Employing Broker Sandra in Denver has a written office policy allowing her to withdraw earned commission from the trust account on the day the transaction closes, even before the title company issues the final HUD-1 or closing disclosure. A CREC auditor reviews her trust account records. Which of the following best describes the auditor's likely finding?
Correct Answer
B) The policy is a violation because commissions may only be disbursed from the trust account after all closing documents are executed and the transaction is fully funded
Under CREC rules and C.R.S. § 12-10-217, trust funds may only be disbursed when all conditions authorizing disbursement have been met — meaning the transaction must be fully closed, all documents executed, and the transaction fully funded. Withdrawing commission before the closing disclosure is finalized and the transaction is confirmed as fully funded creates a risk of trust account shortage if the transaction fails to close at the last moment. This constitutes an improper disbursement procedure and is a violation of CREC trust account rules.
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Related Topics & Key Terms
Key Terms:
Related Concepts
In real estate, the distinction between an independent contractor and an employee determines tax treatment, liability, and the level of control a broker may exercise over the agent's daily activities. Most real estate agents operate as independent contractors.
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License requirements are the mandatory qualifications—including pre-licensing education, examination, and background checks—that a person must satisfy before legally practicing real estate. These requirements are established and enforced by each state's real estate commission.
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