Florida Real Estate Sales Associate Examination Content OutlineReal Estate Brokerage Activities and ProceduresMedium
A Florida real estate broker is managing an escrow account. Which of the following statements accurately describes the broker's responsibility regarding interest earned on escrowed funds?
- AInterest earned on escrowed funds typically belongs to the party who ultimately receives the funds, unless otherwise agreed in writing.
- BNo interest can be earned on escrow accounts in Florida.
- CThe broker must remit all interest earned to the Florida Real Estate Commission (FREC).
- DThe broker may keep any interest earned on escrowed funds as compensation for managing the account.
Show answer & explanationAnswer & explanation
Correct answer: A. Interest earned on escrowed funds typically belongs to the party who ultimately receives the funds, unless otherwise agreed in writing.
Unless otherwise stipulated in a written agreement, interest earned on escrow accounts typically belongs to the principal party entitled to the funds. Brokers generally cannot keep interest on client funds.
Why the other options are wrong
- B. Interest can be earned on properly established interest-bearing escrow accounts, if permissible by agreement.
- C. FREC does not collect interest from private escrow accounts.
- D. This constitutes commingling or conversion, which is prohibited.
Escrow Account Interest (Florida)
In Florida, interest earned on escrowed funds belongs to the principal party entitled to the funds, unless there is a written agreement specifying a different disposition.
- Interest follows principal.
- Written agreement can alter disposition.
- Broker cannot unilaterally keep interest.
Memory trick: Interest follows the money's true owner, unless a contract says otherwise.