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CO RE Exam > Unit 6 > Flashcards

Unit 6 Flashcards

1
Q

What is a trust account?

A

An account dedicated to hold the peoples money

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2
Q

What type of broker needs a trust account?

A

Employing broker or independent broker (not broker associates)

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3
Q

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

A

No

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4
Q

When should a trust account be established?

A

By the time they first receive money belonging to others

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5
Q

Who can hold earnest money?

A

A title company

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6
Q

How many trust accounts does an employing broker need?

A

Enough to ensure that funds are not being commingled.

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7
Q

What is a Sales Trust Account for?

A

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

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8
Q

What is a Management Trust Account for?

A

Money held in connection for Property Management Services

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9
Q

What is a Security Deposit Trust Account for?

A

For refundable security deposits from tenants managed by the broker

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10
Q

What is a Advanced Rental Trust Account for?

A

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

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11
Q

What is an Owners Association Trust Account for?

A

Funds held on behalf of condo or planned community associations

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12
Q

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

A

yes

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13
Q

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

A

1; earnest money, rent, security deposit

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14
Q

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

A

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

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15
Q

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

A

Yes

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16
Q

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

A

False

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17
Q

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

A

True

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18
Q

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.

A

True

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19
Q

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

A

True

20
Q

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

A

Yes. If not, then no

21
Q

Who is responsible for supervising trust accounts?

A

Employing broker

22
Q

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

A

True

23
Q

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

A

Yes

24
Q

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

A

Yes; No

25
Q

What are operating account funds?

A

Funds to operate brokerage business

26
Q

Can you commingle operating account funds with trust funds?

A

No

27
Q

Commission funds go from the trust account to _________ account.

A

operating

28
Q

When are commission funds moved to the operating account?

A

before the disbursement and after they are earned

29
Q

When can commission funds be earned?

A

After closing

30
Q

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

A

True. 10 days is not prompt

31
Q

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

A

True

32
Q

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

A

3 days (only after the acceptance of the contract)

33
Q

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

A

The broker

34
Q

What is a Earnest money promissory note?

A

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

35
Q

Who is responsible for collecting earnest money promissory notes?

A

Listing broker

36
Q

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

A

Yes

37
Q

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

A

Listing broker

38
Q

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

A

Buyer’s broker

39
Q

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

A

Yes;

  • Closing statements (aka settlement statements)
  • Deeds, deeds of trust, title work
40
Q

How long do records have to be kept?

A

4 years

41
Q

What does an account journal consist of?

A
  • 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)
42
Q

What does a ledger account system consist of?

A
  • Little details
  • Seperate funds in the account by single beneficiary or transaction
  • Info like SSN or tax ID #
43
Q

What does a broker ledger card show?

A

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.

44
Q

How often must trust account be reconciled?

A

Every month that there is activity in the account

45
Q

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?

A

The former sole proprietor for four years

46
Q

List 4 ways to safeguard your records.

A
  1. Frequest reconciliation
  2. Separation of duties
  3. Outside audits
  4. Real Estate Commission assistance
47
Q

What is conversion?

A

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

CO RE Exam (10 decks)

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