Colorado Trust Accounts & Record Keeping

If managing a property and holding security deposits, brokers
a. can withhold money from the deposit if there is damage and it is accounted for to the tenant
b. are not permitted to hold tenant security deposits because their management contract is with the property owner and not the tenant
c. may withhold for normal wear and tear for any lease over a year
d. must refund the full deposit to the tenant within 30 days after the tenant vacates
a
If a broker is acting in good faith but fails to remove his earned commission from the trust account for ten business days after closing the transaction
a. this is an example of commingling
b. is a typical business practice in busy offices
c. this is permitted if the person who must co-sign the check has not been available
d. the broker cannot remove money from the trust account without his client’s authorization
a
If the buyer notifies the seller in writing of a termination of the contract under the inspection provision, what happens to the earnest money?
a. the broker must hold it until she gets mutual agreement to return it to the buyer
b. the buyer and seller must mediate this disagreement about earnest money
c. the broker must immediately return the money to the buyer
d. because the buyer did not properly inspect the property during the showing, the money goes to the seller
c
Which of the following would MOST likely contain Social Security or tax ID numbers of the parties?
a. ledger
b. signature card
c. broker card
d. journal
a
A trust account
a. is a separate account established to hold money belonging to others
b. is a good place to put employee withholding for payroll taxes
c. should have the words “operating account” in its account identification
d. may not contain any broker funds
a
Trust accounts would be used for all the following purposes EXCEPT
a. setting aside money belonging to others separate from a brokerage operating funds
b. holding funds for employees of the firm
c. providing a place to hold money on behalf of others pending closings
d. ensuring the public is generally protected in the event the brokerage assets are attached under the terms of a court action
b
An employing broker is a partner in the ownership of an apartment building and is acting as property manager. The broker
a. must maintain a separate ledger in her regular management account
b. needs no trust account because she is the owner
c. must maintain a separate trust account for this property
d. cannot manage a property in which she has an interest
c
Following closing, an employing broker should pay commission due to broker associates
a. after withholding independent contractor taxes and contributions
b. from the company operating account according to employment agreements
c. from the trust account at the end of the accounting period
d. immediately from the trust account to close the ledger at zero
b
The method identifies the specific details regarding a particular party or parties whose money is held in a trust account is the use of
a. broker file system
b. transaction file system
c. account journal entry system
d. ledger card system
d
If a buyer terminates the contract as permitted, the brokerage holding the earnest money
a. must return the earnest money to the buyer immediately
b. should interplead the funds to the nearest court
c. cannot refund the money to the buyer
d. is permitted to require signed releases from all parties prior to releasing the earnest money
a
All of the following are examples of commingling of trust funds EXCEPT
a. funds of a property partially owned by the broker in the regular management account
b. funds for employee benefits payments held in the trust account
c. a broker fails to withdraw earned commissions for a two month period
d. a broker pays a repair bill from a management account reducing the owner’s ledger balance to zero
d
Whose transaction file would include a copy of the Seller’s Property Disclosure form?
a. selling broker only
b. listing broker only
c. listing and selling brokers
d. does not need to be retained beyond closing
c
Which is TRUE of the signers for a brokerage trust account?
a. the broker must be able to withdraw funds without a cosigner
b. all checks must have two signatures
c. all signers must be individually bonded
d. no unlicensed person may sign the checks
a
Bank reconciliation of a trust account
a. help prevent bank errors
b. should be done annually by a CPA
c. must be done in any month with account activity
d. is a good safeguard but is not required
c
A standard lease with no extension gives the broker how many days to return a tenant’s security deposit?
a. 45
b. 30
c. 60
d. 90
b
The account that would contain a record of all the broker’s trust records and trust accounts in the
a. journal
b. broker
c. bank
d. ledger
a
The employing broker records an earnest money deposit
a. on the transaction ledger and the trust account journal
b. only on the deposit slip stub
c. in the trust account journal
d. on the transaction ledger
a
An employing broker managing a property in which the broker has an ownership interest must
a. not manage other properties
b. keep the funds in the sales trust account
c. have a separate account for this property
d. make sure all the other owners know the funds are in the management account
c
A property manager must deposit rents collected
a. in a timely manner
b. into the appropriate trust account not later than three business days after receipt
c. in an operations account until the check clears
d. in a trust account not later than five business days after receipt of the money
d
An outside audit of a broker’s trust accounts
a. is required annually of all brokers
b. will prevent employee dishonesty
c. will be done annually by Real Estate Commission staff
d. is an excellent safeguard against improper or fraudulent bookkeeping
d
The employing broker should pay his broker associates commissions from which account?
a. sales trust
b. management
c. operations
d. earnest money trust
c
A chronological summary of the cash receipts and disbursements made by the broker, which affect the cash balance of trust account, is the account
a. property file
b. ledger
c. journal
d. management file
c
If a promissory note cannot be redeemed according to the terms of the contract, the
a. listing broker must honor the promissory note and pay the amount of the earnest money from the brokerage trust account
b. title company holding the promissory note will file the appropriate legal papers to collect the money through the courts
c. buyer’s broker is responsible to collect the funds from the buyer
d. listing broker must inform the seller and attempt to collect the money from the buyer
d
In the event a dispute arises between a seller and a buyer regarding the earnest money, the broker
a. must return the earnest money to the buyer immediately
b. should notify the Real Estate Commission
c. must disburse the earnest money to the seller
d. has the option to interplead the earnest money to a court
d
Broker associate commission are paid
a. by the title company if the company conducts the closing
b. monthly after the bank records are reconciled
c. by the employing broker from the operations or other nontrust account
d. from the trust account if the employing broker closes the transaction
c
What records must the brokerage firm retain for four years?
a. all records generated in the firm
b. transaction files
c. independent contractor agreements
d. showing files
b
The Real Estate Commission has the authority to audit a broker’s files
a. at any time
b. only if written notification is received by the broker at least 24 hours in advance
c. only if the broker has received verbal notification at least 24 hours in advance
d. only after receipt of a verified written complaint
a
A commercial broker is holding a $100,000 earnest money deposit on a large sale, which will close in six months. Which of the following statements is TRUE?
a. the broker may deposit the funds in a certificate of deposit and keep the interest
b. the funds must be in the broker’s regular sales escrow account
c. any interest earned automatically goes to the seller
d. the parties may agree to an interest-bearing account and agree who will get the interest
d
An earnest money check submitted with an offer must be
a. deposited not later than the third business day following notice of acceptance of the offer
b. deposited within 24 hours after receipt by the selling broker
c. a cashier’s check or similar good funds
d. held by the buyer’s broker
a
Harry was the sole proprietor of ZYX Realty for three years and has just joined ABC Realty. The person responsible for maintaining the records of ZYX is
a. the employing broker of ABC
b. the Real Estate Commission
c. Harry for four years
d. Harry and his new employing broker
d
A brokerage is holding earnest money for two pending sales. The brokerage is also holding security deposits and rents for eight properties. How many trust accounts must that broker have?
a. all money held for others can be held in a single trust account with proper accounting and audit control
b. this broker would be required to have three trust accounts
c. brokers are only required to have two trust accounts: one for real estate brokerage and one for property management
d. real estate brokers cannot manage more than six properties if they are also listing brokers
b
After the closing of a property transaction, the balance on the owner’s ledger card should be
a. the same as the balance reflected on the broker’s ledger card
b. zero
c. equal to the check the buyer must bring to closing
d. equal to the month-end balance on the journal
b
If an owner chooses not to renew the real estate brokerage firm’s property management agreement, the property manager
a. must advise tenants of who will be holding their security deposits prior to turning the money over to the owner or new manager
b. is relieved of all responsibility to the tenants and must turn over all monies including security deposits to the owner upon the termination date of the old agreement
c. may require the owners to renew the management contracts as long as tenants remain in the property
d. will give the security deposits to the new manager who will notify the tenants
a
Whose transaction file would include a copy of the Exclusive-Right-to-Sell contract?
a. buyer’s broker only
b. listing broker only
c. listing and buyer’s brokers
d. does not need to be retained beyond closing
b
If a new brokerage firm will have a sales trust account, good business practice would indicate that the trust account should be opened
a. after your first closing so you have funds to use to open it
b. upon first receiving notice that the seller has accepted the offer
c. depending on the time of year when banks has incentive programs
d. upon or prior to accepting money belonging to others
d