Florida Real Estate Broker ExaminationReal Estate Brokerage ManagementMedium
A Florida real estate broker is managing a trust account for earnest money deposits. The broker receives an earnest money deposit in the form of a check. Which of the following actions regarding the deposit is permissible for the broker to take?
- ADeposit the check into a separate, federally insured trust (escrow) account established for this purpose.
- BDeposit the check into the brokerage's operating account, provided it is transferred to the trust account within 24 hours.
- CHold the uncashed check in their office safe until the offer is accepted by the seller.
- DEndorse the check and deposit it into their personal checking account to cover immediate business expenses.
Show answer & explanationAnswer & explanation
Correct answer: A. Deposit the check into a separate, federally insured trust (escrow) account established for this purpose.
Florida law requires brokers to place earnest money deposits into a separate, federally insured trust (escrow) account no later than the end of the third business day following receipt. Commingling funds with personal or operating accounts is strictly prohibited.
Why the other options are wrong
- B. Depositing into an operating account, even temporarily, is commingling. Funds must go directly into the trust account.
- C. While holding a check until acceptance might be acceptable in some contexts, the general rule is to deposit promptly into the trust account once received by the broker. Holding it in the safe is not proper handling of trust funds.
- D. This is a prohibited act known as commingling and also conversion.
Earnest Money Deposit Handling
Florida brokers must deposit earnest money into a separate, federally insured trust account by the end of the third business day following receipt.
- Funds must be kept separate from personal or operating accounts.
- Prohibits commingling and conversion.
- Timely deposit is crucial to avoid violations.
Memory trick: Trust funds are not your funds; keep them separate and sacred, like a secret garden.