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Alabama Real Estate Recovery Fund: Definition & Purpose

Instructor: Tara Schofield

Tara has a PhD in Marketing & Management

The Alabama Real Estate Commission protects the public and clients from errors or problems caused by real estate agents. The recovery fund is a tool the commission uses to cover financial losses. Learn how the fund works.

What Is the Recovery Fund?

You just closed on a home where you helped your buyer find the perfect property for his family. It was a difficult transaction because the seller and the seller's broker didn't get along. The seller even sued his agent, Dominick, for causing him to lose $20,000 on the sale of the home. You know you took care of your client and there were no problems with the purchase of the home. The issues were between the seller and Dominick. When all was said and done, the seller was paid $20,000 from the Alabama Real Estate Recovery Fund.

The recovery fund is an account created by the Alabama Division of Real Estate that pays clients or vendors who have lost money because of the acts of a licensed real estate agent. The fund was established to protect buyers, sellers, or other interested parties from being hurt by an agent or broker. The fund will cover actual or compensatory damages but will not cover interest or court costs associated with a claim.

What Happens With Claims?

When a client files a claim to the Alabama Real Estate Commission, the claim is reviewed. Documentation must be included, supporting the claims that the agent acted inappropriately and knowingly or unknowingly caused the client to lose funds. The commission will review the claim and determine if a payment is appropriate.

There are limits to what will be awarded. Each incidence has a limit of $25,000, regardless of how many claimants file for an award. Additionally, a maximum of $50,000 is paid per licensee. In Dominick's situation, the $20,000 was under the incidence maximum. Had two claimants filed for $20,000 each, a total of $25,000 would have been paid out for both claims.

There are other limits on who can receive money from the fund. If a person is not licensed or has an inactive license, a claim cannot be filed against him or her. Also, if a child, spouse, or parent files a claim against their family member, the claim will be denied.

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