Being entrusted with monetary fund’s belonging to a consumer during the selling process of real estate is a huge responsibility that a broker shouldn’t take lightly. According to the Alabama License Law as found in Statute Section §34-27-36 (a) (8) a. which states, “Failing, within a reasonable time, to properly account for or remit money coming into his or her possession which belongs to others, or commingling money belonging to others with his or her own funds.” This section of the law simply states the responsibility for accounting and remitting monies that belong to others and also indicates that such monies can’t be commingled or deposited with the broker’s own personal money.
In Section §34-27-36 (a) (8) b. the law specifies more details saying, “Failing to deposit and account for at all times all funds belonging to, or being held for others, in a separate federally insured account or accounts in a financial institution located in Alabama.” This portion of the law clearly discloses that not only shall the money be in a separate account but it must be in a federally insured account. There is one word in the law that is often overlooked and that is “remit.” This means it is the responsibility of the broker to remit any funds held in trust in a timely manner. This doesn’t however; mean that as soon as the consumer who placed the funds in care of the broker, can requests the funds be returned immediately and the broker is compelled to do so. The timely manner in which a broker must remit funds held in trust is governed by the contract; which also determines to whom the funds can be remitted.
Another portion of the same law found in Section §34-27-36 (a) (8) c. states, “Failing to keep for at least three years a complete record of funds belonging to others showing to whom the money belongs, date deposited, date of withdrawal, and other pertinent information.” This segment bring all three sections together placing notice to the broker that all funds placed in trust with the broker should be in a separate, federally insured trust account, and promptly remitted at the appropriate time, to the appropriate party involved in the transaction (generally during closing), and must provide a complete track record of the entire transaction for a minimum of three years.
Should monetary fund’s be contested by either party involved in the transaction, the broker is bound by statutory law to hold such funds pursuant to a court order as stated in Rule 790-X-3-.03 (5) “Each qualifying broker shall promptly disburse to the appropriate party or parties any trust funds within 7-days of the consummation of the transaction for which the funds were deposited. If for any reason the transaction is not consummated, or if for any reason there is a disagreement involving to whom trust funds should be disbursed, the qualifying broker shall not disburse any trust funds except pursuant to a written agreement signed by all parties or pursuant to a court order.”
As you can well see, Alabama law protects all consumers when buying or selling real estate, so that no monies given in good faith can be dispersed to any party wrongfully. The Alabama Real Estate Commission polices these policies on regular bases to ensure the protection of all consumers.
Should you have specific questions concerning various issues, please let me know and I’ll research the answer for you. I also want to encourage you to subscribe to our “News & Updates” weekly report so you can stay abreast of issues that might affect you when buying or selling real estate. If you haven’t visited my website, please go to www.AlabamaRealEstateInstitute.com and view previous articles.
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How do we get escrow money when buyer refuses to sign mutual release? On June 13, 2019, sellers signed and forwarded said release to buyer She had backed out of deal because of a death at my home. My 19 year old grandson took his life at my home on March 14, 2018. She had an attorney write a letter dated May 28, 2019, stating she should not have to buy my house because of this “ghostly situation”. i have been told this is not valid reason. Do we just do nothing? What is a reasonable length of time for this type of refund?
Both buyers and sellers must sign a release fund document before earnest money can be dispersed. If there is not mutual consent then the dispute must be settled in a court of law.There is not a specific time allowed for disbursing earnest money funds. The sooner disputed funds are settled, the better for all conceerned. Many times the cost for settlement is greater than the amount of the disputed funds.