Definition:
The deposit receipt is a form used to show the receipt of earnest money deposit, commonly used in real estate transactions.
Definition and Example of Real Estate Deposit Receipt
The earnest money deposit is typically paid to the title company, escrow company, or real estate agent when submitting an offer to purchase a home. This entity prepares the deposit receipt to prove that the buyer has indeed submitted the earnest money deposit.
The current trend is for the title company and/or escrow officer to issue the deposit receipt. It is usually issued after the earnest money deposit from the buyer has been deposited into the bank account of the title or escrow company. It often contains the following information:
- Name of the title company
- Address of the title company
- Name of the title company’s bank
- Bank account number of the title company
- Receipt number
- Escrow number
- Property address
- Date of deposit
- Name of the person who received the receipt
- Amount of deposit
- Names of the payee, which is usually the buyer
- Copy of the original check
If the real estate agency is handling the deposit receipt, it will be entered into the agent’s trust account. A buyer’s deposit in any other type of trust account may violate state law, and real estate agents are not allowed to mix funds.
Alternative Name: Deposit Receipt
For example, a couple decides to buy a home and chooses to make a deposit. They start transferring funds to the title company’s bank. Consequently, a real estate deposit receipt is issued to the couple, verifying that they have completed the transfer for the earnest money deposit.
How Does the Deposit Receipt Work?
A common way to handle the initial deposit check is to allow the buyer to transfer the funds directly to the title company or escrow bank. The buyer will still need proof of this deposit to present to their mortgage lender, which is why obtaining the deposit receipt is crucial for the buyer.
Note: The lender would like to see that the original earnest money deposit came from the buyer’s personal funds. If it was paid by a third party on behalf of the borrower, the mortgage lender will require additional documentation. In turn, the mortgage lender will review the borrower’s account statement to ensure that the funds in the buyer’s account have not been recently deposited from an unknown source.
This process is commonly referred to as “money seasoning.” The mortgage lender needs to trace the source of funds, which should have been in the buyer’s account for a certain period. After this period has passed, the source of the funds becomes less critical. Lenders look for documentation behind the deposit receipt to ensure that the borrower is using their own funds to buy a home because if not, they may not be able to meet future mortgage payments.
Source: https://www.thebalancemoney.com/definition-of-deposit-receipt-for-real-estate-1798533
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