Mansfield, TX · Member since 2013 · 207 posts · 26 votes
Just a basic question here, but when you meet with a seller at a house you intend to buy for yourself do you make the earnest money check out to the title company or do you make it out to the seller before you bring it to the title company?
Pellston, MI · Member since 2013 · 10 posts · 1 vote
13y
Bill,
When I have made out an earnest money payment in the past, it has been to the realtor that was representing me. The agency would hold it in escrow until the purchase offer expired or the sale completed. I would be really nervous about cutting a check to the seller in case the deal fell through or if he is less than honest.
Real Estate Investor · Waterbury, CT · Member since 2012 · 117 posts · 19 votes
13y
@Bill Mitchell- In the few wholesale deals I have closed, the buyer always wrote the earnest check out to me but would give it to the attorney to hold for closing. So in your case, I would go with your latter idea on writing the check out to the seller then giving the check to the title company.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
13y
Probably meant to mention Bill Mitchell, If there is no Realtor involved you could make it out to the seller AND the escrow agent (title company or attorney) if you are working directly with the seller, have them endorse the check and then deliver it to the closer as earnest money is consideration paid for the contract. It is a pain when there is no Realtor. If it is customary in your area to make it out to the escrow/closer then you can certainly do that so long as that flies in your jurisdiction. When dealing with a Realtor, go with their instructions as to what is customary in that area.
Realize too, that earnest money deposits are funds held in trust and before the escrow agent can release funds back to a buyer on a contract they can require the seller to sign a release, as it's funds held in trust for their benefit, again, local custom and state requirements. So, even if you make out the check to the escrow agent a seller can still cause some hang time in getting your money back. A seller can also object to the release of funds and the escrow agent may then be required to hold funds until any dispute is settled and funds are released.
Who ever agrees to accept the funds accepts liability for the funds as well. You can call a local title company and find out what is customary in your area, best to go with what is customary. :) .