Illinois License Law
Under Illinois law, which of the following is an example of 'conversion' of client funds?
ATransferring earnest money from one trust account to another
BUsing earnest money deposited by a buyer to pay the broker's office rent✓ Correct
CHolding a security deposit in an interest-bearing account
DDisbursing commission to the listing broker at closing
Explanation
Conversion is the unauthorized use of a client's funds for the broker's own purposes—essentially theft. Using earnest money or other client deposits to pay the broker's business expenses (rent, salaries, utilities) is conversion, a serious criminal offense as well as a license law violation.
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Key Terms to Know
Earnest Money
A deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
LienA financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.
Deed of TrustA security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.
State-Specific Concepts
Trust Account RulesEscrow DisputesLicense Law
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