The illegal use of client trust funds for the broker's personal benefit is called:
Why Conversion Is Correct
Answer B: Conversion
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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- 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
- A real estate licensee in California is found to have commingled client funds with their personal bank account. This violates:DRE & Licensing
- What is 'conversion' in the context of trust funds?Trust Funds
- A real estate licensee who engages in 'conversion' of trust funds has:DRE & Licensing
- 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
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- Which California law specifically governs a real estate broker's obligations with respect to trust funds?Trust Funds
Key Terms to Know
A financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.
EscrowA neutral third-party arrangement where funds, documents, and instructions are held until all conditions of a real estate transaction are satisfied.
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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