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Fla. law clear on use of escrow funds

 

ORLANDO, Fla. – Feb. 7, 2011 – In January, escrow violations made up nearly 25 percent of the cases heard by the Florida Real Estate Commission (FREC), and all resulted in license suspension or revocation.
 
“Be aware of your duties when escrow funds are entrusted to you,” says Rania Soliman, Florida Realtors® manager of Member Legal Communication. “In the normal course of doing business, real estate brokers and salespersons receive trust funds on behalf of others, creating a fiduciary responsibility to the funds’ owners. Every licensee in the State of Florida must handle, control and account for all funds entrusted to him or her.”
 
Proper escrow handling is required whether a licensee represents a client/customer as a single agent, as a transaction broker or no brokerage relationship. The escrow rules apply to every broker who receives any fund, deposit, money, check or item of value from sales associates, principals, prospects or other people involved in a real estate transaction.
 
Once received, funds must be deposited by the end of the third business day into an escrow or trust account. Escrow accounts include sales escrow and property management escrow accounts.
 
“Remember that rents collected monthly and made out to the broker must also be in an escrow account,” says Soliman. “Brokers must also reconcile sales escrow and property management escrow accounts monthly.
 
Penalties

Improper handling of escrow funds can lead to revocation or suspension of a real estate license – and the licensee could be held financially liable for damages incurred by clients.
 
“An escrow violation has consistently resulted in suspension or revocation of a real estate license by the Florida Real Estate Commission,” says Soliman. “Escrow violations range from misappropriating funds entrusted to the licensee, to misrepresenting on the sale and purchase contract that the buyer has placed escrow funds with the designated escrow agent when, in fact, the buyer has not.”
 
FREC’s usual sanction for misrepresentation of escrow funds is suspending a real estate license plus fines and costs. However, if a licensee takes escrow funds for personal use, FREC usually revokes the real estate license.
 
“Handle escrow funds carefully,” says Soliman.
 
© 2011 Florida Realtors®

Related Topics: Federal regulations