New Mexico Real Estate Broker Exam — All Questions

The principle of contribution states that the value of a component or improvement is measured by:

• a.The raw number of square feet of floor area or land area that the improvement happens to occupy
• b.The owner's personal emotional attachment to and sentimental feelings about that improvement
• c.Its original construction or installation cost in every case, dollar for dollar, with no exception
• d.How much it adds to the overall value of the property, not its cost✓

Under contribution, an improvement is worth the amount it adds to the whole property's market value, which may be more or less than its cost. This principle explains why some renovations do not fully return their expense, a key point in over-improvement analysis.

Under Internal Revenue Code Section 121, a qualifying homeowner may generally EXCLUDE from taxable capital gain:

• a.Up to $250,000 of gain if single, or $500,000 if married filing jointly✓
• b.Up to a full one million dollars of gain on any property at all, at any time and any frequency
• c.All gain on any and every investment or rental property the taxpayer happens to own and sell
• d.Absolutely nothing, because gain on the sale of a home is always fully and entirely taxable

Section 121 lets homeowners who owned and used the home as their principal residence for at least two of the prior five years exclude up to $250,000 of gain (single) or $500,000 (married filing jointly). It applies to a primary residence, not to investment property.

Depreciation recapture on the sale of investment real estate means that:

• a.All of the depreciation deductions previously claimed are simply refunded to the investor in cash
• b.The investor is legally required to physically restore and rebuild the depreciated building itself
• c.Gain from prior depreciation may be taxed, often at a special rate✓
• d.No income tax is ever owed at all on the sale of a property that has previously been depreciated

When depreciated property is sold at a gain, the portion of gain due to depreciation deductions is 'recaptured' and taxed under special rules, reflecting the earlier tax benefit. It is a tax concept, not a requirement to rebuild, and it increases, not eliminates, tax on sale.

Which appraisal approach is generally MOST reliable for a special-purpose property, such as a church or public school, that rarely sells and earns no market income?

• a.The sales comparison approach, which depends on recent sales of similar comparable properties
• b.The income approach, which converts a property's market rental income into an indicated value
• c.The gross rent multiplier method, which relies on typical market rents that these lack entirely
• d.The cost approach✓

Special-purpose properties have few or no comparable sales and generate no market rent, so the cost approach (replacement cost new, less depreciation, plus land) is typically most reliable. Sales comparison lacks comparables and the income/GRM methods need market income these properties do not produce.

The four characteristics an item must have to possess value in the market, often remembered as DUST, are:

• a.Debt, Utility, Supply, and Taxes, a mix of unrelated financing and cost terms rather than value
• b.Demand, Utility, Scarcity, and Transferability✓
• c.Depreciation, Use, Sale, and Title, which describe stages of ownership rather than value itself
• d.Demand, Ownership, Scarcity, and Time, which swaps in two terms that are not part of the concept

For something to have market value it must have Demand (buyers who want it), Utility (usefulness), Scarcity (limited supply), and Transferability (the ability to convey it). The DUST acronym captures these four essentials of value.

Real estate brokers in New Mexico are licensed and regulated by:

• a.The New Mexico Secretary of State
• b.The New Mexico Real Estate Commission✓
• c.The county clerk
• d.The New Mexico Association of Realtors

The New Mexico Real Estate Commission licenses and regulates real estate brokers and enforces the state's license law and rules. A trade association is a private membership organization and does not license practitioners.

In New Mexico, the entry-level real estate license is the:

• a.Salesperson
• b.Realtor
• c.Sales associate
• d.Associate broker, who works under a qualifying broker✓

New Mexico does not use the 'salesperson' title. The entry-level license is the associate broker, who must work under and be supervised by a qualifying broker. Each brokerage must have a qualifying broker responsible for supervision and trust accounts.

A New Mexico associate broker may lawfully accept compensation for brokerage services:

• a.Directly from the seller upon listing
• b.Directly from the buyer at closing
• c.From any cooperating firm in the transaction
• d.Only through the qualifying broker under whom the associate broker is licensed✓

An associate broker may accept compensation for brokerage services only through the qualifying broker under whom the associate broker is licensed, not directly from a client or another firm. The qualifying broker is responsible for supervision and for paying the associate broker.

Under New Mexico's broker-duties framework, the statutory broker duties are owed:

• a.To the parties in a transaction, whether or not an agency relationship exists✓
• b.Only to the broker's own client
• c.Only after a written agency agreement is signed
• d.Only to the buyer in a transaction

In New Mexico, every associate broker and qualifying broker owes the statutory broker duties, such as honesty, reasonable care, and disclosure of adverse material facts, to the parties whether or not an agency relationship exists. An agency agreement adds further duties to a client, but the baseline broker duties apply to all.

Which of the following must a New Mexico broker provide to a prospective buyer or seller early in the relationship?

• a.A completed appraisal
• b.A property tax estimate
• c.A written disclosure of the broker duties✓
• d.A title commitment

New Mexico requires a broker to provide a written disclosure of the broker duties to a prospective buyer or seller, so the consumer understands the duties every broker owes before working together. This disclosure is a core compliance step for New Mexico brokers.

Under the broker-duties framework, a New Mexico broker must disclose to the parties:

• a.The broker's personal income
• b.Adverse material facts the broker actually knows about the property or transaction✓
• c.The names of all other clients the broker serves
• d.A guarantee that the property has no defects

A New Mexico broker must disclose any adverse material facts the broker actually knows about the property or the transaction, such as a known material defect. The broker need not independently inspect the property but may not conceal known problems or misrepresent the property.

Earnest money that a New Mexico associate broker receives from a buyer must be:

• a.Sent to the Real Estate Commission for safekeeping
• b.Delivered to the qualifying broker so it is handled through the brokerage's trust account✓
• c.Paid directly to the seller when the offer is made
• d.Deposited in the associate broker's personal account until closing

Client money such as earnest money must be handled through the brokerage's trust (escrow) account, which the qualifying broker maintains, and kept separate from personal funds. An associate broker who receives the money must deliver it to the qualifying broker. Commingling or converting trust money is a serious violation.

A New Mexico associate broker may perform brokerage activity:

• a.Only while associated with and supervised by a qualifying broker✓
• b.Only after four years of college
• c.As soon as the exam is passed, with no further steps
• d.Only after registering with the county clerk

A New Mexico associate broker may perform brokerage activity only while associated with and supervised by a qualifying broker. The license is inactive for practice until the associate broker is placed under a qualifying broker, and must re-associate with another qualifying broker before continuing after leaving a firm.

Before applying to take the New Mexico broker's examination, a first-time candidate must document 90 hours of pre-licensing instruction. Those 90 hours consist of:

• a.A 60-hour principles course and a 30-hour law course
• b.Any 90 hours drawn from the commission's approved course catalogue
• c.Three 30-hour courses: real estate principles and practice, real estate law, and broker basics✓
• d.A 45-hour principles course and a 45-hour contracts course

The statute names the three courses and fixes each at 30 commission-approved hours: real estate principles and practice, real estate law, and broker basics. The commission's rule adds that the courses must have been completed within the three years before the examination application. Cite: NMSA 1978 Section 61-29-9(B)(1); 16.61.3.9(B)(1) NMAC.

A New Mexico exam candidate passes the national portion but fails the state portion. Under the commission's rule, the candidate must pass both portions with a minimum score of 75:

• a.No later than 90 calendar days after the first attempt✓
• b.Within two years of completing the pre-licensing courses
• c.Before the end of the calendar year
• d.Within 30 days of the first attempt

A candidate who does not pass both portions with a score of at least 75 within 90 calendar days of the first sitting must retake and pass both portions. The 90 days run from the first attempt, not from the failed portion. Cite: 16.61.3.9(B)(8) NMAC.

A candidate passes both portions of the New Mexico broker's examination on March 1. If the candidate has still not applied for an associate broker's license by the following March 1, the candidate must:

• a.Pay a late application fee and apply
• b.Repeat only the state portion of the examination
• c.Repeat the commission-approved 30-hour broker basics course
• d.Retake and pass both portions of the examination✓

An individual has six months from passing to apply for the associate broker's license. Missing that deadline means retaking both portions of the examination, not merely paying a fee or repeating coursework. Cite: 16.61.3.9(C)(1) and (C)(2) NMAC.

An actively licensed Arizona broker applies to take the New Mexico examination and asks for waivers. Absent a written license recognition agreement, which requirement can never be waived?

• a.The national portion of the broker's examination prescribed by the commission
• b.The commission-approved 30-hour broker basics course✓
• c.The real estate law course
• d.The real estate principles and practice course

An out-of-state licensee may be excused from the principles and practice course, the law course, and the national examination portion on a certified license history. Only an applicant from a jurisdiction holding a written license recognition agreement with the commission may skip broker basics. Cite: 16.61.3.9(B)(2) and (B)(3) NMAC.

A New Mexico associate broker with two years of active experience upgrades to a qualifying broker's license. That broker may not:

• a.Register a trade name with the commission
• b.Hold a trust account for the brokerage
• c.List and sell property for others
• d.Supervise other affiliated brokers until reaching four years of active licensure✓

Two years of active associate broker experience in the preceding 60 months qualifies a person for a qualifying broker's license, but the statute separately bars supervision of other brokers until the licensee has held an active license for at least four years. Licensees holding an active or inactive qualifying broker's license on January 1, 2018 are exempt. Cite: NMSA 1978 Section 61-29-9(C) and (D).

New Mexico measures a qualifying broker candidate's transactional experience in points. The rule requires:

• a.100 points, with at least one transaction each of the four prior years✓
• b.50 points, with no requirement of a transaction in any particular year
• c.200 points accumulated over any period, with no annual minimum required
• d.100 points, which may include transactions in property the applicant owns

The candidate must document 100 points with at least one transaction accomplished during each of the four years before filing. Transactions involving property the applicant owns do not count. The commission may waive up to 30 points and the per-year requirement for documented hardship. Cite: 16.61.3.10(F) NMAC.

Under the New Mexico qualifying broker point schedule, one side of a residential sale transaction is worth:

• a.Three points
• b.Five points✓
• c.Eight points
• d.Ten points

Each sale or lease has two sides and both earn points. A residential sale side is worth five points; a residential lot sale is three, a commercial improved sale is eight, and a farm or ranch of 100 acres or more is ten. Cite: 16.61.3.10(F)(3)(a) NMAC.

Among the education a New Mexico qualifying broker candidate must document is attendance at a commission meeting or hearing. The requirement is at least:

• a.One hour, in person only
• b.A full day, twice in the licensing cycle
• c.Three hours, or until the meeting goes into executive session or ends✓
• d.Six hours, which may be satisfied by reviewing the published minutes of a meeting

The candidate must attend one commission meeting, rule hearing, or disciplinary hearing for at least three hours, or until the commission goes into executive session or the proceeding ends, whichever comes first. Attendance may be live or by live or recorded distance broadcast but must be documented by signing in and out. Cite: 16.61.3.11(D) NMAC.

A New Mexico broker was born in April. That broker's license expires:

• a.On April 30 every year
• b.Three years from the date the commission issued the license, regardless of birth month
• c.Every three years on the last day of the month following the broker's birth month✓
• d.On December 31 of every third year

Every New Mexico real estate license expires every three years on the last day of the month following the licensee's birth month, so an April birthday produces a May 31 expiration. Renewal is the sole responsibility of the broker. Cite: 16.61.11.8(A) NMAC; NMSA 1978 Section 61-29-11(D).

A New Mexico broker lets a license expire and reinstates it seven months later. Without reexamination, the broker pays:

• a.Three times the regular renewal fee✓
• b.The regular renewal fee plus a flat $50 penalty
• c.Double the regular renewal fee
• d.The regular renewal fee only

A broker may reinstate without reexamination up to one year after expiration by paying a renewal fee three times the regular fee. A broker may apply for an exemption from that late fee only for documented active military service or medical incapacity. Cite: 16.61.11.8(B) and (C) NMAC.

A New Mexico broker's license expired 18 months ago and was never reinstated. The broker now wants to practice again and must:

• a.Pay the accumulated late fees and request reactivation
• b.Complete all prelicensure requirements again, as a new applicant would✓
• c.Submit proof of the continuing education due during the expired cycle and pay the late fee
• d.Ask the commission for a hardship waiver

After one year from expiration the license can no longer be renewed or reinstated, and the broker must undergo all prelicensure requirements to become licensed again. The one-year window, not the payment of fees, is what controls. Cite: 16.61.11.8(D) NMAC.

The statutory floor for continuing education that every New Mexico licensee must complete as a condition of license renewal is:

• a.12 hours each year
• b.15 classroom hours every three years
• c.24 classroom hours during each two-year period
• d.30 classroom hours every three years✓

The Real Estate Licensing Law directs the commission to require a minimum of 30 classroom hours of commission-approved instruction every three years, matching the three-year license cycle. Cite: NMSA 1978 Section 61-29-4.1.

The New Mexico Real Estate Commission is made up of:

• a.Seven members elected by the state's licensees
• b.Five members appointed by the governor, four licensed brokers and one public member✓
• c.Nine members appointed by the superintendent of regulation and licensing
• d.Five members, all of whom must be licensed brokers

The governor appoints five commissioners who have been state residents for three consecutive years: four licensed associate or qualifying brokers and one public member who has never been licensed. No more than one member may come from any single county, and members serve five-year terms. Cite: NMSA 1978 Section 61-29-4(A).

How often must the New Mexico Real Estate Commission meet, and how is a special meeting called?

• a.At least quarterly; the president may call one on five days' notice✓
• b.Monthly; a special meeting may be called by any two commission members
• c.Twice each year; a special meeting requires a unanimous vote of the members
• d.Once each year; the statute does not authorize special meetings at all

The commission must meet at least once each quarter-year at a time and place set by its president, and the president may call a special meeting on five days' written notice to each member. Cite: NMSA 1978 Section 61-29-6.

A New Mexico court enters one judgment against a licensee for fraud; four buyers were harmed and three parcels were involved. The most the real estate recovery fund can pay on that judgment is:

• a.$10,000
• b.$30,000
• c.$50,000✓
• d.$200,000

The fund reimburses unpaid actual damages up to $50,000 per judgment regardless of the number of persons aggrieved or parcels involved. Separately, all claimants against any one licensee in a calendar year may recover no more than $100,000 in the aggregate. Cite: NMSA 1978 Section 61-29-23(A).

An aggrieved New Mexico buyer wins a final judgment against a broker for wrongful conversion of trust funds. To reach the real estate recovery fund, the buyer must file a verified petition with the commission:

• a.Before the judgment becomes final
• b.Within 90 days after the conversion is discovered
• c.Within six months after the judgment is entered by the district court
• d.Within two years after obtaining the final judgment✓

The claimant has two years from obtaining a final judgment based on fraud, knowing or willful misrepresentation, or wrongful conversion of entrusted funds to file the verified petition, with the judgment attached, served on the commission. Cite: NMSA 1978 Section 61-29-23(A) and (B).

At the commission hearing on a New Mexico recovery fund petition, the petitioner must show all of the following EXCEPT that the petitioner:

• a.Reported the licensee's conduct to the attorney general✓
• b.Is not the spouse of the judgment debtor or related within the third degree
• c.Has complied with all the requirements of the Real Estate Recovery Fund Act
• d.Holds a judgment not covered by a bond, insurance, surety or indemnity agreement

The statute lists three showings: relationship to the judgment debtor, compliance with the act, and the absence of bond, insurance, surety or indemnity coverage. Reporting the licensee to the attorney general is not among them. Cite: NMSA 1978 Section 61-29-23(D).

New Mexico funds its real estate recovery fund with an annual fee of not more than $10 per licensee. The statute directs that the fund be maintained at:

• a.$100,000, with any excess over $250,000 refunded to licensees
• b.$150,000, with any balance over $400,000 on July 1 moved to the real estate commission fund✓
• c.$250,000, with any excess returned to the general fund
• d.$400,000, with no upper limit

The fund level is fixed at $150,000; if it drops below that the commission may adjust the additional fee or draw on the real estate commission fund. If the balance exceeds $400,000 on July 1 of any year, the surplus is transferred to the real estate commission fund. Cite: NMSA 1978 Section 61-29-22(C).

If the New Mexico real estate recovery fund lacks the money to satisfy an authorized claim, the commission must later pay the unpaid claims:

• a.Largest claim first, without interest
• b.Pro rata among all pending claimants
• c.Only after the legislature appropriates new money
• d.In the order the claims were originally filed, with 8 percent annual interest✓

When sufficient money has been deposited, the commission satisfies unpaid claims in the order they were originally filed, together with accumulated interest at eight percent a year. Cite: NMSA 1978 Section 61-29-26.

After the New Mexico recovery fund pays a judgment creditor on account of a licensee's conduct, the commission may:

• a.Take no further action, because payment from the fund settles the matter
• b.Bill the licensee for the amount paid but take no action on the license
• c.Refuse to renew the license until the fund is reimbursed in full✓
• d.Require the licensee's qualifying broker to reimburse the fund instead

The commission is subrogated to the judgment creditor's rights and may revoke, suspend or refuse to renew the licensee's license. It may also refuse to issue or renew a license to that person until every payment made on the person's behalf is reimbursed. Cite: NMSA 1978 Section 61-29-27.

An unlicensed person in New Mexico negotiates the sale of a neighbor's house for a fee. Under the Real Estate Licensing Law that conduct is:

• a.A fourth degree felony✓
• b.A petty misdemeanor punishable by a $100 fine
• c.A civil infraction only
• d.A misdemeanor punishable by up to six months in jail

Acting in the capacity of an associate or qualifying broker without a commission-issued license is a fourth degree felony. Violating any other provision of the article is the misdemeanor, punishable by a fine of not more than $500 or up to six months, or both. Cite: NMSA 1978 Section 61-29-17(A).

Separately from any criminal case, the New Mexico commission may impose a civil penalty on a person found to have practiced without a license. That penalty is capped at:

• a.$500 for each violation, plus the commission's administrative costs
• b.$1,000 per violation, or the total commissions received✓
• c.$5,000 for each violation, payable to the general fund of the state
• d.Three times the commissions received for the unlicensed activity

The commission may impose a civil penalty not to exceed $1,000 for each violation or, if it can determine the figure, the total commissions received for the unlicensed activity. Money collected goes into the real estate recovery fund. Cite: NMSA 1978 Section 61-29-17.2.

A New Mexico broker is about to hand a prospective seller a listing agreement to read. Under the broker duties rule, the broker must already have:

• a.Obtained the seller's signature on a dual agency agreement
• b.Delivered a written estimate of the seller's net proceeds
• c.Disclosed the applicable broker duties and obtained written acknowledgement of that disclosure✓
• d.Filed a brokerage relationship notice with the commission

Disclosure of the applicable set of broker duties must happen before the broker generates or presents any written document that has the potential to become an express written agreement, and the broker must obtain that party's written acknowledgement. Where the broker is not directly serving the party, the disclosure goes through the broker who is. Cite: 16.61.19.8 NMAC.

A New Mexico buyer tells a broker at an open house, "I want you to be my agent." Under the licensing law the agency relationship:

• a.Arises at that moment, because the buyer said so
• b.Arises once the broker begins showing property to the buyer
• c.Is presumed to exist unless the broker objects to it in writing within ten days
• d.Does not exist unless the buyer and the brokerage agree to it in writing✓

For regulated transactions, no agency relationship exists unless the person and the brokerage agree in writing. No type of agency may be assumed by a party or a licensee, or created orally or by implication. Cite: NMSA 1978 Section 61-29-10.1(A).

In New Mexico the transaction broker relationship is best described as:

• a.An agency relationship limited to ministerial acts
• b.A non-fiduciary relationship in which real estate services are provided without agency✓
• c.A relationship in which the broker represents both parties equally as fiduciaries
• d.A subagency of the listing brokerage

A transaction broker provides real estate services without entering into an agency relationship, and the commission rule expressly labels it a non-fiduciary relationship. The statutory broker duties still apply. Cite: 16.61.19.9(A) NMAC.

Two clients of the same New Mexico brokerage want to buy and sell the same house, and the qualifying broker will not use designated agency. Before writing or presenting offers the dual agent must:

• a.Obtain a separate written dual agency agreement✓
• b.Terminate one of the two existing exclusive agency agreements
• c.Notify the real estate commission of the dual agency in writing
• d.Obtain the written approval of both clients' attorneys of record

A dual agent must obtain written authority from the buyer client and the seller client in the form of a separate dual agency agreement before writing or presenting offers, and must then act as a facilitator rather than as an exclusive agent of either party. Cite: 16.61.19.10(B) and (C) NMAC.

Before a New Mexico dual agency agreement was signed, a seller told the listing broker the lowest price she would take. After dual agency begins, the broker may disclose that figure to the buyer:

• a.Whenever disclosure would help close the transaction
• b.Automatically, because dual agency makes both parties clients
• c.Only if required by law or rule, or if the seller permits it✓
• d.Never, under any circumstance

Information obtained before written dual agency authority was granted may not be disclosed to the other party unless required by law or rules or permitted by the client who originally disclosed the confidential information. Cite: 16.61.19.10(D) NMAC.

Unless the seller authorizes it in writing, a New Mexico broker directly serving that seller may not tell the buyer:

• a.The age of the roof
• b.That another offer has been received and rejected by the seller
• c.The asking price stated in the seller's listing agreement
• d.That the seller will take less than the listed price✓

The rule bars disclosure of the seller's willingness to accept less than the asking price, willingness to accept other financing terms, motivation for selling, and anything else the seller has asked in writing be kept confidential, unless disclosure is required by law. Cite: 16.61.19.8(B)(7) NMAC.

A New Mexico broker manages a residential rental for the owner. To the tenant the broker owes:

• a.Prompt accounting for money received, a receipt for cash, and written disclosure that the broker is the owner's agent✓
• b.The full duties of an exclusive agent
• c.No duties at all, because the tenant is not a client
• d.Only the duty to return the security deposit

A residential property manager is directly providing services to the owner, not the tenant, but still owes the tenant prompt accounting for all money received, including a receipt for cash, and written disclosure that the broker is the agent of the owner and not of the tenant. Cite: 16.61.19.8(C) NMAC.

Under the New Mexico broker duties rule, brokers owe other brokers a list of professional obligations. One of them is:

• a.Sharing each client's confidential information on request
• b.Non-interference with another broker's written agreement✓
• c.Disclosing the commission split offered in the transaction
• d.Delivering the list of broker duties to every cooperating broker

Obligations to other brokers include honesty and reasonable care, timely presentation of written offers, disclosure of adverse material facts and conflicts of interest, and non-interference with a purchase agreement or other express written agreement another broker has with a party. Brokers are not required to give one another the list itself. Cite: 16.61.19.8(D) NMAC.

Before accepting an offer to purchase a New Mexico home, the seller or the seller's broker must request an estimated property tax levy from the county assessor. The value specified in the request must be:

• a.The county's current assessed value
• b.The listed price of the property✓
• c.The price stated in the buyer's offer
• d.The seller's estimate of market value

The seller or seller's broker must ask the county assessor for the estimated property tax levy and must specify the listed price as the value to be used, then give the assessor's written response to the prospective buyer or the buyer's broker. Cite: NMSA 1978 Section 47-13-4(B).

A New Mexico buyer wants to write an offer today, but the assessor's estimated property tax levy is not available. The buyer may:

• a.Proceed, because the disclosure is owed only at closing
• b.Proceed only if the listing broker signs an indemnity
• c.Proceed only after the commission grants a waiver
• d.Waive the disclosure by signing a written waiver before the offer is made✓

A prospective buyer may waive the estimated property tax levy disclosure by signing a written document, before the offer to purchase is made, acknowledging that the estimate is not readily available. Cite: NMSA 1978 Section 47-13-4(F).

A New Mexico listing broker asks the county assessor for an estimated property tax levy on Monday morning. The assessor must comply:

• a.By the close of business on Tuesday✓
• b.Within five business days
• c.Within 30 days
• d.Only if the request is made in person

The assessor must furnish the written estimate by the close of business of the business day following the day the request is received. A county may satisfy the duty through an internet site or other automated format the requester can print. Cite: NMSA 1978 Section 47-13-4(D).

A New Mexico seller knows that a previous owner died of natural causes in the house. Under the Real Estate Disclosure Act the seller and the broker:

• a.Must disclose the death in writing before accepting any offer
• b.Must disclose it only if the buyer is financing the purchase
• c.Have no duty to disclose it under state law✓
• d.Must disclose it only in counties of more than 100,000 residents

New Mexico removes liability and any duty to disclose that property is or was the site of a natural death, a homicide, suicide, assault, sexual assault or other felony, or was occupied by a person with HIV or AIDS. The silence is also not grounds to terminate or rescind the sale. Cite: NMSA 1978 Sections 47-13-2 and 47-13-3.

A New Mexico qualifying broker runs both a sales business and a property management business. The trust accounting must be arranged so that:

• a.Property management funds are never placed in the brokerage trust account✓
• b.One trust account holds both sales and management money
• c.Management money is held in the qualifying broker's operating account
• d.Each managed owner holds the funds personally

The brokerage trust account is for money of others related to a real estate sales transaction, and the rule states that property management funds may not be placed in it. A separate property management trust account holds money received in managing property for others. Cite: 16.61.23.9(A) and (B) NMAC.

How often must a New Mexico trust account be reconciled, and who must verify it?

• a.Quarterly, verified by the brokerage's accountant
• b.Monthly, verified by the qualifying broker✓
• c.Annually, verified by the commission
• d.At the close of each transaction, verified by the associate broker

Trust account reconciliation must be performed monthly and verified by the qualifying broker. A broker who offers property management must also keep monthly three-way reconciliations among the account, the bank statement, and the property ledger. Cite: 16.61.23.8(D) NMAC; 16.61.23.12(B)(3) NMAC.

A New Mexico sales transaction closes in June. The qualifying broker must keep the trust and custodial account records for that transaction:

• a.One year
• b.Three years
• c.Six years✓
• d.Ten years

All trust and custodial account records are retained for six years after the completion of a transaction. For property management the records are kept for the full term of the agreement and then six years from termination. Cite: 16.61.23.10(B) and (C) NMAC.