National Real Estate Exam (PSI)General Principles of AgencyMedium
A listing broker collects an earnest money deposit from a buyer and places it into the firm's trust account, later providing the seller with a detailed statement of all funds received and disbursed at closing. This behavior best demonstrates which fiduciary duty?
- ADuty of disclosure
- BDuty of loyalty
- CDuty of accounting
- DDuty of obedience
Show answer & explanationAnswer & explanation
Correct answer: C. Duty of accounting
The duty of accounting requires an agent to keep accurate records of all money and property handled on behalf of the principal and to report on those funds. Proper trust account handling and closing statements are direct examples of this duty.
Why the other options are wrong
- A. Disclosure involves sharing material facts, not financial record-keeping.
- B. Loyalty concerns acting in the principal's best interest, not record-keeping of funds.
- D. Obedience means following lawful instructions, unrelated to fund tracking.
Duty of Accounting
The fiduciary duty requiring an agent to properly handle, safeguard, and report all funds and documents received on behalf of the principal.
- Includes trust account management
- Requires timely, accurate financial reporting
- Part of the fiduciary duties (often OLD CAR)
Memory trick: Accounting = Adding it all up