In many real estate transactions, an eager homebuyer writes an earnest money check, hands it to their real estate agent, and the agent then drives it to their brokerage’s headquarters or the office of a closing attorney or title company. It’s then handed to someone who deposits the funds into an escrow account.
This process has worked fairly well for decades; however, it has its pitfalls. Sometimes it’s difficult for the real estate agent to get to the company’s location within the allotted time frame (typically 72 hours, but sometimes 48 hours). Some agents work quite a distance from the office and may need to drive for an hour or more to get there.
Missing the deadline, of course, constitutes a breach of contract by the buyer. The seller can now cancel the contract and sell the house to a different buyer. Depending on the state, if a real estate agent is the cause of this breach, they could lose their real estate license.
In addition to timing issues, physical checks can be lost or stolen, of course. While this doesn’t happen frequently, it’s a hassle and potentially a costly situation for the buyers that are affected by it.
Finally, once checks are handed over the escrow agent, that isn’t the end of the story. Often, a real estate brokerage receptionist’s desk drawer is full of mystery checks, waiting to match them to contracts. Here again, the 72 hour deadline can be missed, or checks can be lost or stolen.
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