Record Keeping and Trusts Accounts
No, brokerage/manager should also be periodically reviewing licensee's transaction files
Are licensees solely responsible for the contents and accuracy of their transaction files?
no
Are there limits to trust accounts?
deposit or withdrawal made from each trust account
Brokers must maintain a journal or other accounting system which details each....
paper
CREC requires that you keep escrow account bank reconciliation worksheets on ....
having trust money in the same account as a broker's money for operating expenses (this is illegal)
Commingling
No, some brokerages use an escrow company for all trust monies received
Do brokerages have to maintain their trust accounts?
"OLD CAR": Obedience, Loyalty, Disclosure, Confidentiality, Accountability, and Reasonable Care.
Fiduciary Duties
program to reclaim lost or forgotten assets that have been turned over to the state
Great Colorado Payback Program
random audits are selected from the commission's statewide database or in response to a complaint
How are audits triggered/started?
in separate bank accounts for trust monies
How do brokers hold trust monies?
by using escrow or trust in the account name, along with an additional labe further describing the account's purpose
How do you identify trust account?
written report in mail
How does the licensee hear back from commission about audit findings?
90 days
If a broker makes monetary advances to a beneficiary from a trust account, the cash must be replaced within how many days?
Brokerage name and brokerage owners name ex. mile high homes, llc and henry o'toole
If a broker-owner is opening trust accounts what names must be included on all trust accounts they open?
additional insurance
If earnest money exceeds the insured amount, what is is recommended?
seller
If earnest money is held in interest-bearing trust, who gets interest after transaction closes?
yes, documents can be kept electronically
If the licensee can't find the hard copy of transactional documents is there another way they can prove they have the documents?
the listing broker
If title company isn't involved, who is responsible for holding earnest money deposits in Colorado?
deposit it into the appropriate trust fund account by Friday
If you receive a security deposit on Monday, when does the deposit need to be made?
chronological, and contain the same general transaction details as the main journal
Ledger for trust accounts must be in ______ order
detail each beneficiary's transactions, which must be able to be segregated from other transactions in a trust account
Ledger is used to
earnest money
Most common trust?
brokers working with homebuilders must keep trust monies separate, unless purchaser give written consent
New Construction Trust
broker entrusted with an item of value other than money it's their responsibility to hold it
Non-monetary items
agents must obey all of their clients lawful instructions
Obedience
Brokers who act as property manager can deposit security deposits, rent payments, etc into their sale escrow accounts but only if they manage fewer than 7 single-family residences
Property Management
agents must provide clients with quality, knowledgeable and prudent service and live up to the trust their clients have placed in them
Reasonable Skill and Care
brokerage's registered office address
Records of brokers deposits and withdrawals from their trust accounts must be kept at or accessible from the....
document or record that commission requests for investigation, audit or rule enforcement
Rule E3 stated that licensees must be able to produce any _______
complete an earnest money receipt for the buyers and give it to them through their agent
Sellers agent-the written offer is accompanied by an earned money check. Which of these actions will seller agent take if the family accepts the offer?
helps to ensure that the accounting records are properly maintained, and that risk of errors, theft and fraud is lessened
Separation of Duties helps?
more than one person is in charge of completing related tasks and there's a verification process to ensure that trust fund accounting and record keeping tasks are carried out properly
Separation of duties means that
audits of brokerage files to ensure compliance with record-keeping requirements
The Colorado real estate commission conducts routine, random _____
brokers are supposed to make journey and ledger entries for payments and deposits as they occur. IN order for the bank balance and the journal ledger totals to reconcile, all payments and deposits must be accounted for.
The bank reconciliation worksheet provides a space for brokers to list any outstanding payments or deposits. Why is this?
Earnest money check, receipt given to buyer, deposit slip/confirmation for funds held in the brokerage trust account, receipt from any third party holding the funds per closing instructions
The broker must keep copies of earnest money transaction documents. Includes:
three
The holding broker has _____ business days from the date of receipt to deposit the funds into the broker's trust account.
beneficiary ledgers plus the brokers ledger
The reconciled account balance should equal the?
additional distinguishing it from one that is used for earnest money
Trust account for security deposits need to have?
Federal deposit insurance corporation (FDIC)-insured banking institution
Trust accounts must be established at an .....
transaction documents she prepared or which were prepared on her behalf
What defines the records she keeps to comply with Colorado Law?
account description and an explanation of the inherent risks, restrictions and/or penalties associated with the account
What does the disclosure need to include?
confidentiality and accounting
What fiduciary duties survive the agency relationship?
escrow account journal, the broker's ledger, separate beneficiary ledgers, and bank reconciliation
What four types of records must be maintained for brokerage accounting?
they've to to open a separate trust account specifically for property management purposes
What happens if broker manages more than 7 single-family residences?
broker needs to make every reasonable effort to refund monies to beneficiaries, but if not possible then keep files of all correspondence as proof of efforts, funds transferred to state's escheat fund for safekeeping, if beneficiary last know address is in colorado than transferred to Great Colorado Payback Fund
What happens to unclaimed trust funds in a sales transactions?
a copy of the deed granting title to the buyer
What record are brokers not required to keep according to CREC rules?
the bank statement's balance
What would be the best entry to make first on your reconciliation worksheet?
the reconciled account balance, the total of all ledgers, and the total of the escrow account journal all match
When is the escrow account reconciliation considered in balance?
within five years after all efforts to contact beneficiary have been exhausted
When should funds be transferred to great colorado payback fund?
electronically with the commission and can be found online
Where are final audit reports filed?
on-site or via correspondence with the commission
Where can audits be done?
1) central, secure location at a brokers office 2) password-protected electronic files
Where can you keep transaction file documents?
the broker, who acts as the fiduciary
Who is responsible for any loss of the trust account, exceeding what's federally insured?
security deposits-tenant rent-landlord
Who keeps interest earned from security deposits and rent when they are in interest-bearing trust?
the beneficiary or buyer
Who owns the escrow funds?
Listing brokers unless otherwise stated in writing
Who typically holds earnest money deposits?
the beneficiary ledger doesn't include deposits and credits unrelated to the specific beneficiary, so it would start to a zero balance
Why doesn't the beneficiary ledger provide a place to show the account balance carried forward?
agents must promptly account for all monies, property and paperwork entrusted to them by their clients accounting
accounting
no, other forms can be used but they must contain the same information specified on the CREC form
are brokers and closing agents required to use the CREC-approved broker's ledger form?
snapshot of the condition of the escrow accounting equation
bank reconciliation worksheet
details all changes in the cash balance held for an individual party
beneficiary ledger
primarily used to record escrow funds deposited for bank service charges, account maintenance, and interest
brokers ledger
no
can a broker keep the interest earned from placing monies in an interest-bearing trust?
agents must keep any confidential information their clients share confidential
confidentiality
using trust monies for personal use or to cover other trust monies-Illegal
conversion
The agent must disclose to the client any information she receives that may benefit the client's position in a negotiation.
disclosure
reconciliation worksheet
document that must include the date, journal balance, sum of all ledger balances, each ledger's balance, and bank account balance on a month
bank reconciliation worksheet-demonstrates that the numbers all add up correctly
each month that account is active, the broker must produce a ?
includes entries for all funds going into and coming out of an escrow account
escrow account journal
pay directly out of the escrow account
how does a broker pay transactional expenses from escrow funds?
in escrow account journal and related beneficiary ledger
how is broker commission in journal and ledgers?
four years
how long do licensee's have to keep transactional documents?
four years
how long do you need to maintain escrow account reconciliation worksheets and other accounting forms?
until all transaction funds have been disbursed per the contract
how long must a broker maintain a beneficiary ledger?
four years
how long must colorado escrow account journals be retained in brokerage records?
$100,000
how much must the FDIC-insured banking institution insure each deposit up to?
once per month
how often must colorado escrow accounts be reconciled?
in escrow journal and the beneficiary ledger
how record earnest money in journals and ledgers?
in brokers ledger and the escrow account journal
how record transfer from brokerage operations account into the brokerage trust account?
they have a new client who they accepted escrow funds
if a broker is setting up a new beneficiary ledger, what is true?
title company
in most states who acts as the escrow agent?
yes!! emails, face to face, and phone calls all must be documented
is it important for brokers to document every single conversation?
positive
ledger must always carry a ____ balance
agents must put their clients interests ahead of all others, including their own
loyalty
brokers ledger these are the checking supplies, and bank charges and deposit of funds to open account
non-transactional funds are tracked separately from transactional funds on the ______
written disclosure to and consent of all parties
placing trust monies into interest-bearing accounts or certificates of deposit requires what?
beneficiary ledger
transaction-related funds are recorded in the ____ ledger?
preliminary report
what document is used to give buyer an overview of the title history and information about what is or isnt covered in an insurance policy?
using the accrual method of accounting for maintaining her trust journals, records are kept via cash basis
what trust account recordkeeping requirement doesn't an independent broker have to adhere to?
water
what utility does a colorado closing company withhold funds at closing?
cash basis
which accounting method of record keeping is to be used in Colorado unless otherwise agreed upon in writing?
