Client money and E&O: what is a broker owner actually on the hook for
From the lending side looking in, the question is what a brokerage's balance sheet and liabilities actually look like. One common claim is that a broker owner sits on escrow deposits, a pile of other people's cash inside the business. Another says earnest money goes to the title company and the brokerage never touches it. Both can't be generally true across the board, and the answer tends to depend on state trust account rules and how a given firm is set up. Separately, E&O insurance is listed as a line item for nearly every brokerage, but what it actually pays for and what it roughly costs per agent is worth spelling out for anyone underwriting a brokerage as a borrower or evaluating one as an operator: it typically covers claims tied to errors, omissions and negligence in representing a client, not general liability, and premiums scale with agent count and claims history. Knowing which of these liabilities are real, and which are misconceptions, matters before treating a brokerage's balance sheet as opaque.
