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
