The Broker as Escrow Agent

30 Apr

Metro® Boston, Publication Date: January 26, 2011

By Attorney George Warshaw

It wasn’t a bad idea.

The buyer saw a condo at a Coldwell Banker open house. He made an offer. It was revised and rejected several times. THEN he hired a broker to help him. His offer was finally accepted by the seller.

The buyer made an unusual deal with his new broker. “I’ll pay you an hourly fee, but no less than $3,000; just refund me your share of the broker’s commission.”

Coldwell claimed that the buyer’s broker was too late to the dance and had done nothing, or very little, to earn a commission. Since Coldwell was holding the deposit in escrow from which commissions were to be paid, it refused to pay the buyer’s agents any portion after closing. 

The purchase agreement, however, stated that the commission was to be split evenly between Coldwell and the buyer’s agent, but Coldwell never signed the agreement (brokers rarely do). 

The court nonetheless found Coldwell liable and awarded the buyer triple damages. An escrow agent is required to follow the escrow terms of the purchase and sale agreement. In the event of a conflict, it should have declined to hold the money, negotiated different terms of escrow, or sought immediate guidance from a court. See Zang v. NRT NewEngland,77 Mass. App. Ct.665 (2010). 

The foregoing is not intended as legal advice. Consult an attorney to see how or if the foregoing applies to you.

Attorney George Warshaw represents buyers and sellers of homes, condos and investment properties and prepares wills and trusts for inheriting real estate. George welcomes new clients and questions at  george.warshaw@warshawlaw.com.

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