Trust Funds
Which of the following is considered a trust fund under California law?
AA broker's commission earned and paid at closing
BAn earnest money deposit received from a buyer✓ Correct
CA referral fee paid by one broker to another
DFunds in the broker's general business operating account
Explanation
Trust funds are money or things of value received by a broker on behalf of a principal (such as an earnest money deposit from a buyer). They must be kept separate from the broker's own funds. Earned commissions and referral fees are broker business income, not trust funds.
Related California Trust Funds Questions
- 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 is 'conversion' in the context of trust funds?
- How often must a broker reconcile the trust fund bank account balance with the total of all client ledger balances?
- Can a broker keep their own money in a client trust account?
- If a buyer's offer is rejected and they had deposited earnest money, the broker must:
- A buyer's earnest money deposit is held in the broker's trust account. The sale falls through with no dispute. The broker may release the deposit:
- If a broker discovers a shortage in the trust account caused by a bank error, what is the BEST course of action?
- A broker receives an earnest money check made out to the seller. The buyer instructs the broker to hold the check uncashed until offer acceptance. The broker MUST:
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