Have You Been Harmed By Escrow Agent Negligence?
In order to avoid escrow agent mistakes, you first need to understand the role of an escrow agent. An escrow agent is an entity or person that holds the property in trust for third parties during the completion of a real estate transaction. By taking on this assignment, an agent has a fiduciary responsibility to both parties involved in an escrow agreement.
Escrow Agent Duties
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Escrow Agents Fiduciary Duty
A fiduciary duty is a legal obligation to act in the best interests of two parties of an escrow agreement, or the principals. The person who is obligated to take on this responsibility is the fiduciary. Whenever a breach of fiduciary occurs, the fiduciary or escrow agent has not upheld its responsibility, either through gross negligence or by misrepresentation.
What Is Escrow?
Escrow itself, according to California law, is a deed or deposit of funds by one party for delivery to another person or entity upon the finalization of a specific event or conditions. The escrow agent is in charge of the escrow until it can be delivered. Whether you are a purchaser, seller, borrower, or lender, you want to make sure that no property or funds can be conveyed until a real estate transaction is completed.
Therefore, the holder of escrow, or the escrow agent, has the responsibility to protect the documentation or funds while they are in his or her possession, and to convey the title or allocate the funds only when the all the escrow provisions have been met.
Who Are the Principals To An Escrow?
The principals to the escrow include the purchaser, seller, borrower, and lender. If a broker is involved in the transaction, he or she will give the escrow agent (usually an escrow/title company or attorney), all the details needed for preparing the escrow instructions and documentation.
In turn, the escrow agent holds the escrow according the instructions. When all the conditions are met for escrow, the escrow is closed. The duties of an escrow agent included the following:
Following the directions given by the parties and principals of the escrow transaction, and doing so in a timely fashion.
Managing the documentation and funds according to the directions;
- Paying the bills as authorized;
- Replying to official requests from the principals;
- Closing the escrow, according to the instructions; and
- Providing an accounting through a settlement or closing statement.
Always Get a Copy or Receipt
Being aware of fraud is also important if you want to avoid problems with misrepresentation or gross negligence. This means retaining a copy of every piece of paperwork that is signed in an escrow transaction. If you sign a document, ask for a copy if you are not given one. This is particularly true when you make deposits into escrow. You should always get a receipt of your deposit. All these copies and deposit slips represent your escrow transaction records.
It is also vital to question last-minute modifications to previously held contracts or paperwork. If an escrow agent is asking you to provide data not previously needed or to sign a document that reflects an agreement to which you are not aware, consult with your attorney.
Escrow Agents Have A Duty To Disclose
Circumstances can also arise where a lender does not approve a credit between the parties. To close the escrow, an escrow officer may suggest that the credit be handled outside of escrow, without disclosing the transaction to the lender. This normally leads to the escrow agent allocating funds after the close of escrow, thereby failing to honor the lender’s instruction. Legally, any credits of this type must be disclosed to the lender. Otherwise, these actions are considered to be in violation of the law.
As you can see, a breach of fiduciary duty is indeed a serious offense. If an escrow agent does not explicitly follow instructions, or takes sides in a real property transaction, his or her motives should be carefully reviewed and considered. Make sure you can turn to an advocate in this type of circumstance. A law firm, such as Equity Legal, can resolve any questions or concerns during the escrow process.
Escrow Agent Mistakes Happen, Let Equity Legal LLP Help
Schedule Your Free 15 Minute Consultation and let us help you with any escrow company negligence or agent mistakes. We are expert real estate attorneys and look forward to professionally answering any questions you may have.