A Florida real estate broker is managing an escrow account. Which of the following statements regarding interest-bearing escrow accounts is true?
- AOnly the broker is permitted to retain the interest earned on an interest-bearing escrow account.
- BInterest earned on escrow accounts can only be used to offset bank service charges.
- CIf an escrow account is interest-bearing, the broker must obtain written permission from all parties to the transaction to place funds in it and specify who will receive the interest.
- DAll interest earned on escrow accounts must be remitted to the Florida Real Estate Commission (FREC).
Show answer & explanationAnswer & explanation
Correct answer: C. If an escrow account is interest-bearing, the broker must obtain written permission from all parties to the transaction to place funds in it and specify who will receive the interest.
If a broker places escrow funds into an interest-bearing account, they must first obtain written permission from all interested parties to the transaction. This agreement must also specify who is entitled to the interest earned, as the broker cannot unilaterally keep it.
Why the other options are wrong
- A. The broker cannot unilaterally retain the interest; it must be agreed upon by all parties in writing.
- B. While some interest might offset service charges in specific scenarios (like property management accounts with specific agreements), the general rule for sales escrow is broader and requires agreement on who gets the interest.
- D. Interest earned on escrow accounts is not remitted to FREC; it belongs to the parties as agreed upon.
Interest-Bearing Escrow Accounts (FL)
In Florida, if a real estate broker uses an interest-bearing escrow account for transaction funds, they must obtain written agreement from all parties regarding the placement of funds and the disposition of any earned interest.
- Requires written permission from all parties.
- Agreement must specify who receives the interest.
- Broker cannot keep interest without agreement.
- Protects against commingling of funds and unauthorized profit.
Memory trick: Interest earned? Get it in writing, from everyone concerned.