Part 1 (Units 4) Getting Started In Real Estate Brokerage Business Flashcards
An example of a broker’s illegal commingling of funds is to mix sales escrow funds with a tenant’s rent funds.
a. True
b. False
b. False
Ex. Brokers are not required to keep earnest money deposits separate from rental deposits. Escrow account is used to hold funds belonging to anyone other than the broker.
A person other than the broker may sign checks on the scrow account, but the broker must also be a signatory on the account.
a. True
b. False
a. True
Ex. If a real estate brokerage has more than one licensed broker, one of the brokers may be designated as the signatory on the excrow account. The broker may designate another person, such as a bookkeeper, to sign checks on the account in the ordinary course of business.
A prospective buyer pays a $2,000 fee to a broker to assist with locating investment rental property. the broker must place the funds into his escrow account.
a. True
b. False
a. True
Ex. Sometimes a broker will receive commission or partial compensation before completing the real estate service. When this occurs, the broker is entrusted with funds that must be placed into the broker’s escrow or trust account until the services are completed. Once the service is completed, the broker has earned the compensation and my at that time transfer the funds into the broker’s operating account.
A sales associate receives a binder deposit from a buyer on Thursday. The broker must deposit the funds into her escrow account no later than the end of business on Monday of the next week.
a. True
b. False
b. False
Ex. Brokers must deposit escrow funds by the end of the third business day following receipt of the funds.
A broker may NOT place funds into an interest-bearing account unless all parties agree who is entitled to the interest.
a. True
b. False
a. True
Ex. If the broker’s escrow account is an interest-bearing account, the broker must get written permission from all parties before placing the funds in this type of account. The written authorization must specify who is entitled to the interest earned. The broker may receive the interest earned, but only if it is specifically agreed to by all parties.
Rule 61J2-14.014 state that the written agreement must indicate consent to placing the escrow money into an interest-bearing escrow account, designate the party to receive the interest, and specify when the accrued interes is to be disbured. Brokers must be abe to document that written agreements exist regarding the placement of funds into an interest-bearing escrow account.
Abroker has an interest-bearing esscrow account The broker is preparing to cut checks to take to the title closing. In the account is a $30,000 binder deposit and $375 in accrued interest. The broker should transfer the $30,375 to the broker’s non-interest-bearing escrow account berfore disbursing checks to the title company.
a. True
b. False
a. True
Ex. A broker designated to receive accrued interest must transfer the interest to the operating account on a monthly basis. Accumulated accrued interest that has not been timely transferred is considered to be an overage and commingling of escrow funds with the broker’s own funds.
Failure to stop interest from accruing before disbursement may result in a notice of noncompliance, provided it is the broker’s first offense and the situation is corrected within 15 days; otherwise a citation may be issued. Failure to get written permission of all interest parties before placing trust funds into an interest-bearing escrow account may result in a citation.
If the escrow deposit is to be held by a title company the sale contract must indicate the name of the title company and its address and telephone number.
a. True
b. False
a. True
Ex. When a deposit is placed with a title company or with an attorney, the following procedure must be used:
- The real estate licensee who prepared or presented the sale contract must indicate on the purchase and sale agreement the title company’s name (or attorney’s name, if applicable), address and telephone number.
A buyer request in the sale contract that the earnest money deposit be held by Bob White, attorney, trust account. Within 10 days, the broker must request written verification that the earnest money deposit was place in White’s trust account.
a. True
b. False
b. False
Ex. Buyer’s broker must make a written request within 10 business days to the title company (or attorney) to provide written verification of the deposit (unless the deposit is held by a title company or by an attorney nominated in writing by a seller’s agent).
A broker may place up to $5,000 of personal funds into a property management escrow account.
a. True
b. False
a. True
Ex. For property management escrow account, brokers may keep up to $5,000 of their own monies in this type of account as brokerage operations funds or personal funds.
To reconcile the bank statement, the broker takes the ending bank balance, adds deposits in transit, and subtracts any outstanding checks.
a. True
b. False
a. True
Ex. $7,475 ending balance + $1,250 deposit in transit - $2,000 outstanding check = $6,725 adjusted account balance
A broker may be issued a $500 citation for having a shortage in the escrow account.
a. True
b. False
b. False
Ex. Disciplinary guidelines for failing to reconcile escrow accounts: Brokers who fail to reconcile their escrow accounts at least monthly are subject to a citation. Rule 61J2-24.002 provides that a broker may be issued a citation if the broker fails to properly reconsile an escrow account even though the account balances.
Rule 61J2-24.002(cc) states that the broker is subject to a $500 citation and only issued when the account balances. Any shortage, regardless of how small, results in regular disciplinary process.
Brokers must retain business records for five(5) years unless the transaction failes to close.
a. True
b. False
b. False
Ex. Brokers must maintain records for five (5) years, regardless of whether escrow funds were pledged. In the event of litigation, records must be retained for two (2) years following completion of litigation, but in no case for less than five (5) years.
Arbitration, one of the settlement procedures for disputed escrow deposits, is an informal discussion of the issues, resulting in a negotiated settlement.
a. True
b. False
b. False
Ex. Arbitration is one of four (4) settlement procedures for disputing escrow deposits:
Arbitration - is a precess whereby, with the prior written consent of all parties to the dispute, the matter is submitted to a disinterested third party. Each side presents its case to a third party, who makes a binding judgement. in favor of one side or the other. The parties must agree in advance to abide by the arbitrator’s final decision.
If a broker request an EDO and the escrow dispute is either settled or goes to court before the EDO is issued, the broker must notify the FREC within 15 business dayse.
a. True
b. False
b. False
Ex. If a broker request an EDO and the escrow dispute is either settled or goes to court before the EDO is issued, the broker must notify the FREC within 10 business days.
