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There is still time left — but not much — for affected California brokers to submit their annual Escrow Activity Report to the Bureau of Real Estate (BRE). This applies to firms that operate a “broker-controlled escrow” that engaged in five or more transactions or whose escrow activities exceeded $1 million in the past calendar year.
Not every California Broker has an escrow division. Many own escrow companies that operate under the Department of Business Oversight (DBO). Many others simply have no ownership interest in any escrow operation. Then, there are those who operate a “broker controlled escrow”, pursuant to their real estate broker’s license. These escrows are restricted to transactions in which the relevant brokerage must be a party or an agent in connection with the escrow and performing services requiring a real estate license.
Broker-controlled escrows are, then, significantly restricted as to their potential market when compared to the more common escrow company operating under the DBO. Nonetheless, broker escrows require less capitalization and can still bring a decent profit into a brokerage.
In October of 2011, Senate Bill 53 (Calderon) was signed into law adding section 10141.6 to the Business and Professions Code. It set forth filing requirements for broker-controlled escrows. If such operations conduct escrow activities for five or more transactions in a calendar year, or whose activities equal or exceed one million dollars in a calendar year, it is required that a report be filed within sixty days following the completion of the calendar year. Except for leap years, the deadline is March 1. As I said, there’s not much time left.
The report is submitted on the Bureau’s form RE 890. It is neither particularly burdensome nor time-consuming to complete. In addition to asking about the number and dollar volume of escrow transactions, it requests the location of escrow offices and basic information regarding the escrow officers and escrow trust accounts. If anyone has difficulty with the form, they may contact the CalBRE Mortgage Loan Activities section at (916) 263-8941.
It has been a source of particular annoyance to the Bureau and its Commissioner that, so far, there appears to be a serious lack of compliance with Business and Professions Code 10141.6.
In the first year the requirement went into effect, for calendar year 2013, 206 real estate brokers reported broker escrow activities totaling $8.63 billion. In the next year, for calendar year 2014, 161 real estate brokers reported broker escrow activities totaling $5.52 billion. For calendar year 2015, 143 brokers reported broker escrow activities totaling $8.45 billion. That is, in the first three years the number of brokerages reporting actually declined.
At the Commissioner’s recent forum in Indian Wells, it was reported that, last year, 170 brokers submitted reports showing total activity of $10.3 billion. While 170 reports is an improvement over the initial response to the reporting requirements, it still remains woefully inadequate. The Bureau estimates that more than 700 brokerages should be submitting reports.
Fines for failing to submit a timely report can run up to $10,000. There can also be non-monetary penalties as well as the often-substantial cost of a BRE audit. The Bureau’s Audit section is actively pursuing brokers to determine if they have met their reporting requirements, if any. Brokers who have escrows that meet the relevant activity levels are advised to file with the BRE if they have not already done so.
Bob Hunt is a director of the California Association of Realtors®. He is the author of Real Estate the Ethical Way. His email address is This email address is being protected from spambots. You need JavaScript enabled to view it..
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