Florida Real Estate: What is Escrow and How Does it Work?

Purchasing or selling a home in Florida can be a complicated process. It’s a process that most buyers, especially first-time ones, are unprepared for and can't comprehend. Besides the inspection and getting the mortgage, other activities must take place during the real estate purchase or sale process.

Escrow often occurs between the time the seller agrees to the offer and when the buyer acquires ownership of the property. Here's everything you need to know about escrow in Florida.

What is Escrow?

Escrow describes a financial agreement in which money or an asset is kept by a third party in the interest of other parties trying to complete a transaction. An escrow agent manages an escrow account.

The escrow agent only releases the assets or funds when the parties have fulfilled their contractual obligations. Escrow can be used in mergers and acquisitions, real estate, law, internet transactions, intellectual property, and banking.

It helps reduce fraud risks and keeps all the parties involved in the transaction stay up to date with the transaction.

Florida's Escrow Laws

Florida state laws have established regulations governing players in real estate transactions. These regulations include:

• Timeframe for Delivering Deposits: An associate of a broker must deliver the deposit to the broker within the next business day. This implies that associates should not hold funds in escrow transactions. It is a good practice for brokers to deposit the funds within the shortest time possible since accidents can occur at any time.

• Brokerage Accounts: All escrow accounts should have one broker as a signatory since any account can hold up to $1000 of the company's money.

These accounts should be kept in a credit union, bank, loan institution, and title company with trust powers or a trust company. Upon receiving the money from the customer, the broker should deposit it into the account within three business days.

• Monthly Reconciliation Statement: Brokers must prepare a monthly reconciliation statement for brokerage escrow accounts. An accountant can prepare the statement, but it has to be reviewed and signed by the broker.

• Escrow Disputes: Often, escrow disputes arise between the seller and the buyer. When a real estate broker receives conflicting demands, they must notify the Florida Real Estate Commission (FREC). The notice should be in writing and delivered within 15 business days.

The broker can then establish a settlement within 30 days after the conflicting demand arises. They have three options:

• Request for disbursement with the FREC.
• Submit the dispute to mediation or arbitration, provided all parties agree.
• File interpleader action to request a court to determine who is entitled to the deposit.

Get in Touch with Our Florida Real Estate Attorneys

At Atlantic Coast Title and Escrow, we're ready to help provide guidance and experience through real estate transactions. Contact us today and let our Florida real estate attorneys serve all your closing needs.