MAR Online Blog

Q: If a transaction falls apart and there is a dispute over the release of escrow funds, can the seller place the property back on the market and go under contract with a new buyer?

A: Maybe. It is a best practice to fully resolve any outstanding issues with the failed transaction prior to placing the property back on market and proceeding with a subsequent purchaser. Unfortunately, not all situations are able to be resolved in a timely manner. If this is the case, the seller should always be advised to consult with their legal counsel to determine whether they are at risk of any legal liability if they move forward with a new buyer. The question becomes whether the dispute is solely over the disbursement of the escrow funds, or whether there is a dispute relating to the underlying purchase contract, as well. If it is the former, the parties should sign a release from the contract, noting that the distribution of escrow funds remains unsettled (see MAR Form #514). Entering into a new contract to purchase while there is a dispute as to the enforceability of the first contract to purchase may place the seller at significant risk of liability because they may become bound to sell one property to two different buyers.

If, after consultation with their attorney, a seller determines that it is appropriate to place the property back on the market, the escrow agent should continue to hold the disputed funds until the parties are able to come to an agreement or there is a court order directing the disbursement of the funds. As long as a proper accounting of the funds is maintained, there is no prohibition to the escrow agent holding a deposit from a new buyer on the same property.

Q: My seller does not want dual agency – can I be a facilitator for a buyer?

A: No, you may not act in an agency capacity for one party, and as a facilitator, which is a non-agent relationship, with the other party in the same transaction. If your seller client does not consent to dual agency, you may work with an unrepresented buyer as a customer or refer them to another agent. There is no obligation for a listing agent to establish a client relationship with an unrepresented buyer. The listing agent may remain solely as the seller’s representative in the transaction and move forward with the buyer as a customer. In this event, the listing agent continues to owe the full suite of fiduciary duties (obedience to lawful instructions, loyalty, disclosure, confidentiality, accounting, and reasonable care) to the seller client, but is obligated to present the property honestly and accurately and disclose known material defects to the buyer.

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Written by: Justin Davidson, General Counsel; Catherine Taylor, Associate Counsel; and Jonathan Schreiber, Legislative & Regulatory Counsel.

Services provided through the Massachusetts Association of REALTORS® is intended for informational purposes and does not constitute legal advice, nor does it establish an attorney-client relationship. The Massachusetts Association of REALTORS®, by providing this service, assumes no actual or implied responsibility for any improper use of responses to questions through this service.  The Massachusetts Association of REALTORS® will not be legally responsible for any potential misrepresentations or errors made by providing this service. For more information regarding these topics authorized callers should contact the MAR legal hotline at 800-370-5342 or e-mail at legalhotline@marealtor.com.