LICENSED VS CONTROLLED ESCROW COMPANIES: What Homebuyers and Sellers Should Know

Most real estate transactions in California involve escrow, yet few buyers and sellers truly understand how it works—or why the choice of escrow provider matters.

In a real estate transaction, escrow acts as a neutral third party, holding funds in trust and ensuring that all conditions of the contract are met before closing. Your money is safeguarded, and every instruction in the agreement is carried out correctly.

Because this is such an important step, it’s essential to make an informed decision about which escrow service to use. In California, escrow falls into two categories: licensed or controlled.

Escrow Agents are either “Licensed” or “Controlled” Escrow Companies

Licensed escrow companies

Also known as Independent Escrow Companies, are regulated by California’s Department of Financial Protection and Innovation (DFPI).

To earn this license, an escrow provider  must meet strict requirements under the Escrow Law, including:

• Experienced escrow officers on staff

• Fingerprinting and background checks through the Department of Justice

• Additional bonding and financial stability requirements

• Annual CPA audits and surprise inspections

Additionally, all licensed escrow companies must be members of the Escrow Agents’ Fidelity Corporation, which provides $5 million in fidelity coverage to protect client trust accounts in the event of theft.

These rigorous standards provide homebuyers and sellers with peace of mind that their funds are in safe, experienced hands.

Controlled Escrow Companies

Controlled escrow companies, sometimes referred to as non-independent escrow companies, operate under a different set of rules. They are not licensed by DFPI and do not have the same bonding, background check, or experience requirements.

These escrow divisions are often owned by:

• Real estate brokers

• Attorneys

• Title companies

Because controlled escrow is regulated under the license of the parent company (such as a broker or attorney), oversight and requirements can vary widely. While they may handle routine transactions, they lack the additional consumer protections of a licensed independent escrow company.

Why a Licensed Escrow Company Is the Safer Choice

Choosing a licensed escrow  provides significant advantages for consumers:

• Stronger consumer protection and state oversight

• Experienced escrow officers on-site

• $5 million fidelity bond protection for client trust accounts

• Company focus solely on escrow, with no competing interests

For buyers and sellers, this means confidence that funds are protected and the transaction will be handled with professionalism.

Bottom Line:

Your home is one of your largest investments, and part of my role as your broker is to guide you in making the safest choices during your transaction. I only recommend licensed escrow services because they provide the highest level of security and transparency for my clients.

If you’re thinking about buying or selling in the Desert, or want to better understand how escrow works, reach out to me, I’m here to make the process smooth and worry-free.

The choice between using a Licensed or Controlled Escrow Company is yours to make. The bottom line is that a licensed escrow company is the best possible neutral third party to complete your real estate transaction.

When it comes to your real estate transaction, my goal is to guide you every step of the way.  I only recommend licensed escrow companies because they provide the highest level of protection, oversight, and professionalism for my clients. If you’re planning a move or just want to understand how escrow works in the Desert real estate market, reach out to me, I’m here to help you navigate the process with confidence.

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