Texas Real Estate Sales Agent ExamReal Estate PracticeMedium
A real estate agent receives an offer on a property and notices that the earnest money check is made out to the agent directly, instead of the title company or broker's trust account. What is the agent's immediate and most appropriate action according to TREC rules?
- ADeposit the check into their personal bank account, then transfer the funds to the broker's trust account.
- BHold onto the check and inform the buyer's agent to arrange for a new check payable to the correct entity.
- CImmediately return the check to the buyer and explain that it must be made out to the designated escrow agent or broker.
- DEndorse the check over to the title company and forward it with the contract.
Show answer & explanationAnswer & explanation
Correct answer: C. Immediately return the check to the buyer and explain that it must be made out to the designated escrow agent or broker.
TREC rules strictly prohibit an agent from accepting earnest money checks made out to themselves. The agent's immediate action should be to return the improperly made-out check and instruct the buyer on the correct payee.
Why the other options are wrong
- A. Depositing client funds into a personal account is commingling and a serious violation.
- B. Holding the check without immediate action is not ideal, and the agent should directly address the error.
- D. Endorsing the check may be seen as exercising control over funds not properly made out to the agent, potentially leading to issues.
Earnest Money Handling by Agent
Real estate agents must ensure earnest money is made payable to and delivered to the designated escrow agent (e.g., title company or broker's trust account), never to the agent personally.
- Never made payable to the individual agent.
- Promptly delivered to the correct escrow agent.
- Broker is ultimately responsible for proper handling.
Memory trick: Earnest Money: Direct to Trust, Never to Me!