Broker Responsibilities, Escrow, and Trust Funds
The broker owns the responsibility
A broker must supervise salespersons and branch offices, maintain written procedures, and review transactions. The broker holds the license; the salesperson's acts are the broker's acts. Transaction files, listings, and trust records are kept three years.
Trust funds
Money held for others - earnest money, rents, security deposits, reserve funds - belongs in a trust account, never in the broker's operating or personal account. Putting client money in the general account is commingling; actually spending it is conversion, a crime and grounds for revocation.
Handling sequence: a salesperson who receives funds delivers them to the broker promptly; the broker deposits them into the trust account or delivers them to escrow no later than three business days after receipt, unless the contract specifies otherwise. Trust records must be reconciled monthly, show a running balance, and identify each beneficiary. Interest belongs to the beneficiary unless the account is a properly noticed interest-bearing trust account.
Escrow
An escrow holder is a neutral fiduciary for both parties, acts only on written instructions signed by all parties, uses good funds, and may not give legal advice or decide disputes.
Traps: a broker may not run a business through the trust account; an escrow officer's personal opinion about who is right does not authorize disbursement.
Rule of thumb: every dollar that is not yours belongs in a separate, labeled, reconciled account.