VA Escrow Agents

In which circumstance would a broker be guilty of commingling funds? Select one: A. Placing rental security deposits in the same escrow account as earnest money deposits B. Placing personal funds in the same account as funds belonging to salespersons and employees C. Placing rental security deposits in the same account as the property operating funds D. Using the same financial institution an escrow account and a personal account

placing rental security deposits in the same account as the property operating funds (escrow accounts) 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.

Which of the following actions is NOT a violation of Virginia License Law? Select one: A. Placing an earnest money deposit in an interest-bearing account, but failing to advise all parties of that fact B. Accepting a net listing C. Refusing to cooperate on the sale of property listed exclusively D. 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 (disciplinary procedures & sanctions) The law does not specify that you must cooperate on listings; this is only customary. All other answers are violations of the law.

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? Select one: A. 5 B. 4 C. 3 D. 2

3 (financial records and escrow management) 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.

As a property manager, a broker should maintain a bank account for money that belongs to the owner. How is this account identified? Select one: A. Escrow account B. Operating account C. Reserve account D. Miscellaneous account

Escrow account (escrow accounts) Escrow is defined as money that belongs to another person. Therefore, the account should be so identified.

A real estate transaction does not go to settlement. Under what circumstances can the escrow funds be released? Select one: A. An attorney handling the settlement may release the funds B. A broker may disburse the funds with permission of the seller C. A court must order disbursement D. A broker may disburse the funds with written approval of all parties

a broker may disabuse the funds with written approval of all parties (escrow accounts) If the parties agree to disbursement, the broker may release the funds. In cases of dispute, a broker may release the funds to the courts by interpleader (court holds the funds until dispute is settled). Otherwise, a court could (but is not required to) order disbursement. Note that if there is an agreement, it's unnecessary to work through the court system (for example, if it was agreed upon in the original sales contract).

Which funds would NOT need to be held in an escrow account? Select one: A. Money received as a security deposit for rental housing B. An earnest money deposit, if closing is scheduled in less than 15 days C. An earnest money deposit of less than $500 D. A commission received from an out-of-state broker

a commission received from an out of state broker (escrow accounts) Earned commissions need not be placed in escrow.

When a broker establishes an account to hold money belonging to others, which of the following statements is true? Select one: A. All checks, deposit slips, and bank statements must include the word "Escrow" as part of the account name B. Accounts may be labeled as either "Trust" or "Escrow" C. The money cannot be held in the same bank as the broker's operating account D. An individual account is required for each transaction

all checks deposit slips and bank statements must include the word "escrow" as part of the account name (escrow accounts) All escrow accounts and all deposits into such accounts must be labeled as "escrow."

A broker is NOT required to hold money in an escrow account if: Select one: A. The deposit amount is less than $500 B. All parties to the transaction have agreed, in writing C. Closing is scheduled in less than 30 days D. The purchaser is a non-profit organization

all parties to the transaction have agreed in writing (escrow accounts) The only time that a broker can accept money and NOT put it into his escrow account is when all parties agree in writing.

A broker received an earnest money deposit to support a valid contract. If the contract is breached and does not close, the broker is required to hold the escrow funds until: Select one: A. The buyer requests for the deposit be returned B. The broker receives notice of the breach of contract from an attorney C. All principals to the contract agree to the intended distribution D. The non-defaulting party threatens legal action

all principals to the contract agree to the intended distribution (escrow accounts) In the event of a breach, the broker must hold the escrow funds until the parties agree on how they should be disbursed, the funds are successfully interpleaded into court, or until a court orders disbursement. The broker can also disburse according to the specific terms of the sales contract (requires written notice and a minimum waiting period).

An escrow account is required to: Select one: A. Be opened by a broker to hold money that belongs to another party B. Be opened to ensure that all affiliates and employees will be paid regularly C. Be an interest-bearing account D. Have a minimum balance of $500

be opened by a broker to hold money that belongs to another party (escrow accounts) 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.

If a contract of sale is not consummated, how are escrow funds disbursed? Select one: A. By the settlement attorney, with permission of all parties B. By the broker, with written permission of the seller C. By the broker, according to the terms of the contract if neither party files a written objection D. By the broker, only upon notification of the court

by the broker, according to the terms of the contract if neither party files a written objection (escrow accounts) The broker may disburse the escrow with written authority of all parties, or after 15 days notice of intended distribution if neither party objects. If all parties cannot agree, then the broker must file an interpleader or wait for court order.

Earnest money deposits may be placed in interest-bearing accounts if the: Select one: A. Contract specifies the beneficiary of any earned interest B. Account earns a minimum of 5% interest C. Account is properly titled as escrow D. Interest is divided between the cooperating brokers

contract specifies the beneficiary of any earned interest (escrow accounts) 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.

If a broker receives a deposit for escrow, his handling of the deposit would be in violation of Virginia License Regulations if he: Select one: A. Places the money in an interest-bearing account B. Has the earned interest credited to his personal account, with permission from all parties involved in the transaction C. Does not advise the principals of exactly how the earned interest on the deposit will be distributed D. Places the money in a non-interest bearing account

does not advise the principals of exactly how the earned interest on the deposit will be distributed (escrow accounts) 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.

A broker receives a deposit for escrow. In this situation, the broker would violate Board regulations if he: Select one: A. Places the money in an interest-bearing account B. Obtains permission to have any earned interest credited into his personal account C. Does not advise the principals on how any earned interest will be distributed D. Places the money in an account that is not interest-bearing

does not advise the principals on how any earned interest will be distributed (escrow accounts) There is no requirement that an escrow account bear interest. However, if the account does earn interest, the broker must disclose (to all parties) exactly how the interest will be distributed.

Brenda the Salesperson is employed by Broker Byron. She receives a check from Alessandra as a "thank you" for the excellent job she did in finding a buyer. In this instance, Brenda should: Select one: A. Cash the check, because it was a tough sale and she earned the money B. Endorse the check and give it to Byron C. Put the check in her escrow account D. Cash the check, but inform Byron

endorse the check and give it to Byron (disciplinary procedures & sanctions) A salesperson can ONLY receive compensation from her employing broker. Once earned, there is no requirement to place payment into escrow.

A contract cannot be consummated due to a disagreement between buyer and seller. The broker still has the earnest money deposit in his escrow account. The seller demands that the deposit be given to him, but the buyer demands that the deposit be returned to her. What can the broker legally do? Select one: A. Immediately return the funds to the buyer B. Immediately give the funds to the seller C. Retain the funds as his commission D. Hold the funds until ordered by the court to disburse

hold the funds until ordered by the court to disburse (escrow accounts) The License Law and Regulations advise that if the sale is not consummated, the deposit should be disbursed as agreed upon by the parties (in the sales contract or otherwise). However, there is no agreement in this situation and no indication of the contract terms. Therefore, the only solutions are to let the courts hold the funds until the dispute is settled (interpleader), or to hold the money until a court orders the disposition of the funds.

Chris, 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. Chris obtains a valid contract for one of his listed properties. What should he do with the earnest money deposit supporting this contract? Select one: A. Deposit it into the escrow account which he has established near his home B. Mail it (special delivery) to his broker C. Keep it with the contract until his next visit to the broker's office D. Give it to the seller for safekeeping

mail it (special delivery) to his broker (escrow accounts) 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.

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? Select one: A. Put this information into the written offer B. Immediately give the note to her broker for deposit in the escrow account C. Immediately call the seller on the telephone D. Tell the buyer to forget it

put this information into the written offer (escrow accounts) 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.

A broker could remove money from her escrow account under all of the following circumstances, EXCEPT: Select one: A. With a written agreement of all of the parties B. Rescission by the buyer C. Termination of the contract, by full performance D. As a result of a court order

recession by the buyer (escrow accounts) Money can be removed from escrow with written permission of the principals to the contract (in the sales contract or otherwise), upon consummation of the transaction, interpleader, or by court order. Rescission (cancelling the contract) requires agreement from both the buyer and the seller.

Broker Tom can remove money from his escrow account in all of the following circumstances, except: Select one: A. When a court orders the broker to do so B. With written permission of all parties to the contract C. Rescission of the contract by the seller D. Termination of the contract, by performance

recession of the contract by the seller (escrow accounts) 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 contracts provides instructions for the distribution of escrow money? Select one: A. Deed B. Mortgage C. Sales contract D. Listing contract

sales contract (escrow accounts) The sales contract should state the parameters of the sale, including how escrow funds will be distributed.

If a broker holds an earnest money deposit in an interest-bearing escrow account, what is the disposition of any earned interest? Select one: A. It is, by regulation, credited to the buyer B. It is always credited to the seller at closing C. The broker may keep the interest D. Escrow accounts cannot, by regulation, earn interest

the broker may keep the interest (escrow accounts) Interest earned from escrow account deposits can be kept by the broker, as long as there is written disclosure and agreement by all parties.

Which payment does NOT need to be held in an escrow account? Select one: A. Money received as a security deposit for rental property B. A referral fee received from an out-of-state broker C. An earnest money deposit, if closing is scheduled in less than 15 days D. An earnest money deposit, if the amount is less than $250

a referral fee received from an out of state broker (escrow accounts) 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.

Which of the following would NOT be a violation of Board Regulations? Select one: A. Placing an earnest money deposit into a regular operating account B. Placing an earnest money deposit into a separate escrow account C. Paying for a CRV and a credit report out of the escrow account D. Turning the deposit over to a seller

placing an earnest money deposit into a separate escrow account (escrow accounts) The earnest money deposit must be placed in an escrow account. This escrow account is separate from other accounts that the broker may have. If the terms of the contract require that the deposit earn interest pending consummation of the deal, the deposit could be placed in an escrow account of its own.

Which of the following actions is an example of commingling? Select one: A. Placing earnest money from two buyers into the same escrow account B. Using personal funds to open an escrow account C. Placing earned commissions in the same account as earnest money deposits D. Placing earned commissions in the same account as referral fees

placing earned commissions in the same account as earnest money deposits (escrow accounts) Earned commissions belong to the broker. The broker must not place his own money (earned commissions) in with escrow funds. To do so is to commingle.

A broker has the buyer's earnest money deposited in an escrow account. The amount of the deposit exceeds the amount of the broker's commission for the sale. The broker can ONLY remove his commission for the sale: Select one: A. When the buyer moves into the property B. When the seller moves out of the property C. When the closing is completed D. Whenever the seller says it's fine to do so

when the closing is completed (escrow accounts) The broker may remove his commission from the escrow account after closing or when ALL parties to the transaction agree in writing, not when only the seller states it's okay to do so.

How long must a broker keep copies of escrow records? Select one: A. 2 years from the date of consummation or ratification of the contract B. 3 years from the date the transaction was originated C. 3 years from the date of consummation or ratification of the contract D. 5 years from the date the transaction was originated

3 years from the date of consummation or ratification of the contract (escrow accounts) Escrow records must be kept for 3 year from the date of CONSUMMATION (closing) or ratification (if the contract does not go to closing).

Money or trust instruments received, accepted, or held on behalf of another pending consummation or termination of a real estate transaction are: Select one: A. Commissions B. Down payments C. Escrow funds D. Anticipated profits

escrow funds (escrow accounts) The money could be intended as commissions or down payments. However, since it's held for others, the money must be placed in escrow.

A party defaults during the executory period of a valid real estate contract. As a condition of the contract, the broker must hold any funds in his possession until: Select one: A. The seller advises the broker that the contract has been breached B. The lending institution has advised the broker that the loan application was rejected C. The attorney for the non-defaulting party orders a release of the funds D. A court of competent jurisdiction orders disbursement

a court of competent jurisdiction orders disbursement (escrow accounts) 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.

A broker manages three separate properties for the same owner. One property is in need of emergency repairs, but there is no money in the management account to cover the cost. The broker "borrows" money from another property's escrow account to make the needed repairs. Assuming he restores the borrowed funds on the next business day, which of the following statements is true? Select one: A. The broker acted properly by safeguarding his client's interests B. The broker is in violation of License Law for improperly handling escrow funds C. Such action by the broker is proper because all properties are owned by the same person D. The broker is required to make the repairs with his own funds, then receive reimbursement from the owner

the broker is in violation of license law for improperly handling escrow funds (escrow accounts) Brokers cannot combine money from different escrow sources because it probably contains security deposits belonging to tenants of multiple properties. Even if he pays it back the next day, the broker is still in violation of the regulations.

When can a broker remove money from his escrow account? Select one: A. At the time the buyer occupies the property B. When directed to do so by the seller C. When closing is completed D. Any of the above

when closing is completed (escrow accounts) Of the choices presented, the best choice is that funds may be removed from escrow when closing is complete.

A salesperson who receives an earnest money deposit is NOT required to place the money in an escrow account: Select one: A. With the knowledge and consent of the parties B. With the permission of his or her broker C. With the written agreement of both parties D. Until 10 days prior to settlement

with the written agreement of both parties (escrow accounts) We have no way of knowing why the parties would agree to not use an escrow account. However, if all parties agree in writing, then it is OK.

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? Select one: A. Within 2 banking days B. Within 3 banking days C. Within 4 banking days D. Within 5 banking days

within 5 banking days (escrow accounts) Brokers must deposit any earnest money, down payments, rental payments, security deposits, and advances before the end of 5th banking day.