Escrow funds cannot be commingled with the broker's personal funds or operating funds. Commingling funds is the illegal practice of mixing a buyer's, seller's, tenant's, or landlord's funds with the broker's own money or of mixing escrow money with the broker's personal or brokerage funds.
An escrow account, therefore, is associated with the type of monies held in the account. What makes an account an escrow account is that the account is used to hold funds belonging to anyone other than the broker.
It is not mandatory to include the word escrow or trust in the account name. However, it is advisable to use the word escrow or trust in the account name to clearly indicate for IRS purposes that the funds in the account do not belong to the broker and therefore are not subject to seizure by the IRS. Such funds include earnest money tendered with respect to an offer to purchase real property, security deposits, and maintenance fees, as well as rental proceeds received from tenants.
The types of monies that a broker may handle for others in the ordinary course of business include, but are not limited to:
• Sales deposits (earnest money)
• Property management (rent)
• Security deposits
• Pet deposits
• Maintenance deposits
• Money paid by sellers for marketing expenses not covered by broker
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