Definition of Deposit Receipt for Real Estate

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Definition: In the old days, like back when Sonny and Cher wailed I Got You Babe, a deposit receipt was slang for a purchase contract. It consisted of one page, and contained a sales price, initial deposit, balance of down payment and / or loan amount. It was called a deposit receipt because it constituted the buyer's receipt for an earnest money deposit. Yet, it was really a purchase contract.

Deposit Receipt in Today's Market

Fast-forward to today, and a deposit receipt is the form used to show receipt of an earnest money deposit. Buyers typically make an earnest money deposit in an offer to buy a home. The earnest money is usually payable to a title company, escrow company or real estate brokerage. One of those entities then issues a receipt for the deposit, which proves that the buyer actually handed over the earnest money deposit.

The trend today is for the title company and / or escrow officer to issue the deposit receipt. This is generally issued after the buyer's earnest money deposit has been deposited into the title or escrow company's bank account. It will often contain the following:

  • Name of title company
  • Address of title company
  • Name of title company's bank
  • The title company's bank account number
  • The receipt number
  • The escrow number
  • The property address
  • Date of deposit
  • Name of person who received the receipt
  • Amount of the deposit
  • Name(s) of the payor, which is usually the buyer
  • Copy of the original check

If the deposit receipt is handled by the real estate brokerage, it will be entered into the broker's trust account. To deposit funds from a buyer into any other kind of trust account might be a violation of state law, and real estate brokers are not allowed to co-mingle funds.

In California, for example, most of the violations investigated by the Bureau of Real Estate involve trust fund records. This is a reason that some real estate brokerages have elected not to handle trust funds at all, and they often expect a buyer to make the check payable to a title company. If a real estate broker collects a deposit, it must be recorded in the trust fund record log, even if it is not deposited into the bank.

How to Handle the Initial Deposit Check

A common way to handle the initial deposit check is to allow the buyer to wire the funds directly to the title or escrow company's bank. But a home buyer will still need evidence of that deposit to produce for the buyer's mortgage lender, and this why a deposit receipt is imperative for a home buyer to obtain.

The lender will want 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 check the borrower's bank statement to make sure the money in the buyer's bank account was not recently deposited from an unknown source.

It's what is commonly referred to as seasoning of funds. A mortgage lender needs to identify the source of the funds. The funds must be in the buyer's account for a certain time period, after which time the source of funds is not nearly as important. The lenders look for documentation beyond the deposit receipt to make sure the borrower is using her own money to buy a home.

We've had enormous issues created when a family member, for example, writes the earnest money deposit. It's not in the buyer's name. Therefore, it did not come from the buyer, and the lender will need to source the funds. It can also be a Catch 22 because there will be more problems if the funds simply appear from a family member into the buyer's account. It creates all sorts of complications.

Also Known As: receipt for deposit

Common Misspellings: deposit recipt

Examples: Even Cher got a deposit receipt when she bought land to build a home on the Big Island of Hawaii. She bought the land for $2.9 million and built an impressive Balinese-style home, which she later sold for almost $9 million. The buyer of Cher's home received a deposit receipt that reflected the buyer's earnest money deposit.

At the time of writing, Elizabeth Weintraub, CalBRE #00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.