Trust Funds
When a real estate transaction closes, how should trust funds (e.g., the buyer's deposit) be handled?
AReturned to the buyer automatically
BApplied toward the purchase price or costs as directed in the escrow instructions✓ Correct
CRetained by the broker for 30 days after closing
DDonated to the Real Estate Recovery Fund
Explanation
At closing, trust funds such as the earnest money deposit are disbursed in accordance with escrow instructions — typically credited to the buyer's down payment or closing costs — and are no longer held in the broker's trust account.
Related California Trust Funds Questions
- A broker receives a $5,000 earnest money deposit on a Friday at 5 PM. The three-business-day deposit deadline would be:
- 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:
- When escrow is used in a California real estate transaction, trust funds are typically held by:
- A property manager collects security deposits from tenants. Under California law, security deposits:
- Which of the following records is a broker required to maintain for the trust fund account?
- What is 'commingling' of trust funds?
- A broker who maintains a property management business must:
- A broker may maintain a personal (broker's) funds balance in the trust account of up to how much to cover bank service charges?
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