Could Agents Be Liable for Escrow Officers’ Conspiracy?

It’s been over two years since we last wrote about escrow diversions. On many occasions, we found that escrow officers were deliberately ignoring written instructions in Residential Purchasing Agreements (RPA) from buyers and sellers. Recently, we looked into the practice again to see if it was still prevalent. Unfortunately, we found this practice has not only continued, but it has escalated.

The RPA is the contract that the buyer, seller and their respective agents complete and sign, giving the escrow company instructions on a number of subjects, most notably the buyer and seller decisions on service providers.

When the escrow officer orders services from companies not listed in the RPA, is the escrow officer violating the law? And more importantly, is the real estate agent liable for the conduct of the escrow officer? Can they lose their license? Sadly, the answer to all of the above is “Yes.”

“Since real estate agents are ultimately responsible for all the stipulations of the final RPA, any change in the terms of the contract fall under the purview of the agents,” said Robert Mobasseri, a Los Angeles-based attorney focused on the real estate industry. “If, after the sale, any new liens are brought against the buyer due to an inaccurate settlement investigation, the fault could lie with the agent.”

Do real estate agents have a duty to act in the best interests of their clients? Please write us and let us know your thoughts or post to this story. Could a failure to do so could result in a claim alleging breach of fiduciary duty?

In the event of a unilateral change to the RPA by an escrow officer, the agent could be charged with violating their fiduciary duty to defend the interests of the client and can be held responsible for any problems that arise from a change in service providers.

“The paper trail can run back to the agents,” said Mobasseri. “Some agents think that they bear no responsibility, but they do.”

So what could be the consequence of failing to correct changes in the written instructions in the RPA? If a real estate agent is found complicit, the result could be a loss of license and punitive damages. In the case of one class-action lawsuit in Minnesota, the judgment for the plaintiffs was over $200,000.

Is this something that you have seen? Are you worried about escrow agents changing the terms of the RPA? Would you continue to work with an escrow officer who did?