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Real Estate · General

A licencee is found guilty of 'commingling' by the state real estate commission. What does this mean?

Correct answer

Depositing client trust funds (earnest money, rent deposits) into the broker's operating account rather than maintaining a separate trust account — a serious violation

  1. A Mixing clients from different companies
  2. B Depositing client trust funds (earnest money, rent deposits) into the broker's operating account rather than maintaining a separate trust account — a serious violation
  3. C Showing properties to clients from multiple brokerages
  4. D Working as both a buyer's and seller's agent simultaneously

Why this is the answer

COMMINGLING is one of the most serious trust account violations: mixing client funds (earnest money, security deposits, advance fees) with the broker's own business or personal funds. Why it's prohibited: client funds are not the broker's money — they are held in trust; mixing makes accounting difficult and obscures whether client funds are available; creates risk that client funds will be spent or used for business expenses (which then becomes CONVERSION — theft). The standard: client funds must be deposited in a SEPARATE, DESIGNATED trust account within the time specified by state law (typically 1-3 business days). All balances must be reconciled monthly. Commingling even with honest intent is a violation. Conversion (actually using client funds for business) is a criminal act in addition to a licence violation.
Source: Real Estate State Exam, Commingling

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