Trust Accounts, Funds Handling, and Settlement Statements
The broker's trust account
Maryland brokers hold client money as fiduciaries. Earnest money, rent deposits and escrow funds go into a trust account at an FDIC-insured bank, kept separate from the broker's operating and personal funds. Commingling and using trust money for business expenses are among the fastest routes to revocation.
Handling rules
- Deposit promptly after receipt; MREC rules set a short deadline, and leaving a buyer's check in a desk drawer is not compliance.
- Disburse only for the authorized purpose: at settlement, on a signed release from all parties, or on court order.
- If parties dispute entitlement, the broker holds the funds until written agreement or interpleads them.
- Keep a ledger for each transaction, bank statements and monthly reconciliations, retained at least three years.
- An interest-bearing trust account requires written authorization, and interest is credited per that agreement.
Settlement statements
The closing disclosure itemizes commissions, prorations, transfer and recordation taxes, and loan charges. Commissions are paid from settlement proceeds, never skimmed from the trust account before closing.
Worked example
A $10,000 deposit arrives Friday; the broker deposits it Monday. Three weeks later the deal collapses and both parties claim the money. The broker may not simply refund the buyer or pay the seller; without a signed release the broker holds the funds or files an interpleader.
Traps that cost marks
Netting a commission out of a deposit; refunding on one party's verbal say-so; deferring reconciliation to year-end; opening an interest-bearing account without written authorization.