Laws & AgencyQuestion 43 of 120
A broker who receives a buyer's earnest money deposit and, instead of depositing it, uses it for office expenses is guilty of:
a.Commingling and conversion of trust funds
b.Lawful use of a commission advance
c.A permissible loan
d.Proper trust accounting
Explanation
Trust funds such as earnest money must be placed in a neutral escrow, a trust account, or delivered to the principal, and never mixed with the broker's own funds. Using client funds for personal or business expenses is commingling and conversion, a serious violation. The DRE strictly regulates trust fund handling.
Law Reference: CA Business & Professions CodePractice all 120 questions free — no signup required.
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