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NJ RE Broker practice questions

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Question 1New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

Before taking the New Jersey real estate broker licensing examination, an applicant must complete how many hours of approved pre-licensing education?

  1. 300 hours
  2. 75 hours
  3. 150 hours Correct answer.
  4. 30 hours

Explanation

New Jersey requires 150 clock hours of approved pre-licensing instruction for a broker applicant, in addition to the required experience. The salesperson pre-licensing requirement is 75 hours, which is why that figure appears as a distractor.

Question 2New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

How much experience as a licensed salesperson must a New Jersey broker applicant generally have?

  1. Four years
  2. Three years Correct answer.
  3. One year
  4. Two years

Explanation

A broker applicant must show at least three years of experience as a licensed real estate salesperson together with the required classroom hours. Shorter periods do not satisfy the statutory experience requirement.

Question 3New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

A salesperson negotiates the sale of a buyer-client's home, and the buyer offers to pay the salesperson a $2,000 bonus directly at closing. Under New Jersey law, the salesperson may:

  1. Accept the payment directly since it is not a commission split
  2. Accept the payment directly from the buyer with written disclosure
  3. Refuse it, because licensees may not accept bonus payments
  4. Receive the payment only through the employing broker Correct answer.

Explanation

A salesperson may be compensated for brokerage activity only by and through the employing broker, who then pays the salesperson the agreed share. Direct payment from a consumer undercuts the broker's supervisory role and the rule that commissions flow through the brokerage.

Question 4New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

A New Jersey referral agent license authorizes the holder to:

  1. Manage rental property for an owner for compensation
  2. List and sell property while supervised by a broker
  3. Refer prospective clients to a brokerage for a fee Correct answer.
  4. Prepare and negotiate contracts of sale for clients

Explanation

The referral agent license is a limited license that permits only the referral of prospects to a licensed brokerage in exchange for compensation. A referral agent must be affiliated with a sponsoring broker and may not list, show, or negotiate.

Question 5New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

A licensed New Jersey broker who chooses to work under the supervision of another broker must:

  1. Open a separate office in the employing broker's name
  2. Be licensed as a broker-salesperson and work under that broker Correct answer.
  3. Operate independently while sharing commissions with the employing broker
  4. Surrender the broker license and obtain a salesperson license

Explanation

A broker who affiliates with another brokerage holds a broker-salesperson license and is supervised by the employing broker, just as a salesperson is. The broker-salesperson may not operate independently while in that affiliation.

Question 6New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

A broker receives a $10,000 deposit on a listing and deposits it into the firm's general business account to cover operating expenses. This conduct is:

  1. Prohibited, because trust funds must be escrowed separately Correct answer.
  2. Permissible if the broker records the deposit as a liability
  3. Prohibited unless the buyer consents in writing
  4. Permissible if the deposit is replaced before closing

Explanation

Funds held for others must be kept in a separate escrow or trust account and may not be commingled with the broker's own operating money. Bookkeeping entries or later replacement do not cure the commingling.

Question 7New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

Under New Jersey rules, the Consumer Information Statement explaining agency relationships must be provided to a consumer:

  1. Only after the consumer signs a buyer agency agreement
  2. Before the closing of the transaction
  3. At the first substantive contact with the consumer Correct answer.
  4. Within three business days of the first showing

Explanation

The Consumer Information Statement must be given at the first substantive contact, before confidential information is exchanged or an agency relationship is formed. Delaying the disclosure until later in the transaction defeats its purpose.

Question 8New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

A brokerage firm wishes to act as a dual agent in a transaction where it represents both the seller and the buyer. The firm must:

  1. Obtain the written informed consent of both parties Correct answer.
  2. Obtain verbal consent from both parties at the first showing
  3. Refer the buyer to another firm to avoid any conflict of interest
  4. Obtain the consent of the seller only, since the seller pays the commission

Explanation

Dual agency is permitted in New Jersey only with the informed written consent of both the buyer and the seller. Consent may not be inferred from who pays the commission, and oral consent is insufficient.

Question 9New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

A brokerage firm with written consent represents both parties to a transaction using designated agency. Under this arrangement:

  1. Two different brokers must each hold a separate license for the same office
  2. The broker remains a dual agent, with separate licensees for each party Correct answer.
  3. The designated licensees become dual agents for both parties
  4. The broker represents neither party once designations are made

Explanation

In designated agency the broker remains a dual agent while assigning different affiliated licensees to represent the seller and the buyer. Each designated licensee then owes full fiduciary duties to only one party, which reduces conflicts at the individual level.

Question 10New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

A net listing agreement, under which the broker keeps all proceeds above a seller-specified minimum price, is:

  1. Permitted if the broker discloses the estimated commission
  2. Permitted if the seller is represented by an attorney
  3. Permitted only for commercial property
  4. Prohibited in New Jersey Correct answer.

Explanation

New Jersey prohibits net listing agreements because they place the broker's interest in a high resale price in conflict with the seller's interest and can obscure the true compensation. The prohibition applies regardless of property type or attorney involvement.

Question 11New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

Which statement about advertising by a New Jersey salesperson is correct?

  1. Advertisements must include the brokerage's registered business name Correct answer.
  2. Only the broker may place advertisements, never the salesperson
  3. The salesperson may advertise in the salesperson's own name without the firm name
  4. Advertising requires prior written approval of the Commission

Explanation

Advertising must identify the brokerage, because the firm is the party to the agency relationship and the salesperson acts under the broker's supervision. A salesperson may advertise, but the registered firm name must appear.

Question 12New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

Which task may an unlicensed assistant legally perform for a New Jersey brokerage?

  1. Explain the terms of a listing agreement to a seller
  2. Answer the telephone and take messages from callers Correct answer.
  3. Quote a commission rate to a prospective seller
  4. Show a listed home to prospective buyers

Explanation

Unlicensed assistants may perform clerical and administrative work such as answering phones and taking messages. Activities that require a license, such as showing property, quoting compensation, or explaining contract terms, may not be delegated to them.

Question 13New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

To renew a New Jersey real estate license, a licensee must complete continuing education totaling:

  1. 12 hours per two-year license term, including required core topics Correct answer.
  2. 3 hours per year, all in ethics
  3. No hours if the license has been held for ten years
  4. 6 hours per year, all in elective subjects

Explanation

New Jersey requires 12 hours of continuing education during each two-year license term, with specified core, ethics, and agency components. Length of tenure does not exempt a licensee from the requirement.

Question 14New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

The New Jersey Real Estate Commission operates within which state entity?

  1. The Division of Consumer Affairs Correct answer.
  2. The Judiciary's Office of the Clerk
  3. The Department of the Treasury
  4. The Department of Community Affairs

Explanation

The Commission is an agency housed in the Division of Consumer Affairs, which is part of the Department of Law and Public Safety. It regulates licensees and administers the licensing law.

Question 15New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

Which of these is a ground for disciplinary action against a New Jersey real estate licensee?

  1. Charging a commission rate above the local customary rate
  2. Knowingly making a material misrepresentation to a consumer Correct answer.
  3. Declining a listing because the seller will not offer cooperation
  4. Refusing to reduce a commission for a repeat client

Explanation

Knowingly misrepresenting a material fact is a statutory ground for discipline, and the Commission may suspend, revoke, or penalize the licensee. Commission amounts are negotiable, so charging above a customary rate or refusing a reduction is not misconduct.

Question 16New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

An owner who sells their own home without a licensee and advertises it themselves must:

  1. Hold no real estate license, because the owner is exempt Correct answer.
  2. Pay a referral fee to the Commission
  3. Obtain a one-time homeowner license from the Commission
  4. Register the sale with the Commission before closing

Explanation

A person selling or leasing their own property in their own right is exempt from the licensing law. No homeowner permit, registration, or fee to the Commission is required for that transaction.

Question 17New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

A salesperson licensed in another state wants to perform brokerage activity in New Jersey. Generally, that person must:

  1. Only pass the New Jersey portion of the exam, never the national part
  2. Obtain a New Jersey license, unless a reciprocity provision applies Correct answer.
  3. Obtain a New Jersey broker license rather than a salesperson license
  4. Practice under the out-of-state license for up to one year

Explanation

Brokerage activity in New Jersey requires a New Jersey license, and an out-of-state license alone does not authorize it. Where a reciprocal agreement exists, parts of the qualification process may be waived, but a New Jersey license is still obtained.

Question 18New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

A broker opens a second office in a neighboring town. Under New Jersey requirements:

  1. The branch office must be separately licensed and supervised Correct answer.
  2. No additional license is needed if the same broker owns both offices
  3. Only a post office box address must be filed with the Commission
  4. The branch may be licensed only if it is within ten miles of the main office

Explanation

Each branch office must be separately licensed and operate under the supervision of a licensed broker. Distance from the main office does not affect the requirement, and common ownership does not eliminate it.

Question 19New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

A salesperson affiliated with a brokerage makes an unauthorized misrepresentation to a buyer. With respect to the employing broker, New Jersey law:

  1. Excuses the broker if the salesperson signed an independent contractor agreement
  2. Holds the broker liable only if the broker was physically present
  3. Excuses the broker entirely if the salesperson acted without instructions
  4. May discipline the broker for failing to supervise the salesperson's conduct Correct answer.

Explanation

The employing broker is responsible for supervising affiliated licensees, and inadequate supervision can itself be a disciplinable offense. Routing a salesperson through an independent contractor agreement or claiming ignorance of the conduct does not shield the broker.

Question 20New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

In a disciplinary proceeding, the New Jersey Real Estate Commission may:

  1. Only issue a written reprimand, since fines are set by the courts
  2. Impose a jail sentence of up to six months
  3. Suspend or revoke a license and impose a monetary penalty Correct answer.
  4. Award punitive damages to an aggrieved consumer

Explanation

The Commission's disciplinary powers include suspending or revoking a license and imposing monetary penalties, along with other authorized sanctions. It does not impose criminal punishment, and compensatory or punitive damages are awarded by courts, not the Commission.

Question 21New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

A licensee wants to buy a home listed with the licensee's own firm before it is marketed publicly. The licensee should:

  1. Buy at the listed price without disclosing, since full price is offered
  2. Buy through a relative's name to keep the transaction confidential
  3. Disclose in writing the licensee's status and interest before offering Correct answer.
  4. Wait until the listing expires so no disclosure is required

Explanation

A licensee acquiring an interest in a property must disclose both licensed status and personal interest in writing before making an offer. Using a straw buyer or inside information to obtain an advantage breaches the duties owed to the client and the licensing law.

Question 22New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

When a salesperson's affiliation with a brokerage ends, the broker must:

  1. Return all commissions earned by the salesperson to the Commission
  2. Notify all clients of the firm in writing within 24 hours
  3. Hold the salesperson's license until a new broker is found
  4. Notify the Commission so the license record reflects the change Correct answer.

Explanation

The Commission must be notified when an affiliated licensee's employment terminates, so the licensing record accurately reflects who is supervising the licensee. The broker does not keep the license, and earned commissions are not surrendered to the Commission.

Question 23New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

Real estate commission rates in New Jersey are:

  1. Negotiable between the broker and the client Correct answer.
  2. Set by the Real Estate Commission and published annually
  3. Fixed by local boards of realtors for their members
  4. Capped at six percent of the sale price by statute

Explanation

Commission rates are freely negotiable between the broker and the client; no statute, regulation, or trade association sets them. Independent brokers agreeing on rates with competitors can raise antitrust concerns.

Question 24New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

A buyer and a seller both claim the same earnest money deposit, which the broker holds in escrow. The broker should:

  1. Return the funds to the buyer, since the buyer paid them
  2. Apply the funds to the broker's commission and remit any balance to the seller
  3. Hold the funds until the parties agree in writing or a court orders release Correct answer.
  4. Split the deposit equally between the parties to resolve the dispute

Explanation

When entitlement to escrowed funds is disputed, the broker must keep the money in escrow until the parties sign a written agreement or a court directs disbursement. The broker may not choose a side, self-help the commission, or divide the money unilaterally.

Question 25New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

A licensee represents the seller in a transaction, and the buyer has signed no agency agreement with the firm. The licensee owes the buyer:

  1. No duties whatsoever, since no agency agreement was signed
  2. Confidentiality, but no duty of honesty
  3. The same fiduciary duties owed to the seller
  4. Honest and fair dealing, but not fiduciary duties Correct answer.

Explanation

An unrepresented buyer is a customer rather than a client, so the seller's agent must treat the buyer honestly and fairly and disclose material defects, but does not owe fiduciary duties such as loyalty and full confidentiality. Those fiduciary duties run to the seller.

Question 26New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

To qualify for an initial New Jersey real estate salesperson license, an applicant must be at least:

  1. At least 18 with a high school diploma or equivalent Correct answer.
  2. At least 21 with a high school diploma or equivalent
  3. At least 18 with a four-year college degree
  4. At least 21 with two years of sales experience

Explanation

New Jersey requires salesperson applicants to be at least 18 years old and to have a high school diploma or its equivalent. These are minimum statutory qualifications that must be met before licensure.

Question 27New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

New Jersey real estate licenses are renewed on what cycle?

  1. Biennially, every two years Correct answer.
  2. Every four years after initial licensing
  3. Every three years after initial licensing
  4. Annually, on each calendar year

Explanation

New Jersey real estate licenses are biennial and must be renewed every two years. Continuing education requirements are tied to that renewal cycle.

Question 28New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

A New Jersey salesperson license may be affiliated with how many brokers at one time?

  1. Three brokers at a time
  2. One broker at a time Correct answer.
  3. Two brokers at a time
  4. Any number of brokers

Explanation

A salesperson may hold an active license with only one New Jersey broker at a time. Changing affiliation requires a transfer of the salesperson’s license to the new broker.

Question 29New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

An unlicensed individual who uses the title “real estate broker” in New Jersey is:

  1. A violation of the license law Correct answer.
  2. Allowed if no fee is charged
  3. Allowed for a single transaction
  4. Allowed with written notice

Explanation

Only individuals licensed by the Commission may use the title “real estate broker” or hold themselves out as brokers. Unlicensed use of the title violates the real estate license law.

Question 30New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

How many hours of approved prelicensing education are required for a New Jersey salesperson license?

  1. 60 hours
  2. 45 hours
  3. 75 hours Correct answer.
  4. 90 hours

Explanation

New Jersey requires 75 clock hours of approved prelicensing education for a salesperson license. The coursework must be completed before the licensing examination.

Question 31New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

A salesperson whose license expired last month continues to show homes and write contracts. This activity is:

  1. Permitted while the renewal application is pending
  2. Permitted if the employing broker approves it
  3. A minor paperwork violation with no penalty
  4. Unlicensed activity subject to discipline Correct answer.

Explanation

Practicing brokerage without a current license is unlicensed activity, even if a renewal application is pending. An expired license does not authorize showings, negotiations, or contract work.

Question 32New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

To qualify for a New Jersey broker license, an applicant generally must have:

  1. One year as a licensed salesperson
  2. Three years as a licensed salesperson Correct answer.
  3. No salesperson experience, only education
  4. Five years as a licensed salesperson

Explanation

Broker applicants must document at least three years of full-time experience as a licensed salesperson. The required broker education must also be completed.

Question 33New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

The New Jersey Real Estate Guaranty Fund exists to:

  1. Reimburse consumers for certain licensee losses Correct answer.
  2. Fund continuing education for licensees
  3. Provide errors and omissions insurance to brokers
  4. Pay commissions owed to salespersons after a closing

Explanation

The Guaranty Fund may reimburse consumers who obtain a judgment for certain out-of-pocket losses caused by a licensee’s fraud or dishonesty. It is not a general insurance program for brokers.

Question 34New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

A brokerage firm wants to operate under a name different from its licensed name. Under Commission rules, the firm must:

  1. Register the trade name with the Commission Correct answer.
  2. Obtain approval from the local zoning board
  3. File the trade name only with the county clerk
  4. Use the name without any filing or approval

Explanation

A brokerage may advertise and operate under a trade name only if that name is properly registered with the Commission. Otherwise, the licensed name must be used in advertising and business dealings.

Question 35New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

A broker wants to pay part of a commission to an unlicensed friend who referred a buyer. This payment is:

  1. Allowed because the friend is not an agent
  2. Prohibited unlicensed compensation Correct answer.
  3. Allowed if the referral is disclosed in writing
  4. Allowed if the payment is under $500

Explanation

Paying compensation to an unlicensed person for referring brokerage business is prohibited because it compensates unlicensed activity. Disclosure or a small dollar amount does not make the payment lawful.

Question 36New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

A salesperson completes a sale and the buyer wants to pay the salesperson directly. The salesperson should:

  1. Ask the buyer to pay the title company
  2. Accept the payment directly from the buyer
  3. Deposit it into the broker's escrow account
  4. Have the broker collect and disburse the fee Correct answer.

Explanation

A salesperson’s commission is payable through the employing broker. The salesperson may not accept compensation directly from a client for brokerage services.

Question 37New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

Managing residential rental property for another person for a fee in New Jersey requires:

  1. A New Jersey broker license Correct answer.
  2. A salesperson license alone
  3. Only a local rental permit
  4. No license of any kind

Explanation

Managing rental property for another person for compensation is brokerage activity and requires a New Jersey real estate broker license. A salesperson may perform such work only under a broker’s supervision.

Question 38New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

A corporation applies for a real estate broker license. The corporation must:

  1. Use an out-of-state broker as supervisor
  2. Obtain a license without any individual broker
  3. Designate any corporate officer as responsible
  4. Designate a licensed broker of record Correct answer.

Explanation

A corporate or entity broker license requires a licensed New Jersey broker to be designated as broker of record. That individual is responsible for the brokerage’s licensed activities.

Question 39New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

A licensee plans to sell their personal residence. Before listing, the licensee must:

  1. Disclose the license in writing to the buyer Correct answer.
  2. Make no disclosure because it is a personal sale
  3. Disclose only if the buyer asks about it
  4. Mention it orally at the first showing

Explanation

A licensee selling their own property must disclose their licensed status in writing so the buyer knows they are dealing with a real estate professional. An oral comment or silence does not satisfy the disclosure requirement.

Question 40New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

A licensee advertises a property for sale online without the owner's permission. This is:

  1. Allowed because online ads are unregulated
  2. Prohibited without owner authorization Correct answer.
  3. Allowed if the listing price is accurate
  4. Allowed if the address is omitted

Explanation

A licensee may advertise another person’s property only with the owner’s authorization. Advertising without permission violates Commission rules regardless of whether the information is accurate.

Question 41New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

A licensed salesperson wants to open an independent brokerage under a trade name. To do so, the salesperson must first:

  1. Obtain a New Jersey broker license Correct answer.
  2. Register the trade name and begin work
  3. Ask the Commission for a salesperson waiver
  4. Open the office with a broker as manager

Explanation

Only a licensed broker may own or operate a brokerage. A salesperson must first qualify for and obtain a broker license before opening an independent brokerage.

Question 42New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

Under Commission rules, a broker must retain transaction and escrow records for at least:

  1. One year
  2. Ten years
  3. Six years Correct answer.
  4. Three years

Explanation

New Jersey brokers must keep transaction and escrow records for at least six years and make them available to the Commission on request. Retention supports auditing and disciplinary investigations.

Question 43New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

Broker A refers a client to Broker B, and Broker B pays Broker A a share of the commission at closing. This arrangement is:

  1. Permissible only with Commission preapproval
  2. Permissible only within the same brokerage
  3. Permissible because both are licensed brokers Correct answer.
  4. Prohibited as an illegal kickback in all cases

Explanation

Commission-sharing between licensed New Jersey brokers is permissible. The prohibition applies to paying unlicensed persons for brokerage referrals, not to compensation between licensed brokers.

Question 44New Jersey Real Estate License Law, Commission Rules and Licensing Requirements

A broker allows an unlicensed receptionist to quote rental prices and negotiate lease terms with prospective tenants. The broker is:

  1. Subject to discipline for allowing unlicensed activity Correct answer.
  2. Not responsible because the receptionist is unlicensed
  3. Responsible only if a lease is actually signed
  4. Required to report only the receptionist to the Commission

Explanation

The broker is responsible for supervising staff and may not allow unlicensed persons to negotiate lease terms. Permitting unlicensed brokerage activity can support disciplinary action against the broker.

Question 45Brokerage Office Management, Supervision and Trust/Escrow Account Handling

A New Jersey broker deposits a client's earnest money into the firm's general operating account 'temporarily' because the escrow account paperwork is not yet complete. This practice is best described as:

  1. Acceptable if the funds are transferred within 30 days
  2. Acceptable if the broker records the deposit in the general ledger
  3. Prohibited commingling of trust and broker funds Correct answer.
  4. Permitted when the deposit is under $1,000

Explanation

Trust funds held for clients must be kept in a separate escrow or trust account and may not be mixed with the broker's own business or personal money. Commingling is a violation even if the funds are later moved and even if the amount is small. The broker's bookkeeping entries do not cure the improper deposit.

Question 46Brokerage Office Management, Supervision and Trust/Escrow Account Handling

The individual ultimately responsible for the supervision of every licensed salesperson affiliated with a New Jersey brokerage firm is:

  1. The broker of record Correct answer.
  2. The firm's attorney
  3. The firm's office manager
  4. The top-producing salesperson

Explanation

Supervisory responsibility rests with the licensed broker who holds the firm's broker-of-record status. That broker answers to the Commission for the brokerage activities of affiliated licensees and for the handling of trust funds. Others may assist with day-to-day management but do not displace that responsibility.

Question 47Brokerage Office Management, Supervision and Trust/Escrow Account Handling

A New Jersey brokerage wants to pay a $500 referral fee to an unlicensed acquaintance who introduced a buyer to the firm. This payment is:

  1. Permissible if the friend signs a written referral and disclosure form
  2. Permissible if the amount stays under $1,000
  3. Permissible if the fee is disclosed in writing to the buyer
  4. Prohibited; unlicensed persons cannot be paid for brokerage services Correct answer.

Explanation

Compensation for activity that requires a real estate license may be paid only to properly licensed persons, generally through their employing broker. A referral of a prospective buyer is brokerage activity, so an unlicensed person may not be compensated for it. Written disclosure or a small dollar amount does not change the rule.

Question 48Brokerage Office Management, Supervision and Trust/Escrow Account Handling

A salesperson earns a commission, and the seller asks whether the check may be written directly to the salesperson. The correct answer is:

  1. No; commissions must be paid to and through the brokerage Correct answer.
  2. No, unless the salesperson has an independent contractor agreement
  3. Yes, if the salesperson endorses it over to the broker
  4. Yes, if the commission is under the broker's split threshold

Explanation

A salesperson may not accept compensation for brokerage work directly from a client. The commission is paid to the brokerage and then divided with the salesperson under their agreement. An independent contractor arrangement does not change who may lawfully receive the payment.

Question 49Brokerage Office Management, Supervision and Trust/Escrow Account Handling

Earnest money given to a broker should be deposited into the escrow account:

  1. Promptly upon receipt, as the rules require Correct answer.
  2. Whenever the bookkeeper next reconciles the account
  3. Only at the closing of the transaction
  4. At the end of the month in which it was received

Explanation

Trust funds must be placed in the escrow account promptly after the broker receives them, consistent with the Commission's timing requirements. Holding a deposit in the file or in a desk drawer until closing exposes the funds to loss and violates escrow rules. Internal bookkeeping schedules do not set the deposit deadline.

Question 50Brokerage Office Management, Supervision and Trust/Escrow Account Handling

An escrow account maintained by a brokerage firm should be titled:

  1. In the name of the largest client on deposit
  2. As a trust account identifying the broker as trustee Correct answer.
  3. In the name of the firm's owner personally
  4. In the name of the salesperson handling the transaction

Explanation

The account must be clearly identified as a trust or escrow account holding money belonging to others, with the broker as trustee. Titling it personally or in a client's or salesperson's name blurs ownership and defeats the purpose of segregation. Proper titling also lets a bank or examiner recognize the fiduciary nature of the funds.