What is an Escrow Deposit? An escrow deposit is also referred to as a good-faith deposit or earnest money deposit. It is a monetary deposit a buyer gives when contracting on a property for sale. The escrow deposit shows the buyer's good faith intent to close the transaction as promised.

Did you know that there are laws that brokers and REALTORS have to abide by when receiving and handling escrow deposits?  To begin, let me explain that the Florida Real Estate Commission (FREC) is the governing body that sets the laws for real estate brokers and REALTORS.  FREC enforces the escrow laws to ensure that consumers may safely entrust their money to a broker. The guidelines set are in the best interest of the real estate industry as a whole.

Here is a quick view of the laws and guidelines that a broker (does not include title companies & attorneys) must follow when electing to have an escrow account:

• The escrow account must be in an account within the state of Florida
• The account can hold funds that belong to persons other than the broker
• At least one broker in the firm must be authorized to sign checks on the account (other members of the firm may be authorized to sign)
• The sales associate receiving an escrow deposit must deliver it to the broker by the next business day
• The broker must place the deposit in an escrow account no later than the third business day from receipt of the customer
• The broker may place the funds in an interest-bearing account with permission of all parties - but must disclose the amount of time to disburse interest and name person to receive the interest
• The broker is the custodian of the escrow funds, but does not legally control the funds
• The buyer has control of funds until the seller has accepted an offer to purchase from the buyer
• Upon acceptance, both buyer and seller legally control the deposit
• The broker should not disburse funds to either party with out a written agreement from both parties

If the buyer and seller do not close on the transaction, and there is a dispute/conflicting demands on the funds the broker must notify FREC in writting with in 15 business days, and file a Notice of Escrow Dispute after receiving an escrow demand from either party.

In addition, the broker must begin one of the following settlement procedures with 30 business days after receiving a demand for escrow from either party:

• Request the brokers commission he/she is entitled to for the transaction in question.  The broker may retain the amount of the claim in the escrow account until the dispute is settled
• Submit the dispute for mediation, if all parties agree.  Payment for mediation must also be agreed upon by both parties in writing.  The mediator assists the buyer and seller in reaching a mutual agreement, and does not have a binding decision 
• Submit the dispute for arbitration, if all parties agree.  Parties are legally bound by the arbitrator's decision
• Submit the dispute for litigation.  Both parties are bound by litigation.

In conclusion, if the broker does not follow the laws set forth he/she will be in violation and penalties may be imposed.  It is important, that all parties understand that there are rules and obligations that the broker has to abide by when escrow funds are in question.  Therefore, if/when their is a dispute regarding who should receive the escrow deposit, the broker may not disburse the funds to either party, until a mutual agreement between the buyer and seller is reached.  They must provide a written agreement to the broker explaining exactly how the funds should be disbursed.  If an agreement is not reached, by law, the broker must notify FREC and the buyer and seller will then be given a choice to either mediate, arbitrate or litigate for the escrow deposit .

**These laws apply to the state of Florida and may vary from state to state**

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