Broker Johnson discovers that his bookkeeper accidentally deposited a $3,000 earnest money check into the company's operating account instead of the escrow account three days ago. The error was discovered during a routine audit. What should Johnson do immediately?
Correct Answer
A) Transfer the $3,000 to the escrow account and report to FREC immediately
Correct: A - Transfer the $3,000 to the escrow account and report to FREC immediately. When escrow funds are improperly deposited, they must be immediately transferred to the proper escrow account and FREC must be notified immediately of the error. Why not B: This option is incorrect because "Wait until the transaction closes since the funds are still available" does not match the rule tested by the question. The correct answer is "Transfer the $3,000 to the escrow account and report to FREC immediately". When escrow funds are improperly deposited, they must be immediately transferred to the proper escrow account and FREC must be notified immediately of the error. Why not C: This option is incorrect because "Leave the funds in the operating account since the error was unintentional" does not match the rule tested by the question. The correct answer is "Transfer the $3,000 to the escrow account and report to FREC immediately". When escrow funds are improperly deposited, they must be immediately transferred to the proper escrow account and FREC must be notified immediately of the error. Why not D: This option is incorrect because "Transfer the $3,000 to the escrow account and notify FREC within 15 days" does not match the rule tested by the question. The correct answer is "Transfer the $3,000 to the escrow account and report to FREC immediately". When escrow funds are improperly deposited, they must be immediately transferred to the proper escrow account and FREC must be notified immediately of the error.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Antitrust violations in real estate occur when competing brokerages or agents engage in practices that restrain trade, reduce competition, or harm consumers through collusion. These violations are governed by the Sherman Antitrust Act and can result in severe penalties.
Broker supervision is the legal obligation of a designated or managing broker to oversee and be accountable for the real estate activities of all salespersons and associate brokers operating under their license.
Commingling is the illegal act of mixing client funds with a broker's personal or business operating funds, while conversion is the unauthorized use of client funds for the broker's own benefit. Both are serious violations that can result in license revocation.
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