Q: What happens if a buyer wants to change the settlement agent after a contract is already ratified? Also, what happens to the EMD if it was already deposited with the first settlement agent?
A: Section 55.1-1006 of the Code of Virginia states, “A purchaser or borrower in a transaction related to real estate in the commonwealth shall have the right to select the settlement agent to provide escrow, closing, or settlement services in connection with the transaction.” Nonetheless, once a contract is ratified with a particular settlement agent and holder of escrow funds identified, those become terms of the contract. If the settlement agent is not yet holding any escrow funds, the buyer can change the settlement agent by delivering a notice of change to the seller. However, if the settlement agent is already holding funds in escrow, the contract needs to be modified. The parties would need to execute an addendum to the contract identifying the new settlement agent and how the escrow funds will be transferred.
What is the Legal Hotline?
The Legal Hotline is a member benefit that has been supporting members for over 25 years. Our team of lawyers answers your important questions about real estate transactions quickly and accurately (usually within three business hours!).