Laramie, Wyoming Real Estate: What is a Trust Account?

By
Real Estate Broker/Owner with Live in Laramie Real Estate, Laramie, Wyoming WY #12296

A trust account, also called an earnest money or escrow account, is an account established by someone who is being "trusted" to hold your money for a temporary amount of time.  In real estate, trust accounts are generally for earnest money, rental security deposits and any other situation in which a broker might briefly have custody of another person's money. 

Frog with Question MarkThe money in a trust account does NOT belong to the broker but to the person for which it is being held.  There are strict rules in place to safeguard funds being held in trust accounts. Money that finds itself in custody of a trust account is subject to those rules and to the provisions of the contract that allowed it to be placed there in the first place.

For example, when a buyer submits an earnest money check with their offer, that check will be deposited into the selling brokerage's designated trust account.  This may be an account held by the broker at a financial insitiution or that broker may use an outside entity, like a title company.  The money is not being given to the seller or to the broker. 

 
Real estate contracts will specify under which conditions earnest money may be released.  Usually, but not always, this will be back to the buyer, turned over to the seller or applied at closing to the purchase price of the property.  Other situations may exist but one rule remains constant . . .  Trust Account Monies can only be released in accordance to the contract that gave custody of the money to the broker to begin with.

So, if you were wondering what happens to the earnest money you submit, now you know.  Yes, there are risks with offering earnest money.  Your contract will spell out exactly what those risks are.  Carefully read and understand it and know that your agent and broker follow strict guidelines to minimize the risks as much as possible.

*This information is intended only to provide further clarification of real estate issues in Laramie, Wyoming. I am not an attorney.   Any consumer with questions about the real estate process should always consult an attorney of their own.

Posted by

Brenda Whitman, Broker/Co-owner                                                Office Phone: 307.460.3298

Live in Laramie Real Estate                                                                Cell Phone: 307.399.5477

302 S 2nd Street, Suite 206                                                      E-mail: brenda@liveinlaramie.com

Laramie, Wyoming  82070                                                       Office Website:  www.liveinlaramie.com

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Andrea Swiedler
Berkshire Hathaway HomeServices New England Properties - New Milford, CT
Realtor, Southern Litchfield County CT

Brenda, great information! Even if our real estate laws are different state to state, or if things are called something different, money that goes into a trustee account is governed by all sorts of laws. And if a broker uses that money it is a big nono....

Feb 17, 2011 05:31 AM #1
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Pat Haddad, ABR, CRS, ePRO, GRI
Keller Williams Indianapolis Metro NE - Carmel, IN
Carmel, Fishers, Westfield IN Real Estate Expert

Brenda--Another great post explaining a very important topic about which every buyer needs to know.  As Andrea above says, we differ from state to state, but one thing is constant---no mixing funds unless you want to spend some quiet time alone in a 8 X 8 concrete room!

Feb 17, 2011 09:03 AM #2
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Brenda Whitman, Live in Laramie Real Estate
Live in Laramie Real Estate, Laramie, Wyoming - Laramie, WY
Broker/Co-Owner, Laramie, Wyoming

Hi Andrea - I have found that first time buyers, espcially, don't understand that earnest money is not going straight into the sellers pocket so I wanted to explain where it does go and why!

Hi Pat - Trust accounts are complicated things. It's important that people know their money is being safeguarded and not just thrown to the wind...

Feb 17, 2011 12:08 PM #3
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Liz Lockhart
Riverbend Realty, Cape Girardeau, MO - Cape Girardeau, MO
GRI, Cape Girardeau Real Estate

Brenda~Violation of a trust account (trustee account, escrow account) will often mean the loss of a license and the gain of three squares and a cot (three meals and a place to sleep in jail). Your explanation is great. Interestingly enough, I don't actually know any real estate brokers who have done jail time for misuse of trust money, but I do know more than one lawyer... err, make that ex-lawyer....

Feb 17, 2011 01:15 PM #4
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Brenda Whitman, Live in Laramie Real Estate
Live in Laramie Real Estate, Laramie, Wyoming - Laramie, WY
Broker/Co-Owner, Laramie, Wyoming

Liz - Oh my!  The rules are so straight forward, especially I would think to an attorney!  I have not heard of any Broker violations around here, either.  I think most brokers strive to be very conscientious.  At least I know mine is - she's scruptiously honest!  I feel so lucky to work with her!

Feb 17, 2011 02:10 PM #5
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Gary Coles (International Referrals)
Venture Realty International - Las Vegas, NV
Latin America Real Estate

Brenda, For someone who only a month and a half ago was very unsure about blogging, you have become a phenomenal success. I've loved both the series on loving Laramie and on local sculptures and now you have a series of informative articles that are very well written -- informative and entertaining. Keep up the fantastic work. 

Feb 17, 2011 05:57 PM #6
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Tim Bradley
Contour Investment Properties - Jackson Hole, WY
Commercial Real Estate Expert in Jackson Hole, WY

Hi Brenda,

My company doesn't maintain a trust account. We decided it's just not worth the trouble, so we simply do not accept earnest money checks. Instead, the earnest money check is made out to the title company, and is deposited directly into the title company escrow account. That way, I don't have any liability for the funds, and the money doesn't have to be transferred anywhere at closing...it's already at the title company.

Feb 18, 2011 02:46 AM #7
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Brenda Whitman, Live in Laramie Real Estate
Live in Laramie Real Estate, Laramie, Wyoming - Laramie, WY
Broker/Co-Owner, Laramie, Wyoming

Thanks, Gary!  I'm trying!  Some days take more of an effort than others, I guess that just the way it is, huh?  "Phenomenal", I don't know about THAT, but thanks anyway! You and the other billion pointers have raised the bar high! ;-)

Hi Tim - We have some companies here that do it that way and I can see why!  Sounds like you have excellent title companies there as well and that makes it even more logical to do it that way.

Feb 18, 2011 02:05 PM #8
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Tim Bradley
Contour Investment Properties - Jackson Hole, WY
Commercial Real Estate Expert in Jackson Hole, WY

We have excellent title companies here. I'm spoiled. My favorite is Wyoming Title & Escrow...they give you a "Payday" candy bar at closing! Hmmm, sounds like a blog topic to me!

Feb 18, 2011 04:47 PM #9
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Brenda Whitman, Live in Laramie Real Estate

Broker/Co-Owner, Laramie, Wyoming
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