Escrow & Disclosure in Virginia Real Estate

Instructor: Ian Lord

Ian has an MBA and is a real estate investor, former health professions educator, and Air Force veteran.

In this lesson we will examine specific Virginia real estate law regarding real estate agent responsibilities for escrow account management and property disclosures.

Virginia Specific Escrow and Disclosure Laws

Aaron is a brand new real estate agent in Virginia and ready to go to work listing homes for sale. As a Virginia licensed real estate agent, Aaron is obligated to follow Commonwealth-specific laws regarding the management of escrow accounts and disclosure. Let's review some of the specific Virginia laws that apply in these cases.

Virginia Escrow Laws

If Aaron is going to provide escrow accounts for his clients to hold money as a third party until closing, he must abide by Virginia's specific laws. These state that the account must be set up with a federally insured institution, such as a bank, and be designated as an escrow account for the specific real estate transaction. Every check deposited into or written from the account, as well as statements, must be clearly labeled as escrow funds. Overall responsibility for supervision of escrow belongs to Aaron's supervising broker.

Some of the money within the escrow account may be used to pay Aaron's costs or fees, but he must receive payment as a check from the account rather than just pull money out as the account administrator. In the escrow account agreement, Aaron must define how any interest accrued in the account will be distributed to the parties. If Aaron or his supervising broker violate these rules, or fail to report violations or other improper conduct regarding escrow account maintenance to the Commonwealth Real Estate Board, they'll face disciplinary action.

Virginia Disclosure Laws

During the period between putting a property under contract and concluding the deal at the closing table, Aaron must provide buyers with certain mandatory disclosures. The purpose of disclosure is to inform buyers of any potential problems, although legally Aaron is only required to inform buyers about subjects mandated by Virginia law. One of the most common disclosures that Aaron must be aware of involves advertising; he must advertise using his licensed business entity name, which identifies himself as a real estate agent. There are rules about formatting, too: Title 55, Chapter 27 of the Code of Virginia states that properties consisting of fewer than four residential housing units must include these disclosures in at least 10 point font.

Some of the homes Aaron may come across are located in resource protection areas under the Chesapeake Bay Preservation Act. If the property is located in this zone, the disclosure informs the buyers that they should be very careful about making sure their plans to use the property do not conflict with the law. Buyers will want to be sure that they can comply with the law before completing the transaction.

Many parts of Virginia are home to military airfields. Noise and the possibility of accidents are always a concern when military fighters, cargo planes, and helicopters are training or performing missions. Aaron must inform buyers if the home is located in an area designated as a noise zone or accident potential zone according to local zoning maps.

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