request a refund of 75% of the fee (if requested within 30 days) if the tenant does not find a rental; and
You've reached the end of your free preview.
Want to read all 24 pages?
- Fall '16
- Corporation, Types of business entity