Trust Funds
'Conversion' of trust funds occurs when a broker:
ADeposits trust funds in an interest-bearing account
BUses client funds for the broker's own personal or business purposes✓ Correct
CReturns unused earnest money to the buyer
DTransfers a trust account to a new bank
Explanation
Conversion is the illegal act of using client funds (from the trust account) for the broker's own benefit. Unlike commingling (which is mixing funds), conversion involves actually spending or appropriating client money — essentially theft.
Related Alabama Trust Funds Questions
- Which of the following is the best description of a broker's fiduciary duty regarding trust funds?
- Conversion of trust funds in Alabama means:
- In Alabama, a qualifying broker's trust account must be reconciled:
- If a broker fails to maintain proper trust account records, AREC may:
- A qualifying broker is responsible for the trust account actions of all licensees in their firm. This is an example of:
- If a buyer's offer is accepted by the seller and the buyer's check for earnest money is returned by the bank as NSF (non-sufficient funds), the broker should:
- An Alabama broker may deposit their own funds into a trust account in which scenario?
- A property management company collects first and last month's rent plus a security deposit from a new tenant. Which portion(s) must go into a trust account?
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