The buyer, seller and broker all agree that the buyer's money will be placed in an interest-bearing account because the buyer is buying a commercial property that is scheduled to be rezoned in six months. The purchase price of the commercial property is $1.5 million so the interest for six months will be important at 8% interest. The parties agree that the broker is to receive the interest on the interest-bearing escrow account because he will be handling all the paperwork. Is this acceptable?

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Business

Micah Norton

21 October, 10:08

The buyer, seller and broker all agree that the buyer's money will be placed in an interest-bearing account because the buyer is buying a commercial property that is scheduled to be rezoned in six months. The purchase price of the commercial property is $1.5 million so the interest for six months will be important at 8% interest. The parties agree that the broker is to receive the interest on the interest-bearing escrow account because he will be handling all the paperwork. Is this acceptable?

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Parker Orr · Answer 1

The broker cannot do this since

Explanation:

There are two main errors in this proposal:

the escrow account can be an interest bearing only if deposit 20% or less of the purchase price of the property. Apparently in this case the property was being sold at $1.5 million, so the escrow account should only hold $300,000 in an interest bearing account. second, real estate commissions forbid brokers and agents from receiving interest from an interest bearing escrow account unless they are the owners of the property (the sellers or lessors depending on the operation).