South Dakota Broker Associate Exam — All Questions

A written employment contract lets a South Dakota responsible broker hold the principal's money until settlement. When must the money be deposited?

• a.In a special trust account on the first legal banking day after acceptance✓
• b.In a special trust account within three business days after the contract is accepted
• c.In the brokerage's operating account on the first banking day after acceptance
• d.In a special trust account within ten days after acceptance

SDCL 36-21A-80 sets a default and an exception. The default is that the responsible broker "shall remit immediately" to the principal all money belonging to the principal. The exception applies when a written employment contract authorizes the broker to keep the money until final settlement, and then "the responsible broker shall 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." The account must be reconciled to the bank statements, trust ledger and check register at least monthly, and the money "may not be used by the responsible broker except in connection with the transaction as authorized by the principal." A three-day or ten-day window is longer than the statute allows, and the operating account is commingling, which SDCL 36-21A-71(5) makes unprofessional conduct.

An accepted South Dakota purchase agreement fails to close. How may the broker disburse the funds held in trust?

• a.Only after the commission issues a written release of the funds
• b.To whichever party the purchase agreement names as default payee
• c.Only on written instruction of all parties or on a court order✓
• d.By splitting the funds equally between the buyer and the seller

SDCL 36-21A-81 leaves the broker exactly two routes: "If an accepted offer and agreement to purchase does not close, a broker may not disburse any funds held in trust, relative to such real estate transaction, except pursuant to a written instruction of all parties to the transaction or pursuant to a court order." The commission is not a party to the transaction and issues no releases, so waiting on the regulator is not an option. A default-payee clause cannot override the statute, because "all parties" means their agreement at the time of the dispute rather than a term agreed in advance. Splitting the money looks even-handed but is still a unilateral disbursement without written instruction. This section governs a failed closing generally; SDCL 36-21A-77 covers the narrower case where the seller is at fault.

A South Dakota seller is unable to consummate the sale through no fault of the buyer. What happens to the buyer's deposit?

• a.It is applied to the broker's earned commission before any refund is made
• b.It is held in trust until the seller and the broker agree on its division
• c.It is forfeited to the seller as liquidated damages under the sale contract
• d.It must go back to the purchaser at once, though the commission is earned✓

SDCL 36-21A-77 addresses the case where the seller "fails, refuses, neglects or is unable to consummate the transaction as provided in the purchase contract, and through no fault or neglect of the purchaser." The consequence is stated flatly: "the broker has no right to any portion of the deposit money which was deposited by the purchaser, even though the commission is earned. This deposit shall be returned to the purchaser at once." So the broker's claim for a commission, however good, is a claim against the seller and not against the buyer's money. Holding the funds pending a broker-seller negotiation ignores the words "at once," and forfeiting them to the defaulting seller inverts the section. Compare SDCL 36-21A-84, under which no responsible broker is entitled to any part of the money paid until the transaction is consummated or terminated.

How long must a South Dakota broker keep the deposit slip and ledger sheet for a trust account transaction?

• a.At least two years from the closing of the transaction
• b.At least four years from the closing of the transaction✓
• c.At least six years from the closing of the transaction
• d.At least one year from the closing of the transaction

SDCL 36-21A-82 requires the broker to make a deposit slip naming the principal for whom the money is deposited, to maintain an individual ledger sheet showing the amount deposited in trust and any expenditures from it, to make those records available for commission inspection on request, and to keep them "at least four years from the closing of the transaction." The same four-year period runs through the chapter: SDCL 36-21A-74 applies it to listings, offers to purchase and closing statements, and SDCL 36-21A-83 applies it to a broker who remits immediately to the principal without using a trust account at all. Two years and one year would destroy records the commission can still demand under SDCL 36-21A-71(8). Six years is longer than required and is not the statutory figure. The broker must also notify the commission of the financial institution holding the trust account and the name of the account.

When does a South Dakota responsible broker become entitled to compensation from money held in a transaction?

• a.When the buyer's written offer has been accepted by the seller
• b.When the transaction has been consummated or terminated✓
• c.When the buyer's financing contingency has been satisfied
• d.When the listing agreement's stated expiration date has passed

SDCL 36-21A-84 provides that "No responsible broker is entitled to any part of the money paid to the responsible broker in any transaction as part of the responsible broker's compensation until the transaction has been consummated or terminated," and authorizes the commission to make reasonable exceptions by rule. The commission has done so in ARSD 20:69:03:19, which allows compensation for services other than a sale or lease to be collected before closing, and which requires that any compensation a client agrees in writing to pay early "must be placed in the broker's trust account until performance of services has been consummated or terminated by written agreement from both parties." Acceptance of an offer and satisfaction of a contingency are milestones on the way to closing, not the end of the transaction. A listing's expiry ends the engagement without earning anything.