Trust Funds
An Alabama broker receives security deposits from tenants managed under a property management agreement. These funds must be:
ADeposited in the broker's operating account until needed
BHeld in a trust account separate from operating funds✓ Correct
CSent directly to the property owner
DInvested in short-term securities
Explanation
Security deposits collected by a property manager are client funds and must be deposited and maintained in a trust account separate from the broker's operating funds.
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- In Alabama, the term for a broker's obligation to keep client funds separate from personal or business operating funds is:Trust Funds
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- Alabama law requires that a company's real estate trust account be maintained:Alabama License Law
- A property manager receives a security deposit from a new tenant in Alabama. The deposit must be:Property Management
- Which of the following is NOT an acceptable reason for a broker to withdraw funds from an Alabama trust account?Trust Funds
- Conversion of client funds in a trust account occurs when a broker:Trust Funds
- In Alabama, a broker's trust account records must be maintained for a minimum of:Alabama License Law
- An Alabama property manager who receives a commission for referring a tenant to a specific moving company must:Property Management
Key Terms to Know
Lien
A financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.
EscrowA neutral third-party arrangement where funds, documents, and instructions are held until all conditions of a real estate transaction are satisfied.
Listing AgreementA contract between a property owner and a real estate broker that authorizes the broker to market and sell the property.
Deed of TrustA security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.
State-Specific Concepts
Trust Account Rules
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