A separate bank account brokers use to hold client funds, kept apart from the brokerage's own money.
Why Trust Account matters on the exam
This term belongs to Brokerage Operations. The questions below are real items from Freehold's bank that use it - each one cites its source.
Exam questions using Trust Account
Every Freehold question shows why the right answer is right — and cites its source.
A broker uses funds from the trust account to cover the brokerage's payroll, intending to repay them next week. This is:
Permitted if repaid within 30 days
Commingling, a minor bookkeeping issue
Acceptable with the owner's verbal consent
Conversion, the unauthorized use of client funds
Show answer & explanation
Conversion, the unauthorized use of client funds — Conversion is using client trust funds for the broker's own purposes, which is more serious than commingling. Intent to repay does not cure the violation, and it commonly results in license revocation.
Source: PSI National Real Estate Exam Content Outline — Broker Supplement
After a purchase contract is signed, the earnest money received by the brokerage must be:
Deposited into the trust account within the deadline set by state law
Held in the office safe until the closing
Deposited directly into the broker's own separate personal operating account
Given directly over to the seller immediately upon its receipt by the firm
Show answer & explanation
Deposited into the trust account within the deadline set by state law — State license laws require earnest money to be deposited into the broker's trust or escrow account promptly, within a statutory deadline that varies by state. Holding or misdepositing funds violates license law.
Source: PSI National Real Estate Exam Content Outline — Broker Supplement
In real estate practice, 'commingling' refers to which of the following?
Mixing client trust funds with the broker's personal or operating funds
Using client trust funds to pay personal expenses
Splitting a commission between two cooperating brokers
Depositing two clients' earnest money into the same trust account
Show answer & explanation
Mixing client trust funds with the broker's personal or operating funds — Commingling is the mixing of client trust funds with the broker's own operating or personal funds; it is prohibited even without misuse because it jeopardizes the safety of client money.
Source: PSI National Real Estate Exam Content Outline — Broker Supplement
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