Weighing your escrow options?
Who knew there was so much to understand about the escrow process? If you’re deciding on an escrow company to trust, then this is a good place to start. The first thing to understand is that there are two options for you to choose from. Independent and controlled escrow companies.
Independent agents are licensed by the DBO while the controlled companies function under the exemptions of Escrow Law. What does that exactly mean?
Well, the DBO (The Department of Business Oversight) lists the requirements needed to get a license to perform escrow services. Those requirements are stricter than the rules placed on non-independent escrows. Let’s talk about the independent escrow companies first.
An important qualification for an independent escrow agent is to join the EAFC. The EAFC (Escrow Agents’ Fidelity Corporation) membership is a requirement if the agent is involved in escrows specified under Section 17312 (C) of the Financial Code.
The membership protects members against any fraudulent loss or embezzlement against an escrow agent or employee of an agent. Any person or company with a history of misconduct or criminal record is denied membership to the EAFC.
Another requirement for an independent agent is that they must have someone onsite during business hours with at least five years of qualified escrow experience. Any other branch office must have someone with at least four years of escrow experience.
Background checks, fingerprinting and a required audit are other requirements. With more guidelines to abide by, means these independent escrow companies will offer quality escrow service to any principal, broker, or person.
Real estate brokers, mortgage brokers, and banks can all own a controlled escrow company. Compared to an independent escrow company, a controlled agent doesn’t nearly have the same amount of requirements needed. An escrow manager doesn’t even need a license from the BRE (Bureau of Real Estate) to work for a broker’s escrow division.
A real estate agent can simply hire anyone to manage their escrow division. That means, by law, a background check isn’t required. No minimum work experience is needed for any individual working for a real estate broker as an escrow manager either.
Another difference worth mentioning is that there is no separate bonding requirement. The BRE does have a last resort if there has been fraudulent activity. Under the current law, a “victim’s fund” would pay back the fraud victim $50,000 per transaction and up to $250,000 per licensee.
While independent escrows are under the requirements of Escrow Law, a controlled agent is subject to the bodies of law that govern real estate licensees, title insurance, and underwritten title companies.
The choice between using an independent and controlled escrow company is yours to make. Most companies in the escrow business are honest and loyal. But, any time handling large sums of money you want it in trusted hands.
Independent companies have the covering and protection needed, not just for themselves but the buyer as well. Using a controlled escrow company does not guarantee reliable protection. So, choose wisely.
Read this post we did on: How To Open Escrow.
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