Escrow Accounts are governed by Florida Administrative Code (FAC) 61J2-14. Escrow accounts hold money in trust on behalf of someone other than the Broker. It is essential that best practice is applied in maintaining the account and its contents. Florida statutes and FREC’s rules are clear as to how sales escrow funds are handled.
Brokerages which do not have an escrow account usually have an arrangement with a title company or law firm to hold the funds. Associates must know where the escrow account is and must deposit escrow funds into it as the time limits and the brokerage standards of practice demand.
Information for Office Meetings
While the Broker and accounting staff will be clear about these standards, this summary may be a valuable topic for office meetings to ensure that Associates understand the importance of doing everything correctly. It is also useful for Associates, especially those who are new to the business, to be able to explain to their customers how escrow (aka good faith, binder, earnest money) deposits are handled.
Escrow Account Basics
- Must be kept in the state of Florida.
- Must be in only a bank, credit union, savings and loan institution, a trust company, or a title company with trust powers.
- At least one of the firm’s brokers must be an authorized signatory.
- A sales escrow account may hold up to $1000 of the firm’s money.
- There must be a monthly account reconciliation done and the non-escrow funds must be shown as separate items.
- Escrow accounts are usually non-interest bearing. If a buyer demands interest on the deposit, both parties must agree in writing and must state how the accrued interest will be distributed.
- Sales Associates must pass escrow money to their Broker’s office by the end of the next business day. It is good practice for them to hand over the money as soon as is practicable. Accidents do happen!
- The Broker must deposit the funds into the account no later than the third business day after the customer has handed it over.
- If the account is with a title company, the Associate who prepared the contract must include on it, the name address and telephone number of the title company or law firm.
- The Broker must seek confirmation from the escrow agent within ten business days that the escrow money received. If the contract allows for more than one deposit, the Broker must make separate requests for each amount.
- The Broker must confirm receipt(s) with the seller’s Broker. In this way, all interested parties are kept fully informed.
Associates are not responsible for controlling escrow deposits. Many buyers assume that because they gave a check to “their Realtor” that the Realtor can refund it on demand. This is not the case. Escrow deposits “belong to the contract” and may only be disbursed in accordance with the terms and conditions of that contract.
It is a best practice for Associates to explain this to the buyers and sellers to avoid confusion or disagreement should the contract fail.
The Broker decides whether personal checks, money orders, bank drafts or cash may be used for the escrow deposit. Associates must tell their buyers in advance what is acceptable. Best practice would direct buyers to go to a bank or to a Western Union office, for example, in good time if cash is not acceptable.
The more Associates and customers understand the standards of practice associated with handling and accounting for escrow deposits the less chance there is of a misunderstanding leading to either arguments, unfair demands or legal disputes. To learn more about our training programs please click here to contact us.