Due to risks from LLR, any BIC should only disburse held good funds earnest money per these two recommendations:
- A disbursement agreement signed by all the buyers and all the sellers. Can self settle (split the money somehow) or use a mediator to assist with self settlement.
- A court order from a court of competent jurisdiction. Only BIC holding the earnest money can volunteer to file a magistrate interpleader (a limited equity jurisdiction given to magistrate judges for amounts up to $7500). Sellers and or buyers can hire law firm to pursue getting this court order from a court of competent jurisdiction (magistrate judges do not have this equity jurisdiction).
In April 2017, the SCR executive committee approved updating the residential contract with this language starting on September 1, 2017.
Some brokerages do not take possession nor hold earnest money and use one or several law firms to hold the earnest money in order for the BIC to avoid these earnest money disputes.