Handling of Trust and Escrow Funds
Seven state items, the joint-largest area, come almost entirely from Tenn. Comp. R. and Regs. 1260-02-.09 and Tenn. Code Ann. 62-13-321.
Whose Account, and Whose Responsibility
Rule 1260-02-.09(1) defines trust money as money belonging to others received by a licensee acting as agent or facilitator, or any money held by a licensee acting as temporary custodian of funds belonging to others. Paragraph (2) requires each principal broker to maintain a separate escrow or trustee account for trust money received in a fiduciary capacity, and paragraph (4) makes principal brokers responsible at all times for trust money accepted by them or their affiliated brokers. Paragraph (5) requires the contract to specify the terms and conditions of disbursement and the name and address of whoever will actually hold the money; paragraph (6) relieves the principal broker of responsibility only where the contract names another holder, on that holder's receipt. Tenn. Code Ann. 62-13-309(f) requires proof of the firm escrow account at original firm application and each renewal.
Getting Funds In, and Commingling
Rule 1260-02-.09(3) requires an affiliated broker to pay all trust money over to the principal broker immediately upon receipt. Paragraph (11) requires deposit into the escrow or trustee account promptly upon acceptance of the offer, unless the offer carries a statement such as Trust money to be deposited by. Paragraph (10) bars accepting a postdated check for trust money unless the offer provides otherwise. Paragraph (1)(a) defines commingling as maintaining funds belonging to others in the same bank account that contains the licensee's personal or business funds, and paragraph (13) expressly prohibits commingling of funds within firm accounts. Paragraph (12) requires all trust money relating to leases to be held in one or more escrow or trustee accounts separate from the account in paragraph (2).
Getting Funds Out
Rule 1260-02-.09(7) lists the proper disbursements: on a reasonable interpretation of the contract authorizing the broker to hold the money; on a written agreement signed by all parties having an interest and separate from that contract; at the closing; on the rejection of an offer to purchase, sell, rent, lease, exchange, or option real estate; on the withdrawal of an offer not yet accepted; on filing an interpleader action in a court of competent jurisdiction; or on the order of a court of competent jurisdiction. Paragraph (8) requires disbursement without unreasonable delay, and paragraph (9) sets the deadline that matters in a dispute: absent a demonstration of a compelling reason, earnest money shall be disbursed, interpleaded, or turned over to an attorney with instructions to interplead within twenty-one calendar days from receipt of a written request for disbursement.
Interest
Rule 1260-02-.09(14) states that interest-bearing escrow or trustee accounts are neither required nor prohibited. If one is used, the licensee must disclose to the payor at the time of contract execution that the deposit will be placed in an interest-bearing account and must execute a written agreement with the payor on the disposition of interest earned; the licensee does not own the trust money or its interest until properly disbursed to the licensee; and a detailed and accurate accounting of interest earned must be kept for each separate deposit. Tenn. Code Ann. 62-13-312(b)(5) supplies the discipline for failing within a reasonable time to account for or remit money belonging to others.
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State-specific details
State exam facts
- State regulator
- Tennessee Real Estate Commission (TREC)
- Exam vendor
- PSI
- Prelicensing education
- 120 classroom hours, including 30 hours covering office or brokerage management
- Passing score
- 75% on each portion
- Scored questions
- 125
- Time limit
- 240 minutes
Who regulates real estate brokers in Tennessee?
The Tennessee Real Estate Commission (TREC), within the Department of Commerce and Insurance, licenses brokers and affiliate brokers under the Tennessee Real Estate Broker License Act of 1973 (Tenn. Code Ann. tit. 62, ch. 13). TREC contracts with PSI to deliver the licensing exams.
What experience do I need before the Tennessee broker exam?
Tenn. Code Ann. § 62-13-303(c) requires a broker applicant to certify 120 classroom hours in real estate, including 30 hours covering office or brokerage management, and — for anyone licensed as an affiliate broker after May 12, 1988 — to have held an active real estate license for at least 36 months, or 24 months with a baccalaureate degree with a major in real estate. Within three years of the original broker license, § 62-13-303(h) requires a further 120 classroom hours.
How is the Tennessee broker exam structured?
PSI bulletin 511 sets the broker exam at 125 scored items in two independently passed portions: a 75-item national portion scored to 80 points in 150 minutes, and a 50-item Tennessee state portion (50 points) in 90 minutes. You need 75% on each — 60 of 80 national points and 38 of 50 state items. Do not use the Affiliate Broker column printed beside it in the same bulletin; that tier is 80 national items and 40 state items at 70%.
What is on the Tennessee broker state portion?
PSI bulletin 511 sets nine areas for the Broker tier: Duties and Powers of the Real Estate Commission (6 items), Licensing Requirements (5), Advertising and Marketing (7), Broker/Affiliate Relationships (6), Handling of Documents and Record Keeping (6), Handling of Trust/Escrow Funds (7), Other Improper Activities and Consumer Protection (3), Agency and Disclosure Issues (7), and Special Areas of Practice (3). Advertising, trust and escrow funds, and agency are the joint-largest at 14% each, so most of your study time belongs in Tenn. Code Ann. tit. 62, ch. 13 and TREC rules 1260-01 and 1260-02.
Sources: https://test-takers.psiexams.com/api/content/bulletin/511, https://www.tn.gov/commerce/regboards/trec.html, https://publications.tnsosfiles.com/rules/1260/1260.htm
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