Chapter 5 - Learning Objectives & Key Terms Flashcards
Arbitration
If the parties cannot come to a mutual agreement, the issue is submitted to arbitration and a third-party (the arbitrator) makes a decision based upon the facts of the dispute. If arbitration fails, the disputing parties go to Litigation.
Blind Advertisement
An advertisement that fails to provide the name of the brokerage firm.
Commingle
To illegally mix personal funds with money held in trust on behalf of a client.
Conflicting Demands
Where the requirements of the parties involved do not concur, as in disbursement of earnest money held in escrow when a contract is terminated.
Conversion
The unlawful appropriation of another’s property, as in the conversion of trust funds.
Corporation (Inc)
An entity established and treated by law as an individual or unit with rights and liabilities, or both, distinct and apart from those of the persons composing it. A corporation is a creature of having certain powers and duties of a natural person. Being created by law, it may continue for any length of time the law prescribes.
Deposit
Funds entrusted to another to be held for later use in a transaction.
Earnest Money
The cash paid by a prospective buyer of real property as evidence of good-faith in completing the transaction.
Escrow Account
An escrow or trust account is a separate account held by a third party for the deposit of funds such as earnest money. The account must be separate from the broker’s own operating funds.
Escrow Disbursement Order
In the event of a dispute, an Escrow Disbursement Order (EDO) can be requested by the broker from the FREC which will issue instructions on disbursement of funds in Escrow. Once an EDO is requested the broker must follow the instructions issued.
General Partnership
A business owned by more than one broker with each partner being equally liable for any debt; each partner is involved in decision making and receives a share of the profits.
Good-Faith Doubt
Where the broker is not convinced that the sale has failed for a legitimate reason and seeks direction from the FREC regarding disbursement of escrow funds.
Interpleader
A process through the courts to determine the rightful owner of disputed escrow funds.
Kickback
Payment for referrals. It is unlawful for a licensee to pay any fee to an unlicensed individual for performing the services of real estate.
Limited Liability Company (LLC)
A business structure that combines the pass-through taxation of a
partnership or sole proprietorship with the limited liability of a corporation.
