Trust Funds
A 'shortage' in a broker's trust account — where the trust liability exceeds the bank balance — is most likely evidence of:
ANormal banking delays
BConversion or commingling✓ Correct
CProper escrow management
DAn error by the bank
Explanation
A shortage in the trust account (trust liabilities exceed the bank balance) indicates that funds belonging to clients are missing, which is a hallmark of conversion (misappropriation) or improper commingling and is a serious DRE violation.
Related California Trust Funds Questions
- Interest earned on a real estate trust account in California generally:
- A broker receives a commission payment directly from the seller at closing. This money should be deposited into:
- 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:
- A buyer and seller have a dispute over who is entitled to an earnest money deposit after a transaction falls through. The broker should:
- What are 'trust funds' in California real estate practice?
- A broker places a client's $50,000 earnest money deposit into a money market account earning interest. The broker does NOT inform the client or credit the interest to the client. This is:
- What constitutes 'misappropriation' of trust funds?
- Which of the following is NOT a permissible trust account?
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