A broker's trust account shortage (the bank balance is less than the sum of all beneficiary ledger balances) most likely indicates:
Why Conversion — the broker has used client funds for improper purposes Is Correct
Answer C: Conversion — the broker has used client funds for improper purposes
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.
Key Trust Funds Terms in This Question
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Related California Questions
- Under California law, the maximum amount a broker may keep of their own funds in a trust account (to cover bank service charges) is:DRE & Licensing
- A broker may maintain a personal (broker's) funds balance in the trust account of up to how much to cover bank service charges?Trust Funds
- How often must a broker reconcile the trust fund bank account balance with the total of all client ledger balances?Trust Funds
- A 'shortage' in a broker's trust account — where the trust liability exceeds the bank balance — is most likely evidence of:Trust Funds
- A DRE audit of a broker's trust account reveals that the balance of individual client ledgers is less than the total bank balance. This condition is called:Trust Funds
- Under California law, a real estate broker who manages property for clients must maintain a separate trust account for client funds. Mixing client funds with the broker's personal funds is called:Agency
- Real estate trust funds must be deposited into the trust account within how many business days of receipt?DRE & Licensing
- A real estate licensee who engages in 'conversion' of trust funds has:DRE & Licensing
Key Terms to Know
A neutral third-party arrangement where funds, documents, and instructions are held until all conditions of a real estate transaction are satisfied.
LienA financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.
Short SaleA sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.
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
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