This concludes Chapter 24. Below is a brief summary which you can review before you take your chapter quiz. 

Trust funds are money or other things of value received by the broker on the part of another person. Non-trust funds (real estate commissions, general operating funds, rents and deposits) are NOT subject to the California Real Estate Law or the DRE Commissioner’s Regulations. 

Handling the Trust Funds:

1. Give the money to the principal to the transaction;
2. Put it into a neutral escrow depositor/ broker's trust fund account at a bank.

This money MUST BE DEPOSITED within 3 business days following receipt of the funds (except for checks).

If a broker accepts a check (or promissory note) as an earnest money deposit:

1. Broker must make full disclosure to the seller.
2. Buyer’s written instructions should be followed. 
3. Broker must record a receipt of the check in the broker's trust fund records and hold the check in a safe place.

California Trust Fund Regulations

• Promissory notes are not universally accepted as equivalent to cash in California business transactions.
• A real estate salesperson is authorized to accept the trust funds on the behalf of and at the direction of the broker under whom he is licensed.
  1. A trust account must be designated as a trust account in the name of the broker as trustee;
  2. A trust account must be maintained with a bank or recognized depository located in California;
  3. A trust account must be a NON-interest-bearing account;
  4. An out-of-state trust account is permitted only if the FDIC insures the account, and the account is used only to service specific first loans; and
  5. A withdrawal may ONLY be made from a trust account upon the signature of specific parties: 

Commingling: mixing a client's money with the agent's personal funds is ILLEGAL. Conversion: unlawful misappropriation and use of a client's funds by a licensee. Has heavy criminal penalties.

• Commingling or conversion of trust funds in excess of $10,000.00- the licensee may not conduct business authorized under his real estate license, until he receives a further order of the court, and providing that the hearing is held within 5 days after the order is given.

Advance Fees for a Loan Secured by Lien on Real Property: it is illegal for anyone to claim for an advance fee for:

1. Soliciting lenders on behalf of borrowers in connection with any loan to be secured by a lien on real property, before the borrower becomes obligated to complete the loan;
2. Performing any other activities for which a license is required, unless the person is a licensed real estate broker and is acting in accordance with the law.