unit 13- escrow
Escrow may be used in which of the following situations? When property is purchased and secured by a deed of trust In an exchange of property With a contract for sale All of the above
All of the above Escrow accounts are necessary if holding money or property for others. If established, it must be in the firm's licensed name, with a federally insured bank, and all accounts and all deposits must be designated (labeled) as "escrow."
Which payment does not need to be held in an escrow account? An earnest money deposit if closing is scheduled in less than 15 days An earnest money deposit if the amount is less than $250 A referral fee received from an out of state broker Money received as a security deposit for rental property
A referral fee received from an out of state broker Rental security deposits must be held in an escrow account. Any earnest money deposit must also be placed in the escrow account (no matter how short a period it will be held). Meanwhile, a referral fee is earned commission that belongs to the broker, so it should be placed in his personal or operational account.
An escrow account is required to Be opened by a broker to hold money that belongs to another party Have a minimum balance of $500 Be opened to ensure that all affiliates and employee will be paid regularly Be an interest bearing account
Be opened by a broker to hold money that belongs to another party By definition, an escrow account is an account that is used to hold money that belongs to another party. There is no requirement that escrow accounts be interest-bearing.
A broker receives an earnest money deposit from the buyer on thursday when is the latest day he can deposit into his escrow account without violating VREB rules Within 2 banking days Within 3 banking days Within 4 banking days Within 5 banking days
Within 5 banking days Brokers must deposit any earnest money, down payments, rental payments, security deposits, and advances before the end of 5th banking day.
When a broer established an account to hold money belonging to other which of the following statements is true An individual account is required for each transaction The money cannot be held in the same bank as the brokers operating account All checks deposit slips and bank statements must include the word escrow as part of the account name Accounts may be labeled either trust or escrow
All checks deposit slips and bank statements must include the word escrow as part of the account name All escrow accounts and all deposits into such accounts must be labeled as "escrow."
Mitch, the principal broker at ZYX Firm, has reasonable suspicion that one of his associate brokers is stealing escrow funds. As a principal broker, Mitch must report this violation within how many business days? 4 5 3 2
3 All licensees must report known escrow violations. Principal brokers must report escrow violations to the Board within three (3) business days of forming a reasonable belief that any violation occurred.
How long must a broker keep copies of escrow records 5 years from the date the transaction was originated 2 years from the date of consummation or ratification of the contract 3 years from the date of consummation or ratification of the contract 3 years from the date the transaction was originated
3 years from the date of consummation or ratification of the contract Escrow records must be kept for 3 year from the date of CONSUMMATION (closing) or ratification (if the contract does not go to closing).
Which funds would not need to be held in an escrow account An earnest money deposit if closing is schedules in less than 15 days A commission received from an out of state broker An earnest money deposit of less than $500 Money received as a security deposit for rental housing
A commission received from an out of state broker Earned commissions need not be placed in escrow
As a property manager a broker should maintain a bank account for money that belongs to the owner. How is this account identified? Operating account Reserve account Escrow account Miscellaneous account
Escrow account Escrow is defined as money that belongs to another person. Therefore, the account should be so identified.
A party defaults during the executory period of a vali real estate contract as a condition of the contract the broker must hold funds in his possession unit A court of competent jurisdiction orders disbursement The seller advises the broker that the contract has been breached The attorney for the non defaulting party orders a release of the funds The lending institution has advised the broker that the loan application was rejected
A court of competent jurisdiction orders disbursement If a transaction does not go to closing, the broker must hold any funds until all principals to the contract agree IN WRITING to the disposition of the funds, SUCCESSFUL interpleader allows the money to be held by the courts, OR a court orders dispersion. The broker can also disburse according to the specific terms of the sales contract. However, that requires written notice and a minimum waiting period.
All of the following are reason a broker may disburse funds from an escrow account except Court order Collect the commission Transaction is consummate Mutual agreement
Collect the commission
Broker paul realizes that he held an escrow deposit for 6 business days causing the balance of escrow account A to dip below zero if he does not take immediate action. Broker paul must Deposit personal funds into escrow account A to cover any shortage Contact the board within 3 business days and inform them that a violation may have occurred Deposit firm funds into escrow account a to cover any shortage Disburse from escrow account b to cover any shortages in escrow account a
Contact the board within 3 business days and inform them that a violation may have occurred All licensees must report known escrow violations. Principal brokers must report escrow violations to the Board within three (3) business days of forming a reasonable belief that any violation occurred.
If a broker received a deposit for escrow his handling of the deposit would be in violation of virginia license regulations if he Places the money in a non interest bearing account Has the earned interest credited to his personal account with permission from all parties involved in the transaction Does not advise the principals of exactly how he earned interest on the deposit will be distributed Places the money in an interest bearing account
Does not advise the principals of exactly how he earned interest on the deposit will be distributed The law does NOT require that escrow money earn interest. However, if the account does earn interest, all parties to the transaction must be advised and agree on exactly how the interest will be distributed.
Brenda the salesperson is employed by the broker bob. She receives a check from alex as a thank you for the excellent job she did in finding a buyer. In this instance brend should Endorse the check and give it to bob Put the check in her escrow account Cash the check because it was a tough sale and she earned the money Cash the check but inform bob
Endorse the check and give it to bob A salesperson can ONLY receive compensation from her employing broker. Once earned, there is no requirement to place payment into escrow and only brokers maintain escrow accounts.
Money or trust instruments received accepted or held on behlaf of another pending consummation or termination of a real estate transaction are Commissions Down payments Anticipated profits Escrow funds
Escrow funds The money could be intended as commissions or down payments. However, since it's held for others, the money must be placed in escrow
Chuck, lives in a rural area and sells real estate on a part-time basis. He only goes into his broker's office twice a month because it is not near his home. Chuck obtains a valid contract for one of his listed properties. What should he do with the earnest money deposit supporting this contract? Keep it with the contract until his next visit to the brokers office Mail it (special delivery) to his broker Deposit it into the escrow account which he has established near his home Give it to the seller for safekeeping
Mail it (special delivery) to his broker The earnest money deposit should be placed into an escrow account as soon as possible after contract ratification (no later than 5 banking days). As a salesperson or associate broker, Chuck does not have an escrow account. Therefore, he should get it to his broker as quickly as possible.
Virginia escrow accounts Must be held only by those brokers that hold money in escrow Must be held by all brokers and salespersons Need not be held at all Must be held by all brokers
Must be held only by those brokers that hold money in escrow Establishing Escrow Accounts is only necessary if holding money or property for others
Broker foster manages an apartment building for owner smith. Foster used the security deposits of two tenants for general maintenance on the apartment building. What this action permissible? No using these deposits for repairs would eliminate the need to charge damage repair when tenants move out Yes as long as the owner is aware of it No security deposits are held for tenants in an escrow account and are not part of the operating funds Yes because deposits are held to cover the cost of repairs
No security deposits are held for tenants in an escrow account and are not part of the operating funds The tenant's security deposits may be used to repair any damages (except fair "wear and tear") to the tenant's apartments. The Virginia License Law and Board Regulations require that such funds to be placed in an escrow account, they cannot be kept in a general operating account.
Broker tom can remove money from his escrow account in all of the following circumstances except Termination of the contract by performance Rescission of the contract by the seller When a court orders the broker to do so With written permission of all parties to the contract
Rescission of the contract by the seller The only listed situation where a broker CANNOT remove escrow funds is if there were a unilateral rescission--which means the contract was breached. The parties might have accounted for that in the original sales contract (if so, the broker can follow the terms of the contract). However, disputes usually require a successful interpleader or court order before the broker may release funds from escrow.
Which of the following must establish an escrow account All firms Firms holding money for others Firms holding property for others B and c
b and c Establishing Escrow Accounts is only necessary if holding money or property for others.
If the board finds that an escrow account is being mismanaged what action might they take? Seize control of the account Bar licensee access Appoint a receiver to manage the account All of the above
All of the above
Which of the following would not be a violation of board regulations? Placing an earnest money deposit into another separate escrow account Paying for a CRV and a credit report out of the escrow account Turning the deposit over to a seller Placing an earnest money deposit into a regular operating account
Placing an earnest money deposit into another separate escrow account The earnest money deposit must be placed in an escrow account. This escrow account is separate from other accounts that the broker may have. Earnest money must be distributed in accordance with the sales contract and with consent of all parties to the contract.
Under VA law earnest money deposits must be places in escrow within The 10th banking day of ratification The 12th business day of signing The 5th banking day of ratification The 2nd business day of execution
The 5th banking day of ratification Escrow deposits Include (but are not limited to) earnest money and down payments (deposit within 5th banking day following ratification).
Who is primarily liable for escrow violations The seller The listing agent The principal broker The buyers attorney
principal broker Principal broker is primarily liable for escrow accounts, but the supervising broker or any other licensee with escrow account authority may be disciplined for the following violations.
Once a contract is signed and an earnest money deposit is received how long before it must be deposited in an escrow account? Within 3 days Within 5 days Immediately The next business day
within 5 days
Earnest money deposits may be placed in interest bearing accounts if the Account is properly titled as escrow Account earns a minimum of 5% interest Interest is divided between the cooperating brokers Contract specifies the beneficiary of any earned interest
Contract specifies the beneficiary of any earned interest The law does not require that escrow accounts bear interest. However, if the account does bear interest, the broker must disclose exactly how that interest will be distributed.
Escrow records must be kept For 3 years from the date of wither contract ratification or closing whichever is earliest For 4 years from the date of either contract ratification or closing whichever is earliest For 1 year from the date of either contract ratification or closing whichever is earliest For 2 years from the date of either contract ratification or closing whichever is earliest
Fro 3 years from the date of wither contract ratification or closing whichever is earliest Principal or supervising brokers must keep records of all real estate transactions (including escrow activity) for three (3) years from date of closing, contract ratification if there was no closing, termination of contract, or conclusion of the licensee's involvement
In which circumstance would a broker be guilty of commingling funds? Placing rental security deposits in the same account as the property operating funds Using the same financial institution an escrow account and a personal account Placing rental security deposits in the same escrow account as earnest money deposits Placing personal funds in the same account as funds belonging to salespersons and employees
Placing rental security deposits in the same account as the property operating funds Commingling is the act of mixing or mingling entrusted client or customer funds with personal or business funds (deposit into the same account). Examples of commingling include depositing earnest money in the broker's business operating account, or depositing broker's personal funds in the trust account. Security deposits can be placed in the same account as earnest money deposits, but again, they must not be commingled with operating funds.
A buyer gives her salesperson a note payable at settlement as an earnest money deposit for a home. The salesperson must do which of the following actions Immediately call the seller on the telephone Tell the buyer to forget it Immediately give the note to her broker for deposit in the escrow account Put this information into the written offer
Put this information into the written offer The salesperson should write into the offer that the deposit is a note due at settlement. When the offer is presented to the seller, the seller can then decide whether to accept this as a deposit.
Which of the following actions is not a violation of virginia license law Accepting a net listing Placing an earnest money deposit in an interest bearing account but failing to advise all parties of that fact Showing a home to a prospective buyer before the owner has signed a listing agreement Refusing to cooperate on the sale of property listed exclusively
Refusing to cooperate on the sale of property listed exclusively The law does not specify that you must cooperate on listings; this is only customary. All other answers are violations of the law.
The Board believes that a broker is not properly managing her escrow account. Upon request, the court appoints a receiver to manage the account. After investigation, the Board finds that the broker is innocent of any wrong doing. Who is responsible for the expenses and fees of the court-appointed receiver? The broker as a necessary expense to establish her innocence The court that appointed that receiver The board using money from its operating budget The board using money from the transaction recovery fund
The board using money from its operating budget The Board must bear the expense if the licensee is innocent. The Board pays such costs from its operating funds, not the Transaction Recovery Fund.
Jim and his agent find a house that Jim would like to make an offer on. Jim tells his agent he wants to put an escrow deposit down on the property using savings bonds. Can Jim use his savings bonds as an escrow deposit? Yes if the broker approves this form of deposit No sayings bonds are not negotiable Yes if the parties to the contract accept this form of deposit No deposits must be cash or check
Yes if the parties to the contract accept this form of deposit Any note, nonnegotiable instrument, or anything of value not readily negotiable, as a deposit on a contract, offer to purchase, or lease, must be accepted by the parties to the agreement and the acceptance must be acknowledged in the agreement.