Study sets, textbooks, questions
Upgrade to remove ads
ch 24 real estate
Terms in this set (16)
are money or other things of value received by the broker on the part of another person.
Non-trust funds (real estate commissions, general operating funds, rents and deposits)
Non-trust funds (real estate commissions, general operating funds, rents and deposits) are NOT subject to the California Real Estate Law or the DRE Commissioner's Regulations
Handling the Trust Funds:
Give the money to the principal to the transaction;
Put it into a neutral escrow depositor/ broker's trust fund account at a bank.
** This money MUST BE DEPOSITED within 3 business days following receipt of the funds (except for checks)
If a broker accepts a check (or promissory note) as an earnest money deposit:
1. Broker must make full disclosure to the seller.
2. Buyer's written instructions should be followed.
3. Broker must record a receipt of the check in the broker's trust fund records and hold the check in a safe place.
California Trust Fund Regulations
Promissory notes are not universally accepted as equivalent to cash in California business transactions.
A real estate salesperson is authorized to accept the trust funds on the behalf of and at the direction of the broker under whom he is licensed.
1. A trust account must be designated as a trust account in the name of the broker as trustee;
2. A trust account must be maintained with a bank or recognized depository located in California;
3. A trust account must be a NON-interest-bearing account;
4. An out-of-state trust account is permitted only if the FDIC insures the account, and the account is used only to service specific first loans; and
5. A withdrawal may ONLY be made from a trust account upon the signature of specific parties:
Advance Fees for a Loan Secured by Lien on Real Property: it is illegal for anyone to claim for an advance fee for:
1. Soliciting lenders on behalf of borrowers in connection with any loan to be secured by a lien on real property, before the borrower becomes obligated to complete the loan;
2. Performing any other activities for which a license is required, unless the person is a licensed real estate broker and is acting in accordance with the law.
Jackson, a broker, is accused of commingling his money with trust account funds. His broker's trust account is a non-interest-bearing account. The current balance of the trust account is $430,000. The earnest deposit funds portion of the account totals $415,000; the broker's initial deposit totals $15,000. Is Jackson guilty of commingling?
Yes, Jackson's initial deposit to open the account should have only totaled about $200.00. The $15,000 he deposited of his own money to open the account is considered excessive.
The McColls have made an offer on a new home. The home is new construction and scheduled to be completed by the end of the year. They provide a purchase deposit--a check in the amount of $40,000--to their agent, Suzette. Suzette, at the broker's direction, deposits the earnest money in the broker's trust fund account within two business days of receipt of the funds. Did Suzette follow the proper procedures?
Yes, Suzette deposited the earnest money in the broker's trust fund account as directed. She also deposited the check within three business days of receipt. Unless there were written instructions to hold the check until acceptance of the offer, the check may be cashed.
Jason, a broker, has been accused of conversion. His partner, Justin, has been accused of commingling. Which has been accused of a more serious offense?
Jason, conversion is considered a much more serious violation than commingling and has heavy criminal penalties.
Matilda is buying a condo from Tom and Alex Ries. She has given her agent, Manuel, earnest deposit funds in the amount of $10,000. Matilda has post-dated the check to coincide with the expiration date of offer acceptance on the contract. Do the basic trust fund regulations apply to Matilda's earnest deposit?
No, California law has held that post-dated checks are the equivalent of a promissory note and are non-negotiable. The broker must not accept a post-dated check from a buyer without adequate disclosure to the seller.
Miriam is a real estate salesperson. She has just been handed a $100,000 earnest money deposit certified check from buyers who are interested in a new home. What does she do with the money?
Miriam must hand over the check to only her own broker. At that point, the broker might direct her to put the funds into the hands of the broker's principal; place the funds into a neutral escrow depository; or deposit the funds into the broker's trust fund bank account.
When a buyer hands over earnest deposit money to a salesperson licensed to a broker, or to the broker themselves, what type of relationship does this create?
A Fiduciary Relationship with the broker having a fiduciary responsibility to the funds' owners.
Serena and Lucy want to make an offer on their dream home. The seller is requesting a very large earnest money deposit with serious offers on the home. Serena and Lucy have some cash set aside for this purpose, but are short of the amount the sellers are requesting. Do they have any other options?
A personal note made payable to the seller or a pink slip on an automobile given as a deposit is acceptable.
A check made payable to the broker or to an escrow or title company is an option.
Ramon, a salesperson licensed to Richard, a broker, has been given specific written authorization to make a withdrawal from the broker's trust account. Ramon is uncertain this is permissible under California Law. Which California Law, if any, references Ramon's concern?
California Business and Professions Code Section 10145
Commissioner's Regulation 2832
Jamison, a broker, has been fined $10,000 and is being sentenced to four months' prison time for violations he has committed through his brokerage. Which type of violation did he possibly commit?
Advance Fees for a Loan secured by Lien on Real Property
Which of the following statements concerning California Trust Account Requirements is false?
A trust account may be an interest-bearing account.
Sets found in the same folder
Real Estate Principles- Ch 1- Ch 28
Other sets by this creator
Practice Exam 2
practice exam 1
Other Quizlet sets
Pharmacology Unit 2 Simplified
BAR REVIEW - CONTRACTS/SALES
Fungal and Protozoal Diseases