How does a real estate broker controlled escrow work?

How does a real estate broker controlled escrow work?

A real estate “broker controlled” escrow, also known as a “broker run” escrow, means

that a real estate broker is conducting the escrow while performing acts in the course of

or directly incidental to a real estate transaction in which the broker is a party or in which

the broker is an agent performing an act for which a real estate license is required. For

example, a real estate broker representing a buyer in the purchase of real property may

also perform escrow services in connection with that purchase pursuant to the

exemption of the Escrow Law. However, if the real estate broker were performing

escrow services with respect to a transaction where they are not a party or not an

agent performing underlying real estate services, they would be unlawfully performing

escrow services and in violation of the Escrow Law. Under the latter scenario, the BRE

could issue a Desist and Refrain Order against that broker for engaging in an activity

that is in violation of Division 6 of the Financial Code and for not being exempt under the

Escrow Law.

 

Because non-independent escrows have restrictions under the Escrow Law, you should

be aware of these restrictions and properly identify and confirm the escrow’s license

status with their regulatory agency before working with the person or company.

Recently, a regulation of the California Real Estate Commissioner was adopted which

requires that if a real estate broker is using a fictitious business name with the word

“escrow” in it, the name must also include the term “non-independent broker escrow” in

any advertising, signs or electronic promotional material. For example, if ABC Realty

were also doing business as ABC Escrow, they would have to state that they are “ABC

Escrow, a non-independent broker escrow.” This is important for you to know since

some names of escrows may suggest that they are doing business as a licensed,

independent escrow company when in reality, they are not independent.

It is to be noted here that real estate brokers who conduct broker escrows are

responsible for those escrows, cannot delegate that responsibility, must follow the

California Real Estate Law (which is set forth in Sections 10000, et seq. of the Business

and Professions Code, and which includes Regulations of the Real Estate

Commissioner) with respect to the handling and accounting of monies provided to the

brokers in trust, and appropriate discipline can be imposed against those licensees by

the BRE where violations of the law have occurred.

 

Reference: http://www.dre.ca.gov/files/pdf/escrow_info_consumers.pdf

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