Trust FundsIntermediateCalifornia Exam

A broker's trust account cannot be an interest-bearing account unless:

AThe balance exceeds $10,000, per California trust fund record-keeping requirements

BAll parties whose funds are held provide written authorizationCorrect

CThe broker has been licensed for more than 5 years, under standard California trust fund handling rules

DIt is approved by the DRE, as required by DRE trust account regulations

Why All parties whose funds are held provide written authorization Is Correct

Answer B: All parties whose funds are held provide written authorization

A broker's trust account may only be interest-bearing if all parties whose funds are deposited have provided written authorization specifying who receives the interest. Without consent, trust accounts must be non-interest-bearing.

Exam Tip: Trust Funds

Trust fund questions test the rules for handling client money. Know the deadlines for depositing trust funds, what constitutes commingling vs. conversion, and the penalties for violations.

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Key Terms to Know

Escrow

A neutral third-party arrangement where funds, documents, and instructions are held until all conditions of a real estate transaction are satisfied.

Deed of Trust

A security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.

Closing Costs

Fees and expenses paid by the buyer and/or seller at the closing of a real estate transaction, in addition to the property's purchase price.

Proration

The division of ongoing property expenses (taxes, HOA dues, rents) between buyer and seller at closing based on their respective days of ownership.