Are RE Agents Inducing Escrow Officers to Violate the Law?

Recently it’s come to our attention that RE agents are leaving blanks in the residential purchasing agreements (RPAs) being submitted to escrow.

This is a dangerous and careless practice, which not only breaks the law but encourages escrow officers to fill in the blanks with their own favorite vendors.

The California Financial Code 17403.2 and California Financial Code 17403.3 specifically state that no one shall solicit or accept an escrow instruction containing any blank to be filled in after the signing. These were intended to prevent escrow agents from accepting easily altered written instructions containing blanks and to assure that any party opening an escrow has an accurate idea of what the instructions provide.

Additionally, the California Code of Regulations 110.208 specifically states that no escrow agent can solicit or accept escrow instructions containing any blanks after signing or initialing.

And when RPAs come into escrow with blanks, instead of returning to agents to have their clients decide and sign, some escrow officers conveniently enter their preferred vendors or perhaps even vendors owned by their parent companies; in this event, agents and escrow officers become liable and at risk of losing their license.

So the law is pretty clear about this violation of California Financial Code, California Code of Regulations, and Department of Real estate regulations etc. Now, is it a RESPA violation? What are the penalties if you are caught breaking this law? Could you be subject to losing your license? Could agents, brokers and escrow officers be subject to financial penalties or even jail time? We’d like to know because we don’t know. Send us your experience.