A sponsoring broker in Illinois disburses earnest money from the escrow account before the transaction is either consummated or terminated, and no written agreement or other authorized disbursement exception exists. How does Illinois law treat this disbursement?
Correct Answer
C) It is a violation of Illinois law, because escrow funds must remain on deposit until the transaction is consummated or terminated, or an authorized disbursement exception applies.
Under the Illinois License Act of 2000 and IDFPR administrative rules, a sponsoring broker must keep escrow funds on deposit until the transaction is consummated or terminated. Disbursement before that point is authorized only through specific exceptions—such as a written agreement signed by all parties, an interpleader action, or a court order. Disbursing funds without such authority constitutes commingling or conversion of escrow funds, which can result in license suspension or revocation.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A trust account, also called an escrow account, is a separate bank account maintained by a broker to hold funds belonging to others, such as earnest money deposits, security deposits, or other client funds.
Advertising regulations govern how real estate licensees may market properties and services, requiring truthful, non-deceptive advertising that includes proper identification of the brokerage.
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.
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