Iowa Real Estate Broker Exam — All Questions

Under rule 481-2013.1, an Iowa broker must deposit trust funds into the trust account no later than:

• a.Ten calendar days after the offer to purchase is first presented
• b.Five banking days after the last signature of acceptance is obtained✓
• c.Three business days after the broker's salesperson receives the funds
• d.The banking day following receipt, whatever the contract may say

Rule 481-2013.1(1)"a" states that "all trust funds are deposited into the trust account no later than five banking days after the date indicated on the document that the last signature of acceptance of the offer to purchase, rent, lease, exchange, or option is obtained unless otherwise specified in the contract." The clock therefore starts at the last signature of acceptance, not at the moment a salesperson takes the check, and a three-day receipt rule moves the trigger to the wrong event. Ten days from presentation of an offer is longer than the rule allows and keys off an offer that may never be accepted. A next-banking-day rule ignores the closing words of the same sentence, which let the contract specify a different time. The account itself must be held at a federally insured depository institution with the word "trust" in its name.

An Iowa broker holds a disputed earnest-money deposit after a sale falls through and both buyer and seller claim it. The broker should:

• a.Keep the deposit as a cancellation fee
• b.Split the deposit evenly without either party's consent
• c.Keep the funds in trust until the dispute is resolved✓
• d.Release the money to whichever party asks first

Rule 481-2013.1(7) requires the broker to continue holding a disputed deposit in the trust account until one of four things happens: a written release from all parties, a final judgment of the court, a final decision of a binding alternative dispute resolution process or mediation, or the filing of a civil action, at which point the broker may seek authorization to pay the money into court. Rule 481-2013.1(10) allows the broker to file an interpleader action instead. Splitting the money or paying whoever asks first is a unilateral disposition the rule does not permit. Keeping it as a fee is barred outright by rule 481-2013.1(9): "under no circumstances is the broker entitled to withhold any portion of the earnest money when a transaction fails to consummate even if a commission is earned," and the broker must pursue any commission claim separately against the client. Rule 481-2013.1(8) does give a safe harbor for a good-faith disbursement to the buyer after 30 days from the dispute, or to the seller after six months, but only after 30 days' written notice by certified mail to all parties setting out the proposed action and its grounds.

A supervising Iowa broker reconciles the trust account monthly primarily to:

• a.Confirm the account holds what is owed to each client✓
• b.Allow the broker to borrow client funds between closings
• c.Increase the interest earned for the brokerage
• d.Avoid having to keep client ledgers

Rule 481-2013.1(6)"a"(3) requires the journal to provide "a means for monthly reconciliation on a written worksheet of the general ledger balance with the bank balance and with the individual ledger accounts to ensure agreement" - a three-way comparison whose whole purpose is to prove the account holds exactly what is owed to each client and to surface a shortage quickly. It cannot be a way to avoid keeping ledgers, because the reconciliation is only possible when the per-client ledgers required by rule 481-2013.1(6)"b" exist to be compared. It is an accuracy check rather than a way to generate a return, and under section 543B.46(1) the broker cannot benefit from interest on the funds of others in any event. And it certainly does not authorize borrowing client money between closings: rule 481-2013.1(1)"e" bars using the trust account as a business operating account or for personal use, and commissions, salaries and normal business expenses are never disbursed from it directly.

Interest earned on an Iowa broker's common trust account is:

• a.Paid to the listing client at closing and shown on the closing statement
• b.Retained by the broker to offset the cost of maintaining the account
• c.Remitted quarterly to the state unless the parties agree otherwise in writing✓
• d.Left in the account and reported to the commission once every three years

Section 543B.46(1) requires the common trust account to be an interest-bearing account and directs that "the interest on the account shall be transferred quarterly to the treasurer of state and transferred to the Iowa finance authority for deposit in the housing trust fund established in section 16.181 unless there is a written agreement between the buyer and seller to the contrary," adding that "the broker shall not benefit from interest received on funds of others in the broker's possession." That last sentence is why the broker cannot simply keep the interest, although rule 481-2013.1(2) does let the amount remitted be net of service charges attributable to maintaining the interest-bearing account and remitting the interest. Interest goes to a client only under the written agreement contemplated by rule 481-2013.1(3), and then out of a separate account. Nothing is reported to the commission on a three-year cycle; unclaimed trust funds instead go to the Treasurer's Unclaimed Property Division after three years under rule 481-2013.1(14). A broker may keep up to $1,000 of personal funds in the account solely to cover bank service charges (section 543B.46(4)).