Walking the Line: Handling of Client Deposits


As I am sure we all know, purchase agreement contracts in both CA and NV require consideration to be valid and in our world that is the initial or Earnest Money Deposit (EMD).

Due to the increase in electronic funds transfers, California Association of Realtors® recently revised the standard Residential Purchase Agreement to default to Electronic Funds being sent by the Buyer directly to the Escrow account within 3 days of Acceptance unless another method of delivery is specified. In Nevada the requirement is one business day from acceptance unless agreed separately in writing between the parties.

While having the client deliver the funds directly to escrow takes a burden off of us in receiving a check or copy (not allowed in CA), having to use a trust fund log, returning that check if the offer is not accepted, etc. it also requires us to be more diligent in following up to make sure the funds have actually been received by the escrow company.

In Nevada the agent has to acknowledge receipt of the funds on the purchase agreement and then deliver to the title company within 24 hours on a business day.   Funds should never be delivered by a client, nothing should be done that is not agreed between the parties in writing.

We have had some situations lately where the Buyer did not deliver the funds and then cancelled after contingency removals.

Please make sure your calendar the date for deposit delivery to escrow and get a receipt from the escrow company when the funds are received. Of course if you are using one of our Transaction Coordinators they will assist in getting this receipt for your file.

Also in CA remember if funds on deposit are to be increased during escrow there is a second receipt required for the increased deposit and to include in the Liquidated Damages clause. Without this form the increased amount cannot be retained by the seller in the event of a default.

In Nevada there is new language that has been adopted in the purchase agreement effective 2-17-16:

BUYER DEFAULT – Buyer must initial only one of the following.

If BUYER default in the performance of this agreement SELLER shall have the right to:

A. Liquidated Damages: SELLER may retain, as its sole legal recourse, the earnest money deposit. BUYER and SELLER hereby acknowledge that SELLER’S actual damages would be difficult to measure and that the earnest money deposit is a fair and reasonable estimate of such damages.


B. Actual Damages: SELLER shall have the right to recover from BUYER all of SELLER’s actual damages that SELLER may suffer as a result of BUYER’S default, and to pursue any and all other remedies available at law or in equity

Another recent issue with a large deposit was a question about how a contingency removal had been worded to protect the buyer as there was still an outstanding condition that had not been met. Please be very clear with a Buyer that removal of ALL contingencies should not be done until the Buyer is fully satisfied and prepared to have their deposit at risk in the event they do not close the escrow.

As always, when there are any questions on these types of issues, consult with your Manager first!


Written by Linda Kaneko, General Sales Manager, Select Group Real Estate. For questions or further information email Linda.Kaneko@selectgroupre.com.

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