Trust Accounts and Client Money
South Dakota's default rule is not what candidates expect: SDCL 36-21A-80 requires the responsible broker to remit money to the principal immediately, and holding it in trust is the exception a written employment contract has to authorize.
Remit immediately, or deposit on the first banking day
SDCL 36-21A-80 requires a responsible broker to remit immediately to the principal all money received belonging to the principal, unless the terms of a written employment contract authorize the broker to keep it until final settlement and consummation. Where the contract does authorize it, the broker must deposit the money in a federally insured financial institution in a special trust account on the first legal banking day after the acceptance of the contract, must reconcile the account to the bank statements, trust ledger and check register at least monthly, and may not use the money except in connection with the transaction as the principal authorizes. SDCL 36-21A-76 provides that earnest money in a cooperative or co-brokerage transaction is held in a broker's trust account unless the buyer and seller agree otherwise. SDCL 36-21A-83 covers the broker who remits immediately and uses no trust account: those records must still be kept for at least four years.
Getting money back out
SDCL 36-21A-81 is the rule for a deal that dies: if an accepted offer and agreement to purchase does not close, the broker may not disburse any funds held in trust except pursuant to written instruction of all parties to the transaction or pursuant to a court order. There is no third route, and the commission does not issue releases. SDCL 36-21A-77 carves out the case where the seller fails, refuses, neglects or is unable to consummate through no fault of the purchaser: there the broker has no right to any portion of the deposit even though the commission is earned, and the deposit shall be returned to the purchaser at once. SDCL 36-21A-84 provides that no responsible broker is entitled to any part of the money paid as compensation until the transaction has been consummated or terminated, and ARSD 20:69:03:19 requires any compensation a client agrees in writing to pay early to sit in the broker's trust account until performance is consummated or terminated by written agreement of both parties.
Records the commission can demand
SDCL 36-21A-82 requires the broker, at the time of making a deposit, to prepare a deposit slip clearly stating the name of the principal for whom it is deposited, and to maintain in the office an individual ledger sheet for that principal showing the amount deposited in trust and any expenditures from it. Those records must be made available for commission inspection on request and kept at least four years from the closing of the transaction. The broker must also notify the commission, on forms it provides, of the financial institution holding the trust account and the name of the account. Mishandling this is not a technicality: SDCL 36-21A-71(5) makes it unprofessional conduct to fail to account for or remit money within a reasonable time, to commingle the funds of others with the licensee's own, to fail to keep the funds of others in an escrow or trust account with a federally insured financial institution, or to fail to keep the records of the deposit.
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State-specific details
State exam facts
- Exam vendor
- PSI
- Prelicensing education
- 116 classroom hours
- Passing score
- 75%
- Scored questions
- 142
- Time limit
- 270 minutes
Who regulates real estate brokers in South Dakota?
The South Dakota Real Estate Commission licenses real estate professionals in the state. SDCL 36-21A-13 makes it five members appointed by the Governor — three active brokers and two members of the public, who may not all be of one political party — and SDCL 36-21A-16 continues it within the Department of Labor and Regulation. The Commission has contracted with PSI Services LLC to deliver the examination; the bulletin lists sites in Sioux Falls, Rapid City and Madison, plus Fargo, North Dakota, and you may test at any PSI center in the United States.
Is the broker associate license really South Dakota's entry-level license?
Yes. The Commission's license types table lists Broker Associate with no experience requirement, and there is no salesperson row: South Dakota issues no new salesperson licenses, which is why PSI's bulletin is titled the Real Estate Broker Associate Examination. The tier has not been abolished on paper — SDCL 36-21A-12 still defines a real estate salesperson and ARSD 20:69:03:14 still sets a salesperson renewal fee — but the only way in now is the broker associate license, and an existing salesperson upgrades to it under SDCL 36-21A-34.1 by taking 40 hours of prescribed education and filing a broker associate application.
What education and experience do I need before the South Dakota broker exam?
None by way of experience. SDCL 36-21A-30.1 requires 116 class hours in a Commission-approved course of study, and ARSD 20:69:03:04 bars you from sitting the exam until that education is complete and you have registered. SDCL 36-21A-30 adds that you must be at least eighteen and either a United States citizen or a South Dakota resident. Experience matters only at the next tier: SDCL 36-21A-31 requires a responsible broker applicant to have served actively for two years as a licensed salesperson or broker associate and to complete 24 additional class hours beyond the broker associate level, which ARSD 20:69:04:04 makes a 24-hour responsible broker course carrying its own final examination.
How is the South Dakota broker exam structured?
The broker associate examination has a national portion of 90 items worth 100 points with 150 minutes allowed, and a South Dakota state portion of 52 items worth 52 points with 120 minutes allowed — 142 scored items and 270 minutes in total. ARSD 20:69:03:07 sets the passing score at 75, and each portion is passed separately, so a candidate who fails one retakes only that portion. The national portion includes scenario-based questions with more than four options where you pick the single BEST answer, and those options are weighted zero, one or two points; the South Dakota portion is scored one point per item.
What has to happen after I pass the South Dakota exam?
Two things people miss. SDCL 36-21A-36.1 gives you sixty days from the date of the notice that you passed to file the license application with all required documents; miss it and your registration and all rights deriving from the passing score are canceled, so you would have to sit the exam again. SDCL 36-21A-151 also requires a state and federal criminal background investigation by fingerprint checks through the Division of Criminal Investigation and the FBI, obtained before licensure and paid for by you. SDCL 36-21A-33 lists the eight grounds on which the Commission may refuse the application, including an insufficient funds check, a felony or a misdemeanor involving moral turpitude, and a current unpaid judgment.
Sources: https://dlr.sd.gov/realestate/license_types_requirements.aspx, https://dlr.sd.gov/realestate/exam_information.aspx, https://proctor2.psionline.com/programs/Instructions/SDRE.pdf, https://sdlegislature.gov/Statutes/36-21A, https://sdlegislature.gov/Rules/Administrative/20:69
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