Trust Accounts and Record Keeping
Other people's money
Any money a broker holds for others - earnest money, rents, security deposits, escrow repair funds - belongs in a trust account at a Colorado bank or savings institution, titled as a trust account, with the broker authorized to withdraw. Commingling is prohibited; the broker may keep only the minimum balance the bank requires. The Commission must be told the account exists and when it changes. Interest belongs to the beneficiary unless written instructions say otherwise.
Three-way reconciliation
Each month the broker performs a three-way reconciliation: checkbook balance, the sum of all individual client ledgers, and the adjusted bank balance must agree. Every transaction gets its own ledger showing receipts, disbursements, and a running balance. Deposits are made promptly, disbursements require written authorization, and no check is written before funds are on deposit.
Ledgers, journals, reconciliations, bank statements, and contracts are retained for the period the Commission requires and must be available for inspection. Colorado treats trust account violations as among the most serious breaches; a shortage is generally the broker's responsibility.
Traps: paying a commission out of trust before closing; parking a buyer's earnest money in the operating account 'for a few days'; reconciling only when something looks wrong; letting an owner's personal account hold tenant security deposits.
Rule of thumb: if it is not the broker's money, it goes into trust the day it is received and gets a ledger line the same day.