Texas Real Estate Sales Agent ExamReal Estate PracticeEasy
A broker operating a real estate office in Texas ensures that all client funds, such as earnest money and security deposits, are deposited into a separate, non-interest-bearing account. This practice is primarily designed to prevent which of the following unethical activities?
- ABoycotting
- BPrice fixing
- CSteering
- DCommingling
Show answer & explanationAnswer & explanation
Correct answer: D. Commingling
Depositing client funds into a separate account prevents commingling, which is the illegal act of mixing a client's money with the broker's personal or business funds.
Why the other options are wrong
- A. Boycotting is an antitrust violation where competitors refuse to do business with a third party.
- B. Price fixing is an antitrust violation related to setting commission rates.
- C. Steering is a fair housing violation that directs clients to or away from certain neighborhoods based on protected characteristics.
Commingling
Commingling is the illegal act of mixing client funds (earnest money, security deposits, etc.) with a broker's personal or business operating funds, which is strictly prohibited.
- Illegal practice for real estate licensees.
- Requires strict separation of client and personal/business funds.
- Trust or escrow accounts are used to prevent commingling.
Memory trick: Keep client cash clear, avoid the commingle fear!