Concepts Definitions
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- Trust Funds: Money or other items of value received by a broker or salesperson on behalf of a principal or another person, which do not belong to the broker but are held for the benefit of others in a real estate transaction. Examples include earnest money deposits, security deposits, and rents collected. nnnn
- Trust Account: A separate bank account, maintained by a broker, specifically for holding trust funds, distinct from the broker’s personal or general business accounts. nnnn
- Commingling: The illegal act of mixing client trust funds with a broker’s own personal or business funds. nnnn
- Separate Records: The requirement for brokers to maintain detailed and accurate accounting records for each individual client and transaction, even if their funds are deposited into a single trust account. nnnn
- Reconciliation: The monthly process of comparing the broker’s internal accounting records (such as check registers) with the bank statements to ensure that all trust funds are accounted for and balanced . nnnn
- Conversion: The illegal act of spending or using client trust funds for purposes other than those for which they were intended. n