Question

Buyer Yancy offered $6,750 in earnest money with an offer that was accepted. Both Yancy and the seller want the escrow account to be interest bearing. Will this be allowed?

A) Yes, escrow accounts can be interest bearing if both parties agree.B) Yes, escrow accounts can be interest bearing if the escrow amount is over $5,000.C) No, escrow accounts cannot be interest bearing unless the escrow amount is over $10,000.D) No, escrow accounts can never be interest bearing.

Answer 1

Escrow accounts can be interest bearing if both parties to the real estate transaction agree, and if they are in compliance with state regulations. The amount of earnest money does not typically affect the ability to accrue interest.

Step-by-step explanation:

Answer: A) Yes, escrow accounts can be interest bearing if both parties agree. In real estate transactions, an earnest money deposit is a show of good faith by the buyer. It is typically held in an escrow account during the process of closing on a house. Whether or not an escrow account can earn interest depends on the agreement between the buyer and the seller, as well as state laws and regulations. In this case, since both Buyer Yancy and the seller have agreed that they want the escrow account to be interest-bearing, it would be allowed provided that it complies with state regulations. The specific amount of money in escrow does not typically affect the ability to accrue interest unless specified by a particular law or regulation. Therefore, the amount of $6,750 does not inherently disqualify the account from accruing interest.

Answer 2

A) Yes, escrow accounts can be interest bearing if both parties agree.

Step-by-step explanation:

Usually escrow accounts are not interest bearing, mainly because the money is not held for a long time, at most a few months. The US Department of Housing and Urban Development (HUD) doesn't say anything about escrow funds being deposited in interest bearing accounts, but it doesn't prohibit it.

Therefore if both parties agree, then there should be no problem with it.