Deposit Check to Escrow or Title Company

Who do you make your deposit check out to?

4 Answers

Once the seller has accepted your offer to purchase and you are ready to write a deposit check, an escrow account may be opened for the purchase.  This is to the benefit of both parties, buyer and seller, because the escrow holder is neutral to the transaction.  The escrow holder will hold onto and transfer the funds and documents during the transaction.  In most cases the seller chooses an escrow holder, but this may also be negotiated in the offer or contract.  The deposit check should be made out to the escrow holder and taken to the escrow or title company. 

It is important to note that there are other types of legal escrow holders besides escrow or title companies, though rare.  For example, some states allow escrow to be handled by the buyer or seller's attorney.  Please check with the laws specific to your state.

Once the escrow is opened, the deposit check is cashed and the funds are in the escrow account.    These deposit funds, in most cases, are applied to the purchase price.

It depends on whether or not it is a private sale or one facilitated by a Realtor.  Oftentimes, with a private sale, the deposit check is payable to the attorney representing the seller who will hold the funds in escrow until the transaction in finalized. 

In the case of a property listed by a Realtor, the listing agency will usually hold the funds until closing.  In any event, the funds are credited back to you at closing.  And they are returned to you in the event that the sale did not go through and you complied with the terms of the contract.  There may be a financing contingency which would mean financing had to be approved by a date certain.  Or there may by a home inspection clause which states a time in which a satisfactory home inspection must be done and approved.

The bottom line is that a deposit check is the consideration to bind a contract.  ** The amount is negotiable**.

Thank you for writing and this is an excellent question.  In lending your deposit is referred to as earnest monies, or earnest money deposit.  All earnest monies must be carefully documented for the lender.  Therefore, if I had a choice as a lender, I would recommend that the earnest money deposit check is written to the independent third party company that is going to conduct your closing.  In most states that would be the title company or an attorney's firm - it varies from state to state.  This is the company that will be providing the lender with an insured closing letter and your title commitment in most cases.  They are also the company where the lender will wire the proceeds of your mortgage for closing.

However, if your real estate agent's broker maintains an escrow account, it's also not unusual for you to write an earnest money deposit check to the brokerage - again this varies from state to state.  At some point in the transaction, the monies will be transferred to the appropriate closing agent, again a title company or an attorney's firm.  When you write your earnest monies to a brokerage firm, typically you'll receive some sort of receipt and a copy of your check, along with a copy of your Purchase Contract.

The lender will require that your earnest monies have been deposited and have cleared the "agent's" account.  By agent in this context I mean whomever is holding that deposit and cashing the check.  It is not sufficient for lending to give us a copy of the receipt and check, we need verification that the earnest money has cleared the "agent's" account, whether a title company, real estate brokerage, or attorney's firm. You can also provide us with a copy of your cancelled check but your closing may be effected prior to your receipt of a cancelled check.

Additionally, earnest monies are usually held in an account whereby they are safe and cannot be released except on the consent of both the buyer and the seller.  This is for both parties protection.  Should an offer to purchase not work out, neither of you can demand the proceeds of your earnest monies, you both must agree to release them.  In a case of default by either party the earnest monies can become disputed, therefore it's better that a deposit is held in trust by an independent third party.

Should you be working with a seller in a For Sale by Owner situation, I would recommend that the earnest monies are deposited into a title company's account and/or an attorney's firm escrow account.  If you wrote the check to the seller, and things didn't work out, it might be impossible for you to retrieve your monies without some type of court intervention.

I hope this helps in your decision to purchase a home and Good Luck!  It's a very happy occasion when you're buying a home.

If you are refferring to the Earnest Money Deposit check when writing your contract, you would typically write the check out to the selling realtor or the selling realtor's agency.  It then typically goes into their escrow account, and once you close on the property, the amount you put down is credited towards your closing costs or money down.  Basically, you are putting up front money down on the purchase of the property, and showing the seller that you are serious about buying their house. The money is never lost, it is just held until closing occurs, and then it is applied on the final HUD statement as money that has already been paid up front.  Just always make sure it is shown on the final HUD statement that you are signing.  The closer should go over that with you and point it out for you.