Broker. Escrow Management. Chapter 4. Copyright Gold Coast Schools 1

Transcription

1 Broker Chapter 4 Escrow Management 1

2 Learning Objectives Define the term escrow account Define the terms commingle and conversion Describe the requirements for establishing an escrow account(s) Describe the requirements for timely deposit of escrow funds Describe the procedure for handling postdated checks 2

3 Learning Objectives Describe the requirements for maintaining an interest-bearing escrow account Describe the procedure for disbursing funds from an interest-bearing escrow account Describe the requirements for maintaining escrow records Define the term trust liability Calculate the broker's trust liability 3

4 Learning Objectives Calculate the reconciled bank balance Prepare a monthly reconciliation statement Distinguish among the four settlement procedures Recognize exceptions to the FREC's notification and settlement requirements 4

5 Establishing Escrow Accounts Established for the deposit of money a third party holds in trust for others At least one active broker must be a signatory on an escrow account A designated unlicensed employee may also be a signatory on an escrow account Holding of escrow Any federally insured institution located in Florida If designated in a purchase and sale agreement escrow funds may be held by a Florida title company or a Florida attorney 5

6 Establishing Escrow Accounts Commingling Illegal practice of mixing the broker s personal funds with the escrow funds. Exception to open and maintain the account $ 1,000 for sales escrow accounts $ 5,000 for property management escrow accounts 6

7 Title Companies and Attorney Escrow Accounts Escrow Accounts are not required for a broker May use Title Company or Attorney Escrow 475 has no jurisdiction (EDO) Timely deposit of fund is in effect 7

8 Escrow (Trust) Deposits Deposits must be placed in escrow account immediately defined as Check to Broker Check in Escrow Day Deposit Received 1 Business Day 3 Business Days Day not counted Day 1 Day 2 Day 3 Post dated checks or promissory notes require Seller s Consent before accepting 8

9 Immediately (Example) Sun. Mon. Tues. Wed. Thurs Fri. Sat. $ 1 st Bus. Day Buyer gives check to Agent Check must be given to Broker 2 nd Bus. Day 3 rd Bus. Day Check must be in Escrow 9

10 Establishing Escrow Accounts Receipt of a postdated check or promissory note as an earnest money deposit must be Disclosed to all parties immediately Noted on the purchase and sale contract 10

11 Interest-bearing Escrow Accounts All parties to the transaction must give written consent Designate the party to receive the interest When it is to be disbursed Brokers designated to receive interest Must transfer the interest to their operating account Monthly Failure to stop interest from accruing May result in a notice of noncompliance 11

12 Monies Paid in Advance Commissions paid in advance should be deposited into escrow account May be released when earned Time-Share Act prohibits a licensee from collecting an advance fee for listing a time share 12

13 Broker s Records The broker must maintain any relevant records For at least 5 years or 2 years after the conclusion of all litigation including appellate proceedings Whichever is later 13

14 Monthly Reconciliation Statement Trust liability is other people s money being held by the broker at any point in time Trust liability should equal the reconciled bank balance Determining reconciled bank balance Bank statement balance Less outstanding checks Plus deposits in transit Equals reconciled bank balance 14

15 Broker s Records Conversion - the unauthorized use of another person s property. Broker is not responsible paying a check or draft unless: Unpaid due to broker s negligence and Party was damaged 15

16 Escrow Disbursement Dispute Process Conflicting demands occur When a broker receives dissimilar instructions from buyer and seller Which cannot be resolved Good faith doubt A party s faithfulness to their duty or obligations as set forth in a contract or A broker has indications that a party to the transaction is not acting in good faith 16

17 Escrow Disbursement Dispute Process The first step in the dispute resolution process is to notify FREC in writing within 15 business days Of the party s last demand or After having good faith doubt as to a party s honest intentions 17

18 Escrow Disbursement Dispute Process Second step Select one of the dispute resolutions procedures Notify FREC in writing within 30 days Of receiving the last demand or After having good faith doubt 18

19 Dispute Resolution Procedures Mediation - negotiated settlement Arbitration - binding determination Litigation Interpleader Declaratory judgment Escrow disbursement order Contact FREC within 10 days if settled before EDO complete 19

20 Exceptions HUD owned properties A buyer s notice of intent to cancel a contract on a purchase of a residential condominium unit New unit (developer) 15 days Resale unit 3 business days If a buyer in good faith fails to satisfy the terms specified in a financing clause in a contract 20

21 Notification of Special Type of Properties Property Management Deposits and Rents Condominium Unit Purchase Unclaimed Escrow Funds 21

22 Brokers Commissions Antitrust Laws Conspiracy Splitting up Market Areas Conspiring to Boycott Requiring a minimum commission before allowing listings to be circulated (MLS) Liens on Real Property With prior disclosure 22