When a real estate transaction closes, how should trust funds (e.g., the buyer's deposit) be handled?
Why Applied toward the purchase price or costs as directed in the escrow instructions Is Correct
Answer B: Applied toward the purchase price or costs as directed in the escrow instructions
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
A deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
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.
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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.
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.
Earnest MoneyA deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
ProrationThe division of ongoing property expenses (taxes, HOA dues, rents) between buyer and seller at closing based on their respective days of ownership.
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