Real Estate Trust Fund handling

Trust account funds

1) Cannot be frozen pending litigation against the principal broker or brokerage 2) If the principal broker becomes incapacitated or dies. Funds maintained as trust funds are not subject to claims against the brokerage or principal broker that are personal in nature. 3) Are insured up to $250,000 each individual 4) Provides the REA with easy audit access to client trust records.

Regardless of the type of trust accounting system used, the accounting system must meet which of the following criteria?

1)Trust receipts and disbursements must be detailed in chronological order 2)The system must show the balance owing to each beneficiary or on each transaction. 3)The balance in each trust fund account must be calculated on recorded transactions.

Trust funds must be either 1) deposited into a neutral escrow account 2) deposited into the brokerage trust account 3) The trust funds can be given to the owner of those funds if the principal broker has received written instructions from all parties to the transaction in ________ days

3 days

Bank statements, canceled and voided checks, and all bank reconciliations must be retained in chronological order for

6 years

Reviewing and initialing of transaction documents must happen within

7 days of being accepted, rejected, or withdrawn, or before the close of escrow, whichever occurs first

Brokerage Commercial accounts

Are not Trust Fund accounts Client funds must never be deposited into the account.

Examples of trust funds

Cash, checks, promissory notes, fees for future brokerage services, pink slips or other things of value

____________________________ is the act of mingling funds belonging to a client with funds belonging to a principal broker, brokerage, or other real estate licensees

Commingling

the unauthorized assumption and exercise of the right of ownership over the goods or personal chattels belonging to another to the exclusion of the owner's rights"

Conversion

Non-columnar Record

Journals Cash ledger Beneficiary ledger of each account Trust fund bank account statements, deposit slips, cancelled checks, check register

Exceptions to the 3 day deposit rule for trust funds/earnest money

Licensee may hold the funds until offer is accepted or rejected only if seller is notified before or at presentation of offer and must be written in the offer

4 categories of records that must be retained

Listing Files Transaction Files Buyer Files Unaccepted Offer Files

These points in time help to determine ownership of the trust funds:

Prior to acceptance of the offer After acceptance of the offer

The two reconciliations to be made at the end of each bank statement period are

Reconcile the bank account record with the bank statement

Columnar Records System

Record of all trust funds received and paid out Separate record for each beneficiary or transaction Record of trust funds received but not deposited in the trust fund account Separate record for each property managed Trust fund bank account statements, deposit slips, cancelled checks, check register

accounting journal

Records in chronological sequence, the details of all trust account transactions. is a daily chronological record of trust account receipt and disbursement activity

Record of All Trust Funds Received - Not Placed in Broker's Trust Account

This form is used to record all trust funds received but not deposited into the trust bank account, including uncashed checks, notes, or anything of value used as a deposit, and the disposition of such funds.

Separate Record for Each Property Managed

This form is used to record trust fund account deposits and disbursements pertaining to each property managed for others.

Columnar Record of All Trust Funds Received and Paid Out - Trust Fund Bank Account

This is the ledger used to record all trust funds received and deposited into the trust fund bank account and the disbursements from such an account. The balance shown in the right-hand column of this form must agree with the balance shown on the trust account's bank statement as adjusted for deposits in transit, outstanding checks and any other reconciling items.

Separate Record for Each Beneficiary or Transaction for Client's Funds Placed in Trust Fund Bank Account

This ledger is maintained for each transaction or beneficiary of trust funds deposited to and disbursed from the trust bank account, including any interest earned, if applicable. The total of all Separate Records for Each Beneficiary and Separate Records for Each Property Managed (right-hand column of the forms) must equal the trust bank balance shown on Record of All Trust Funds Received and Paid Out on any given date. Any difference must be reconciled.

A principal broker dealing only in brokering real estate may elect not to open and maintain a trust account

True

A property manager must maintain a clients trust account and a separate tenant's security deposit trust account.

True

The trust account does not protect a client from the dishonest acts of the principal broker.

True

You should record transactions in the Bank Account Record and in the Separate Beneficiary Records in chronological sequence

When they occur, or at least daily.

Both trust account shortages and overages are

a violation of the real estate law

Funds received ___________________________ of the offer belong to the offeror and must be handled according to the offeror's instructions.

before the acceptance

An ________________________is NOT the consideration needed for a valid contract, but rather provides protection for the seller in the event of a breach of contract by the buyer

earnest money deposit

Conversion is a form of

embezzlement

beneficiary ledger

for each of the beneficiary accounts that shows, in chronological sequence, the transactions affecting each account, as well as the current balance

Earnest money represents ______________________________ to the seller if a breach occurs

full liquidated damages

Conversion of trust funds

is a theft of the funds.

The amount of liability the trustee has at any given moment

is the total trust fund positive balances due to all beneficiaries of the account. If a beneficiary account has a negative balance, it is not deducted from the total liability, since to do so would allow the trustee to be liable for less than what is due the other beneficiaries.

The following business processes are managed by a principal broker's or property manager's personal eLicense account

license transfers, inactivate a license clients' trust account management

A principal broker must have 2 accounts in elicense

manage a principal broker or property manager's personal license; and manage the business account, whether doing business under a registered business name or the licensed name of the principal broker or property manager.

Commingling is the

mixing of personal funds with trust funds

These items are NOT trust funds

rents and deposits derived from rental property owned by the brokerage itself or a licensee as an individual; real estate commissions; brokerage general operating funds; and a licensee's personal funds.k]\\

A note for earnest money deposit is made payable to the

seller

cash ledger

shows the bank balance affected by transactions recorded in the journal. The ledger is posted by the recording of debits and credits based upon the journal entries.

Within _______________________ after the date a clients' trust account is opened OR closed, the information regarding this account must be transmitted to the REA through its eLicense system

ten business days

Earnest money checks are made payable directly to

the escrow company

Neutral Trust Fund Depository can be

title companies, escrow companies, attorneys, and financial institutions. Must be within state of Oregon