UPDATE: HB 222 – the Escrow Agent Written Agreement legislation, our current Call for Action. We’re please to share that HB 222 passed the full House this morning with a vote of 138-0. Over 1,500 emails were generated among the members of the full House of Delegates, Environment & Transportation Committee and Real Property Subcommittee within a 5-day window. We will keep you updated when it is scheduled for the Senate. Thanks much for everyone’s advocacy efforts.
Currently, your House of Delegates legislator is about to vote on HB 222 - the Escrow Agent Written Agreement (as early as Thursday this week 2/28) and we need you to urge your legislator to support HB 222 HERE...Please email your legislator to support HB 222 - the Escrow Agent Written Agreement, which protects both homebuyers and sellers by requiring a process for the handling of earnest money deposits which is similar to the process outlined within the Real Estate Brokerage Act HERE.
In recent years, some real estate brokers report nearly one-third of all transactions involve escrow holding entities that are not subject to the escrow requirements of the Real Estate Brokerage Act. Some of these companies are title companies but can also include other types of businesses like notary companies and attorneys.
In the past and for years, homebuyers gave earnest money deposits almost exclusively to one of the real estate companies involved in the transaction. The Real Estate Brokerage Act sets out specific requirements for the brokers and agents handling those monies, including:
· Earnest money shall be deposited promptly, but not longer than 7 business days
· Earnest money shall be deposited in an insured financial institution
· How to release the money
· Record keeping requirements
Why HB 222 is So Important:
When deposits are held by a real estate broker, state law prescribes how that money is handled to ensure it is deposited timely in secure accounts. The law also specifies: how that money is released during a transaction; and specific penalties, including access to a “Guarantee Fund” to assist the homebuyer in recovering their money.
If a homebuyer uses a company not subject to the Real Estate Brokerage act, there may be no direction from either party about: how soon the money should be deposited; what kind of account it can be deposited in; and what are the conditions that must be met to release the money. Sometimes checks are not deposited in an account and a seller finds out that the buyer did not have enough funds to cover the deposit money. Other times, a transaction falls apart, and the money is released to the wrong party. Without a written agreement by the parties, homebuyers and sellers are not protected. Currently, Maryland REALTORS® encourages the use of such a written-agreement which is available on their website.
Maryland REALTORS® Position:
REALTORS® support legislation which requires companies with little regulation of these accounts to at least enter into a written agreement with the buyer and seller informing them about how the earnest money will be handled and returned. If HB 222 is passed, the industry already has a model form to guide compliance which was developed by the Maryland REALTORS® and the Maryland Land Title Association and is currently encourage for use to ensure buyers and sellers have a clear understanding of what will occur with their deposit money.
Although HB 222 is new this Session, there was a similar bill that addressed the same issue last year. Unlike the disclosure approach taken in HB 222, however, that bill would have subjected most of the companies holding escrow money to the same standards as real estate companies subject to oversight from the Attorney General’s office. Due in part to concern over the regulatory approach that legislation took, it was unsuccessful.