The term “escrow” denotes a financial agreement. This agreement involves three parties: the buyer, the seller, and a neutral third party- your escrow agent. The agent holds the funds or assets until the buyer and seller agree upon their terms and fulfill them. One of the agent’s jobs is to keep the funds or assets safe. It’s also the agent’s responsibility to transfer funds from one party to the other. As you can imagine, an escrow agent is often required in the real estate world because real estate transactions involve large sums of money. So, it’s common for an escrow agent to be part of the process. With such a vital role to play, it’s easy to imagine why it’s important to work with a legal escrow agent. Here’s a look at some of the differences between licensed and unlicensed agents.
Licensed Escrow Agents
A legal escrow agent abides by all the necessary requirements. In California, the Department of Financial Protection and Innovation (DFPI) has many legal requirements that an escrow agent needs to fulfill in order to become licensed in the state of California.
The Legal Requirements
1) A licensed escrow agent must maintain membership under Escrow Agent’s Fidelity Commission. It’s a legal requirement. This commission protects escrow agents from any type of fraud transactions or loss. Furthermore, the embezzlement of an escrow agent’s employee can also be protected by this commission.
2) EAFC also runs a certificate program for all legal escrow agents and their employees. An agent with a criminal record can’t receive an EAFC certificate.
3) Financial transparency is another important aspect of being a legal escrow agent. A licensed agent must have two audits (minimum) per year.
4) Additionally, the background of all escrow employees is checked, and their fingerprints are also taken. In short, a licensed escrow agent follows several legal steps to ensure they’re capable of providing secure transactions for the public.
Concerns With an Unlicensed Escrow Agent
An unlicensed escrow Agent is also known as a ‘controlled’ or ‘non-independent’ agent. They don’t require any license to operate their company or business. Here are some of the concerns with unlicensed agents.
1) Banks, real estate brokers, attorneys, or title companies can all own and operate an unlicensed escrow company.
2) An unlicensed escrow agent isn’t backed by a commission. This means if any forgery or fraudulent activity happens, the victim is unlikely to recoup his or her money.
3) The employees of a controlled escrow agent are not vetted properly. An unlicensed escrow company doesn’t implement the same stringent procedures when it comes to the hiring process. As a result, employees may work there without experience or proper qualifications.
So, Who Should You Trust?
Such important transactions should always be entrusted to a legal escrow agent. A licensed escrow company follows all the legal requirements, so you can count on it to be secure. If you’re in the San Ramon area, contact us at Bay Area Escrow for a team you can count on. Our office is available at (925) 831-9099.