A Florida real estate broker is managing an escrow account. Which of the following statements regarding interest earned on an escrow account is TRUE?
- AIf an interest-bearing escrow account is used, the broker must have written permission from all interested parties to disburse the interest.
- BAll interest earned on escrow accounts must be remitted to the Florida Real Estate Commission (FREC).
- CThe broker may keep any interest earned on an escrow account as additional compensation for their services.
- DInterest-bearing escrow accounts are prohibited in Florida real estate transactions.
Show answer & explanationAnswer & explanation
Correct answer: A. If an interest-bearing escrow account is used, the broker must have written permission from all interested parties to disburse the interest.
Interest-bearing escrow accounts are permissible in Florida, but the broker must obtain written permission from all parties to the transaction regarding who will receive the interest. Without this, interest cannot be disbursed and must be handled according to specific rules, often requiring it to be paid to the Florida Housing Finance Corporation.
Why the other options are wrong
- B. Interest is not automatically remitted to FREC; it goes to the agreed-upon party or, failing that, to a specific state entity.
- C. The broker cannot keep the interest unless specifically agreed upon by all parties in writing, which is rare for earnest money.
- D. Interest-bearing accounts are allowed, provided proper procedures are followed.
Interest-Bearing Escrow Accounts (Florida)
In Florida, real estate brokers may use interest-bearing escrow accounts for earnest money, but strict rules apply regarding the disbursement of any earned interest.
- Permitted with specific conditions.
- Written agreement from all parties is required to disburse interest.
- Without agreement, interest may be paid to the Florida Housing Finance Corporation.
Memory trick: INTEREST on ESCROW: Get ALL PARTIES' WRITTEN WORD, or the State takes the reward.