Florida Real Estate Sales Associate Examination Content OutlineReal Estate Brokerage Activities and ProceduresMedium
A Florida real estate broker is managing an escrow account. The broker receives a check for a security deposit from a tenant, but the check is returned due to insufficient funds. What is the broker's immediate obligation upon notification of the dishonored check?
- AImmediately notify the Florida Real Estate Commission (FREC) within 24 hours.
- BCover the amount of the check from the broker's operating account to avoid escrow account shortage.
- CWait for 7 business days for the tenant to rectify the issue before taking further action.
- DNotify all parties to the transaction (landlord and tenant) of the dishonored check.
Show answer & explanationAnswer & explanation
Correct answer: D. Notify all parties to the transaction (landlord and tenant) of the dishonored check.
Upon notification that an escrow check has been dishonored, the broker has an immediate obligation to notify all parties to the transaction (in this case, the landlord and tenant) of the issue. This allows the parties to take appropriate action to resolve the situation.
Why the other options are wrong
- A. Notifying FREC is not the immediate first step; notification to parties is prioritized.
- B. Brokers should not use their own funds to cover a dishonored check, as this could be considered commingling.
- C. Waiting is not appropriate; immediate notification to all parties is required to mitigate potential issues.
Dishonored Escrow Check
An earnest money or security deposit check that is returned unpaid due to insufficient funds or other banking issues.
- Broker's immediate duty to notify all parties.
- Broker should not use personal funds to cover.
- May lead to an escrow dispute if not resolved.
Memory trick: Dishonored check? Alert everyone, no personal cash.