A 'shortage' in a broker's trust account — where the trust liability exceeds the bank balance — is most likely evidence of:
Why Conversion or commingling Is Correct
Answer B: Conversion or commingling
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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- 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
- A broker's trust account shortage (the bank balance is less than the sum of all beneficiary ledger balances) most likely indicates: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
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- 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.
Closing CostsFees 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.
ProrationThe division of ongoing property expenses (taxes, HOA dues, rents) between buyer and seller at closing based on their respective days of ownership.
State-Specific Concepts
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