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Escrow Account – Questions & Detailed Solutions
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Escrow Account – Questions & Detailed Solutions
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Escrow Account – Questions & Detailed SolutionsEscrow Correct Ans - taking care of other peoples' money, money
that is held in trust and must be accounted for at all times. It may not be
commingled with the broker's money nor taken out of the account
(conversion) by the broker without authorization to pay the broker's bills.
Occasionally, other items are placed in escrow with a broker such as a boat
or a diamond ring. These can be accepted by the broker so long as all
parties to the transactions are aware and have agreed in writing to this
fact. The broker must handle these items with the same care as money in
an account and is responsible for all escrow items given to him. Correct
Ans - The word "escrow" is used several places in real estate brokerage.
For purposes in this session, escrow refers to the money (or items) put in
trust by a buyer, seller, tenant or landlord with the broker. An escrow
account refers to the account where the money of other people is kept by
the broker. Sometimes this account is called a "trust account." The broker is
responsible for all monies entrusted to his care and must be able to
account for all funds.
The Commission is charged by the legislature of the Commonwealth to
make sure that every broker complies with the following in regard to
escrow accounts:
Every broker must: Correct Ans - Deposit all money accepted by all
licensees who work for a broker and hold those monies until the
consummation or termination of the transaction involved;
Account for the full amount of all monies given to the broker at the time of
consummation or termination;
Have each salesperson or associate broker give the broker promptly a
receipt of monies for a transaction for which he is engaged on behalf of the
broker-employer;
Immediately deposit monies belonging to others in a separate custodial
account or trust fund maintained by the broker with a bank or recognized
depository until the transaction is consummated or terminated. At this
time the broker must account for the full amount received;
Not deposit advance fees into the broker's business or personal account or
be commingled with any funds he may have on deposit;
Keep personal and business money separate from escrow money. The
broker cannot commingle funds;
, Keep careful and good records of all funds deposited in the escrow account
indicating:
The date he received the money,
From whom he received the money,
Date deposited,
The dates of withdrawals,
Pertinent information related to the transaction,
Show clearly for whose account the money is deposited,
To whom the money belongs.
The Commission is charged by the legislature of the Commonwealth to
make sure that every broker complies with the following in regard to
escrow accounts: Correct Ans - Every broker must:
Have records of the escrow account available for inspection by the
Commission;
Have each separate or escrow account designate the broker as trustee and
each account must provide for withdrawal of funds without previous
notice;
Have records available to the Commission immediately after proper
demand or after written notice or upon written notice given to the
depository.
A broker does not have to hold rents in escrow that he receives for a lessor
in property management. These funds must be deposited in a rental
management account which is also separate from the broker's escrow and
general business accounts.
A broker may deposit his own money into an escrow account to cover
service charges to this account assessed by the banking institution.
A broker must have at least two different types of accounts:
an escrow account
an operating account
A rental/property management broker will have three accounts: an escrow
account, a rental account and an operating account.
In general, Correct Ans - a broker must account in a timely manner
for all money and property received from or on behalf of any consumer to a
transaction consistent with the provisions of 604. (a) (5).
Duty to Deposit Money Belonging to Another into an Escrow Account
Correct Ans - The Commission has established standards of conduct
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