In most contracts, signatures and some type of consideration between both parties is enough to constitute a legally binding agreement. However, in Real Estate, while not technically required to create a contract, it is more common than not to use earnest money to help secure a contract between a seller and potential buyer. Earnest money is a good faith gesture by the buyer to show the seller that they are making a serious, bona fide offer.
Understanding the Earnest Money Deposit - Morse Real Estate Iowa and Nebraska Real Estate
When the buyer includes earnest money with a purchase contract, the agent is required to present both to the listing agent. The way earnest money is handled is an ethical and legal obligation held by agents and brokers and outlined in the Iowa Administrative Code. In Iowa, the Iowa Code allows for brokers to hold the earnest money deposit in a trust account according to certain stipulations.
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The ethical obligation to clients requires a good faith, business manner approach to be taken, which includes promptly depositing earnest money with the contract to make it enforceable.
While there are some extreme circumstances which make it difficult or impossible for a broker to deposit the earnest money within the five banking iowa real estate law earnest money periodit should be the exception rather than the norm. As earnest money is considered part of the contract, it only makes sense, that it is put in a trust account simultaneously or as close to the signing of a contract as possible.
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