Nowadays in California most title companies charge a $15 fee in order to deposit into their interest bearing account, which doesn't work out to being worth it.

Really? I have never even heard of such a thing. Perhaps it's more of a regional custom.

I see no point in maintaining a trust acct when the EM can be held by an escrow co.

"I see no point in maintaining a trust acct when the EM can be held by an escrow co."

Wonder what the DRE's preferred position is on who's to hold the EM, and why?

I have never heard a position taken one way or another.

Having escrow hold the funds is certainly safer for the buyer than letting the broker hold the funds.

"Having escrow hold the funds is certainly safer for the buyer than letting the broker hold the funds."

We have had escrow/title co's go belly up, so, why would that be safer than a RE broker? At least the DRE can reimburse the EM, whereas the escrow company/title company here comes under a different, non related jurisdiction.

Hmmm, interesting point Pikes..

We don't have any "local" companies here. All of the title companies are huge national companies so it is a thought that I doubt has crossed anyones mind.

I have a feeling the DRE in California doesn't have a preference either way. They're based in Sacramento, and in Sacramento the custom is that the check is written directly to the title company. We would hear about it if they were unhappy, they like to complain

In New York the law is very specific that brokers holding earnest money must do so in an escrow account where it is not co-mingled with operating funds. Earnest money must be deposited by the next business day following final signature on the contract. Based on attorney advice I have been told there are only 3 ways to take the money out of the escrow account.

1) It may be applied to the broker's commission on closing of the sale transaction.

2) It may be released to buyer and/or seller per an agreement between them as documented on a Cancellation and Release terminating a contract.

3) If it is in dispute it is to be released per a court order settling the dispute.

In a relatively few cases, when required by the client (and I have only seen this a couple of times, and only with REO clients), the earnest money is deposited in the client's attorney's trust account.

B/c there are unscrupulous brokers out there who can be tempted if they are in a financial bind. It happens. Brokers can abscond w/the funds in the trust acct.

Far less likely w/a title and/or escrow co who are bonded & insured.

The reason I don't like brokers holding the earnest money is 2 reasons.Liability for the broker is one.The other and I have seen this is brokers are supposed to be impartial when they interpret a contract for earnest money dispursement but many times are not.

Then you get into a big mess trying to recover the earnest money-when a bank or a seller wants to hold the earnest money I laugh at that.

I like title companies because they are a nuetral third party.They don't represent the seller or buyer in the tranasaction-you could also have a nuetral attorney hold the EM at least in my state.

There is no responsibility shift to another party holding the EM. The broker is still responsible for the EM and it's disposition. (at least in my state..."accounting in a timely manner for all money and property received")

"We don't have any "local" companies here. All of the title companies are huge national companies so it is a thought that I doubt has crossed anyones mind."

Hmmmmm, see below.

http://www.caclo.org/perl/index.pl?document_id=bf1c12fdacd08a71d5986b121494d0ab

Just read this deposit instructions from Old Republic Title company.

In part, this is what it states:

"You have the opportunity to earn interest on the funds you deposit with us through a special account arrangement OldR
has established with one of its depository banks. The current interest rate for these accounts is 2.5% per annum...subject to market conditions.

If you elect to earn interest through this arrangement, OldR will charge you an additional fee of $45.00 for the establishment and maintenance of the account. It is important that you consider this cost in your decision because the cost may exceed the interest you earn.

At the bottom of the form, it gives the buyers the choice of opting in or out on placing their deposit in a segregated interest bearing account, as they call it, plus a lot more legalese.

I've never heard of Universal Title.

The only companies I have ever used in 10 years are Financial Title, Fidelity, North American, First American, Old Republic, Chicago & Placer Title (which I must admit, is somewhat local)

Well, except for all the wacky title companies my REO listings choose. You know, the ones 600 miles away who can't seem to ever get things done on time..

No and no. It's a regular, non-interest bearing checking account.

Actually there is a bit more to a properly established escrow account than just being a no interst checking account. When it is properly set up with the bank that holds it there will be an important difference seperating it from an operating funds checking account. Specifically it will be designated as an escrow (or possibly as a trust) account indicating that the funds contained in it are not yours but rather being held for other parties. As such it is excluded from your assets in the event of some legal action against you.