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Real Estate · State License Law and Commission

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

Reviewed by Jordan Morley, Editorial Lead at 247SimpleTests. Written by the 247SimpleTests Editorial Team from the official source material cited on every question.

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

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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About this topic: State License Law and Commission

State license law and commission questions cover who must be licensed, exemptions, license types and renewal, continuing education, the real estate commission's powers and the grounds for discipline. This is one of 34 Salesperson (State Law) questions on state license law and commission, each with a full explanation on a single study page.

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