Unit 6

Question 1

What is a trust account?

Answer 1

An account dedicated to hold the peoples money

Question 2

What type of broker needs a trust account?

Answer 2

Employing broker or independent broker (not broker associates)

Question 3

Does a trust account hold referral, repair, or operations fees?

Answer 3

No

Question 4

When should a trust account be established?

Answer 4

By the time they first receive money belonging to others

Question 5

Who can hold earnest money?

Answer 5

A title company

Question 6

How many trust accounts does an employing broker need?

Answer 6

Enough to ensure that funds are not being commingled.

Question 7

What is a Sales Trust Account for?

Answer 7

Money held in connection with a sales transaction pending closing (earnest money).

Question 8

What is a Management Trust Account for?

Answer 8

Money held in connection for Property Management Services

Question 9

What is a Security Deposit Trust Account for?

Answer 9

For refundable security deposits from tenants managed by the broker

Question 10

What is a Advanced Rental Trust Account for?

Answer 10

Rental money collected in advanced (i.e. short term vacation rental).

Question 11

What is an Owners Association Trust Account for?

Answer 11

Funds held on behalf of condo or planned community associations

Question 12

Does the amount of properties that the brokerage firm manages depend on the amount of trust accounts opened?

Answer 12

yes

Question 13

How many trust accounts do you need if you have 6 or fewer properties? What goes in them?

Answer 13

1; earnest money, rent, security deposit

Question 14

How many trust accounts do you need if you have 7 or more properties? What are they?

Answer 14

3; Earnest money account, rental money account, security deposit account (if the test says “many” it is 7+)

Question 15

Do all parties have to agree to have an account interest bearing?

Answer 15

Yes

Question 16

True or False? A trust account does not need to be insured by a government agency?

Answer 16

False

Question 17

True or False? A trust account cannot be at a credit union.

Answer 17

True

Question 18

True or False? The word trust or escrow must be in the account name so that the bank recognizes that it is a trust account.

Answer 18

True

Question 19

True or False? The account must be in the name of the corporation and principal broker (employing broker)?

Answer 19

True

Question 20

Do branch offices need to have trust accounts separate from the main office if they keep separate bookkeeping systems?

Answer 20

Yes. If not, then no

Question 21

Who is responsible for supervising trust accounts?

Answer 21

Employing broker

Question 22

True or False? An employing broker must be able to withdraw funds from a trust account without a cosigner?

Answer 22

True

Question 23

Can other authorized parties, licensed or unlicensed, sign on the account, withdraw funds, and sign checks?

Answer 23

Yes

Question 24

Can you use broker’s funds to maintain the account? Is there a set dollar amount?

Answer 24

Yes; No

Question 25

What are operating account funds?

Answer 25

Funds to operate brokerage business

Question 26

Can you commingle operating account funds with trust funds?

Answer 26

No

Question 27

Commission funds go from the trust account to _________ account.

Answer 27

operating

Question 28

When are commission funds moved to the operating account?

Answer 28

before the disbursement and after they are earned

Question 29

When can commission funds be earned?

Answer 29

After closing

Question 30

Commission must be removed promptly (there is no set date). What is considered as prompt?

Answer 30

True. 10 days is not prompt

Question 31

True or False? Earnest money is given to the listing broker and deposited in the listing brokerage or title company's account?

Answer 31

True

Question 32

How many days do you have to deposit earnest money into an account after a contract is accepted?

Answer 32

3 days (only after the acceptance of the contract)

Question 33

Who is responsible for holding the earnest money in a safe place until the offer is accepted?

Answer 33

The broker

Question 34

What is a Earnest money promissory note?

Answer 34

Buyer says IOU earnest money to the seller (forgot check, etc.)

Question 35

Who is responsible for collecting earnest money promissory notes?

Answer 35

Listing broker

Question 36

If the buyer does not pay the promissory note, can the contract be voidable by the seller?

Answer 36

Yes

Question 37

Who needs to have the Exclusive Right-to-Sell Contract on file?

Answer 37

Listing broker

Question 38

Who needs to have the Exclusive Right-to-Buy Contract on file?

Answer 38

Buyer's broker

Question 39

Do both brokers need to have copies of all other agreements made? What is specifically required?

Answer 39

Yes; - Closing statements (aka settlement statements) - Deeds, deeds of trust, title work

Question 40

How long do records have to be kept?

Answer 40

4 years

Question 41

What does an account journal consist of?

Answer 41

- Cash receipts/disbursements - All deposits, withdrawals, activity in the account - Indicate what he money is from and the dates deposited (not specific info on the individual)

Question 42

What does a ledger account system consist of?

Answer 42

- Little details - Seperate funds in the account by single beneficiary or transaction - Info like SSN or tax ID #

Question 43

What does a broker ledger card show?

Answer 43

Funds belonging to the broker (to maintain the account and pay any fees charged). Shows how much funds are used to start the trust account.

Question 44

How often must trust account be reconciled?

Answer 44

Every month that there is activity in the account

Question 45

If a sole proprietor closes their office and goes to work for a brokerage house. Who is responsible for the trust accounts from the closed office?

Answer 45

The former sole proprietor for four years

Question 46

List 4 ways to safeguard your records.

Answer 46

1. Frequest reconciliation 2. Separation of duties 3. Outside audits 4. Real Estate Commission assistance

Question 47

What is conversion?

Answer 47

Mixing one owner's funds to pay for another owner's bills (in property management).