BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
On Monday June 30, 2025, the Department of Real Estate (DRE), jointly with the Department of
Financial Protection and Innovation (DFPI) which supervises escrow companies, issued the following bulletin:
https://www.dre.ca.gov/Licensees/Advisories/Advisory_2025_06_30_RE_Commission_Disbursements.html
This Bulletin has created confusion for real estate licensees and escrow companies. The language of that Advisory is confusing and seems to change existing prior guidance from the DRE regarding compensation of agents by their broker through instructions to the escrow holder which closed the sale transaction.
Particularly confusing is the following language:
In addition, an escrow agent shall disburse trust funds deposited in escrow only in accordance with the written escrow instructions of the principals to the escrow transaction. The principals to the transaction are the buyer and seller or the borrower and lender.8 Real estate brokers are not principals to an escrow transaction. Thus, if a seller or buyer authorizes an escrow agent to pay a real estate broker commission on a written commission authorization, the escrow agent should follow the principal’s instructions to pay the commission to the broker. To do otherwise is a violation of the Escrow Law.
Since its issuance, the DRE has received many inquiries as to the meaning of this language and other language in the Bulletin. As a result, the DRE is preparing a revised version of the bulletin which hopefully will clarify the language.
PRACTICE TIPS
- Do not make decisions regarding broker compensation through the escrow holder in a closing transaction based on the existing Bulletin language.
- If a broker and/or agents handling a closing transaction encounter difficulties with the escrow holder in their transaction, such as refusing to honor a broker demand for payment to the broker and agents, advise the escrow holder that the DRE will be issuing a revised Bulletin clarifying the guidance from the Department on this issue.
- Broker Risk Management will be issuing an updated Practice Tip when the DRE revised Bulletin is published.
WEEKLY PRACTICE TIP: DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip is an attorney-client privileged communication for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management LLP. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry but rather are intended to suggest good risk management practice.