California Real Estate Broker ExaminationPractice of Real Estate and Mandated DisclosuresMedium
A real estate broker receives a cash deposit of $5,000 from a buyer on a purchase agreement. According to California real estate law, by when must the broker deposit these funds into a trust account, unless otherwise instructed in writing by the principals?
- AWithin 3 business days of receipt.
- BWithin 7 calendar days of receipt.
- CWithin 5 calendar days of receipt.
- DWithin 1 business day of receipt.
Show answer & explanationAnswer & explanation
Correct answer: A. Within 3 business days of receipt.
California real estate law requires a broker to deposit trust funds, such as a buyer's deposit, into a neutral escrow depository or a trust account no later than three business days following receipt, unless the principals have given written instructions to hold the funds for a longer period.
Why the other options are wrong
- B. This timeframe is too long according to California regulations.
- C. The timeframe is business days, not calendar days, and the number of days is incorrect.
- D. While some jurisdictions have a 1-day rule, California specifies three business days.
CA Trust Fund Deposit Rule
California regulation specifying the maximum time a broker has to deposit trust funds into a trust account or neutral escrow.
- Funds must be deposited within 3 business days of receipt.
- Applies unless otherwise instructed in writing by the principals.
- Funds can be cash, checks, or other negotiable instruments.
Memory trick: Three Business Days for the Broker's Trust Fund Play!