Florida Broker Practice Exam

What can happen if a broker chooses not to open an escrow account?

1. Funds must be kept in the broker's office

2. Funds may be held by a title company or attorney's trust account

3. Funds will be automatically forfeited

4. Funds can only be held by the state

The correct answer is: Funds may be held by a title company or attorney's trust account

When a broker opts not to open an escrow account, it is possible for funds related to a real estate transaction to be held by an alternative entity, such as a title company or an attorney's trust account. This is a common practice in real estate transactions as it provides flexibility within the management of earnest money and other transactional funds. The law allows brokers the option of having funds held outside their direct control as long as they are entrusted to a reliable third party that complies with legal and ethical standards. Title companies and attorneys typically offer trust accounts designed specifically for the purpose of handling such funds securely until a transaction closes or until the terms of the contract determine their disbursement. This ensures that the funds are protected and managed appropriately, adhering to applicable regulations. In contrast, simply keeping the funds in the broker's office is generally not advisable or compliant with industry standards, which is why that alternative would not be accurate or permitted in real estate practices. Similarly, funds cannot be automatically forfeited or held solely by the state as that would undermine the contractual agreements made in a transaction. Thus, the most accurate and permissible action when a broker does not have an escrow account is the involvement of a title company or attorney's trust account.