Real Estate Trust Fund Accounts

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What Is a Real Estate Trust Fund Account?

Real estate trust fund accounts, also called earnest money or escrow accounts, are accounts that a brokerage company will set up at a bank or some other recognized depository. They are money or other things of value that are received by a broker or salesperson on behalf of an individual (usually the buyer) that is held for the benefit of others in the performance of any acts for which a real estate license is required.

Who Manages Real Estate Trust Funds?

Any and all money that a client gives the company or the company receives on the client's behalf goes into a trust fund account. When a brokerage company sets up a trust fund account for the benefit of its clients, the broker is the trustee for the account. This means that the broker is primarily responsible for the money that is in the account.

What Are the Benefits of a Real Estate Trust Fund?

The trust fund account keeps the client's money segregated from the broker's money. This ensures that any money the client wishes to use for a real estate transaction remains in a secure account only accessible to the client or the broker. Another benefit is insurance. As long as the money is deposited in a federally insured bank by the FDIC (Federal Deposit Insurance Corporation), each client's funds are insured up to $100,000.

What Happens If the Broker Uses ahe Client's Money for Personal Purposes?

A broker runs the risk of losing his license if he uses any money out of the trust fund account for his own personal use. A broker is not only responsible for his own actions, but also for the actions of his salespeople. Thus, he may also be held liable for any commingling, embezzling, and/or conversion of his client's money done by his salespeople.

What Is Commingling?

Commingling is the act of mixing or mingling client's funds with the broker's own money. Generally, a licensee or broker found guilty of mixing or commingling his client's funds with his own personal account can have his license suspended or revoked.

Do I Need an Attorney?

If you feel that your broker has used money that you put in a real estate trust fund for his own person use or has embezzled this money from you in any way, then you should consult a real estate attorney. An experienced attorney will be familiar with the laws governing real estate trust funds and can advise you on whether you have a viable cause of action.

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Last Modified: 07-10-2014 03:11 PM PDT

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