Virginia Real Estate Broker Exam — All Questions

A Virginia broker receives a buyer's earnest-money deposit that the firm will hold. Where must it go?

• a.Into the brokerage's own operating account
• b.Into an escrow account in the firm's name✓
• c.Into the supervising broker's personal account
• d.Into the seller's hands on the day of receipt

Subdivision A 1 of 18VAC135-20-181 requires each firm holding money to maintain "one or more federally insured escrow accounts into which all funds received in connection with a real estate transaction must be deposited," in the name by which the firm is licensed, with the accounts, checks and bank statements labeled "escrow" and the principal broker holding signatory authority. Putting the money in the operating account or in the broker's own account is commingling under subdivision D 2, and the personal account adds the risk of conversion on top of it. Handing the deposit to the seller on receipt disposes of money whose destination still depends on how the contract performs, and Section 54.1-2108.2 reserves that disposition for the four routes it lists. Subdivision A 1 e also requires the escrow balance to be sufficient at all times to cover every fund the firm is holding.

In Virginia, mixing client trust money with the broker's own funds is known as commingling. How does 18VAC135-20-181 treat it?

• a.Allowed if the broker reconciles monthly
• b.Listed as improper maintenance of escrow funds✓
• c.Allowed for sums under one thousand dollars
• d.Required whenever the firm has one bank

Subdivision D 2 of 18VAC135-20-181 lists as improper maintenance of escrow funds "commingling the funds of any person by a principal or supervising broker or the broker's employees or associates or any licensee with the broker's own funds," and adds that pledging or hypothecating a certificate of deposit bought with escrow money, or letting the original certificate leave the broker's direct control, counts as commingling too. Careful bookkeeping is no defense, because the wrong is the mixing rather than the recordkeeping, and a reconciliation performed on a commingled account documents the violation rather than curing it. Nor is there a small-sum allowance; the regulation draws no threshold. And a firm that banks in one place still opens a separate escrow account there, which is exactly what subdivision A 1 d contemplates when it requires the account to be designated "escrow" with the financial institution.

Buyer and seller make conflicting written demands for an escrow deposit a Virginia broker holds. What does the law require of the broker?

• a.Hold the funds until one lawful route to disbursement is met✓
• b.Pay the seller, whose property was under contract first
• c.Retain the deposit and apply it against the earned commission
• d.Pay whichever party first delivers a written demand letter

Subdivision B 1 a of 18VAC135-20-181 sends earnest money to Section 54.1-2108.2 of the Code, and subdivision 3 of that section keeps the funds in escrow until one of four things happens: all principals agree in a written agreement, a court of competent jurisdiction orders disbursement, the funds are successfully interpleaded, or the broker releases them under "the clear and explicit terms of the contract that established the earnest money deposit." Which property went under contract first is a fact about the transaction's history and settles nothing about entitlement. Treating a contested deposit as commission is the conversion that subdivision D 2 of the regulation exists to prevent, and subdivision B 1 b bars the licensee from any part of the deposit as commission before consummation anyway. Paying whoever writes first substitutes a race for a resolution; the same subdivision 3 says no broker is required to decide who is entitled to the money.

Under Section 54.1-2108.2, by when must an earnest-money deposit held in the firm's escrow account be placed there?

• a.By the end of the next business banking day after receipt
• b.By the end of the third business banking day after receipt
• c.By the end of the tenth calendar day following ratification
• d.By the end of the fifth business banking day after ratification✓

Subdivision 1 of Section 54.1-2108.2 provides that "upon the ratification of a contract, an earnest money deposit received by the principal broker or supervising broker, or an agent of such principal broker or supervising broker, that is to be held in the firm's escrow account shall be placed in such escrow account by the end of the fifth business banking day following ratification," unless the principals agree otherwise in writing, and it must stay there until the transaction is consummated or terminated. The next banking day and the third banking day are both tighter than the statute, and neither appears in it. The ten-calendar-day option changes the clock as well as the count, and calendar days would run the deadline through weekends and holidays that business banking days exclude. Subdivision 2 gives the same five-banking-day window for delivering a deposit to an escrow agent named in the contract when the firm will not hold it.

A Virginia broker gives written notice that a disputed deposit will be released under the contract's clear and explicit terms. How long may the other principal protest?

• a.Five business days from the date of the notice
• b.Ten business days from the date of the notice
• c.Thirty calendar days from the date of the notice
• d.Fifteen calendar days from the date of the notice✓

Subdivision 3 of Section 54.1-2108.2 lets the broker send notice "that release of such funds shall be made unless a written protest is received from the principal who is not receiving the funds by such broker within 15 calendar days of the date of such notice." Five and ten business days both shorten the window and change the unit, and business days would exclude the weekends the statute counts. Thirty calendar days doubles it. The same subdivision lists the delivery methods that comply when the contract does not specify one, including hand delivery, prepaid post with proof of mailing, electronic means with proof of delivery, and overnight delivery, and it closes by immunizing a broker who follows the section from liability to any party to the contract.

When may a Virginia licensee take a share of an earnest-money deposit held in escrow as part of the commission?

• a.After the escrow account has been reconciled
• b.After the contract's contingency periods expire
• c.After the listing agreement has expired
• d.After the transaction has been consummated✓

Subdivision B 1 b of 18VAC135-20-181 states that "unless otherwise agreed in writing by all principals to the transaction, a licensee will not be entitled to any part of the earnest money deposit or to any other money paid to the licensee in connection with any real estate transaction as part of the licensee's commission until the transaction has been consummated." Contingencies expiring do not close a sale; they only clear the way to one, and the deposit stays where ratification put it. An expired listing ends the brokerage agreement without consummating anything, so it produces no claim on a buyer's deposit. And reconciling the account only proves the balance is right, as subdivision A 1 e requires at all times; it is not a license to draw commission early. Subdivision A 2 b does allow money that will ultimately belong to the licensee to sit in escrow, provided it is separately identified and withdrawn at intervals of not more than six months.

Rent collected by a Virginia licensee for a landlord client must be placed in an escrow account by when?

• a.By the end of the month in which it was received
• b.By the end of the fifth business banking day after the lease ends
• c.By the end of the fifth business banking day after receipt✓
• d.By the end of the tenth business banking day after receipt

Subdivision B 1 of Section 54.1-2108.1 provides that "any rent paid to a real estate licensee acting on behalf of a landlord client in connection with the lease shall be placed in an escrow account by the end of the fifth business banking day following receipt, regardless of when received," unless the principals to the lease agree otherwise in writing. Holding rent until month end would let a firm sit on other people's money for weeks and defeats the phrase "regardless of when received." Waiting for the lease to end confuses rent with a security deposit, and even security deposits go into escrow on the same five-banking-day clock under subdivision B 2. Ten banking days doubles the statutory period. Subdivision B 3 sets a variant for application deposits, which go into escrow within five business banking days after the landlord approves the rental application.