realestate – Flashcards

5, 3 Money received for property management and short-term rentals shall be deposited within five (5) business days after receipt unless the parties agree otherwise. All other types of money belonging to others shall be deposited not later than the third business day after receipt or as provided in the agreement with those concerned Rule E-1 (n)

Take the buyer to the bank to get a cashier's check

all of the above these are rules required by RESPA and the CREC.

Held by the title company or listing broker whichever is designated in Contract to Buy & Sell The earnest money is held as designated in the contract.

Commingling, or mixing funds, is ILLEGAL and brokers who commingle funds can be prosecuted. Each of the other terms listed here fall under the realm of Fair Housing violations.

All of the above From the Contract to Buy and Sell (Purchase Contract) Good Funds. All amounts payable by the parties at Closing, including any loan proceeds, Cash at Closing and closing costs, shall be in funds that comply with all applicable Colorado laws, including electronic transfer funds, certified check, savings and loan teller's check and cashier's check (Good Funds). This is also covered in Real Estate Commission Rule E-36: E-36. Good funds at closing Pursuant to 38-35-125, a real estate licensee who provides closing services shall not disburse funds or instruct an agent to disburse funds until those funds have been received and are either: (1) available for immediate withdrawal as a matter of right from the financial institution in which the funds have been deposited or (2) available for immediate withdrawal as a consequence of an agreement of a financial institution in which the funds are to be deposited or a financial institution upon which the funds are to be drawn. Such agreement with a financial institution must be for the benefit of the licensee providing the closing service. If the agreement contains contingencies or reservations no disbursements can be made until these are satisfied.

When accepting money belonging to others What is a "Ledger"? A record collectively called a "ledger" or an equivalent component of an accounting system which records in chronological sequence all money which is received or disbursed by the broker on behalf of each particular beneficiary of a trust account. This record must show the monetary transactions affecting each individual beneficiary and must segregate such transactions from those pertaining to other beneficiaries of the trust account. The Real Estate Commision does not require a ledger when an Employing Broker is only managing company money. However, if s/he accepts money belonging to others both an escrow account and a ledger for that account is required. If an employing broker does not take physical possession of earnest money (buyers write checks directly to the title company), rents (written directly to owners), security deposits (written directly to owners) and such; then the emplying broker does not need an escrow account. If s/he does not need an escrow account; s/he does not need a ledger.

Must be done any month in which the account has had activity To be done every month as required by law

3 business days after notice of acceptance A check for the earnest money should either accompany the offer until accepted or be delivered prior to expiration of the Alternative Earnest Money Deadline. Most often, a buyer's agent holding the deposit forwards a copy of the earnest money check with the offer and then specifies a date in the Alternative Earnest Money Deadline when the actual check will be delivered after contract acceptance. If the deposit was tendered with the contract; it must be deposited no later than 3 business days after notice of acceptance of the contract.

interest may accrue to a nonprofit affordable housing fund

Company name and employing broker's name How to Open Escrow Bank Accounts 1. Select a Colorado depository that offers FDIC insurance coverage or as authorized for the specific engagement. 2. Include the following "fiduciary elements" in the account title. These must identify the true owner of the account, specify the type or purpose of account being established (sales, management, homeowner association, etc.), include one of the fiduciary words "escrow" or "trust," state the employing broker's personal name, and show his or her fiduciary capacity as "broker." The employing broker must be able to independently control and operate all escrow bank accounts, but others may be designated as signatories as well. These elements may be abbreviated to facilitate printing the broker's monthly bank statement heading, checks, and deposit stock. The general account title format follows: Licensed brokerage name and/or d.b.a. (brokerage TIN/SSN) Type of escrow, broker's name, broker Statement mailing address

to prevent commingling with your own funds Commingling is illegal and occurs when other people's money is mixed with the broker's operating or personal account.

Seven The law requires that a broker managing seven or more properties must have a property management trust account.

monthly review and comparison of the bank statement with your records Reconciliation is required monthly to balance the escrow account against individual accounts.

The broker has a choice to interplead the money or await written instructions from the parties The broker has two options - to interplead the money or await written instructions from the parties. If the money is in dispute, the only thing an agent cannot do is make a decision as to who gets the money. An agent is not a judge or arbiter. Interplead means the agent turns the money over to a court to determine the ownership rights of the rival claimants to the earnest money. More on the process of returning Earnest Money: The Colorado Contract to Buy and Sell Real Estate (AKA Purchase Contract) says the agent holding earnest money has 5 days to return earnest money to whomever is supposed to get it after receipt of written instructions to do do. This is covered in the Broker Acknowledgements sections of the purchase contact. The actual language reads like this - "Broker agrees that if Brokerage Firm is the Earnest Money Holder and, except as provided in § .., if the Earnest Money has not already been returned following receipt of a Notice to Terminate or other written notice of termination, Earnest Money Holder will release the Earnest Money as directed by the written mutual instructions. Such release of Earnest Money will be made within five days of Earnest Money Holder's receipt of the executed written mutual instructions, provided the Earnest Money check has cleared." BUT!!!!!! to make it even more fun for you, the Real Estate has issued Commission Position 6, whereby they say that if there is no controversy over who gets the earnest money, they want the money returned as quickly as possible and the agent does NOT have to get writen permission from all parties to do so. Most companies as a prudent measure have both parties sign that they agree who gets the earnest money, before they release it. This just makes sense, woe to the agent who releases the earnest money and one of the parties throws a fit over it. Safer to get the parties to agree in writing first. However, sometimes the party that is giving up the earnest money and their agent makes this a pretty low priority on their things-to-do-list. Keep in mind, they are grumpy the deal is dead and even if they know they need to release the earnest money, they are not happy about it. In the meantime, the other party wants their money. Buyers in particular are anxious as they are back on the market looking for a property and can't make an offer until they get their earnest money returned. Therefore, the Commission has made is very clear, that they do not want slow paperwork to hold things up when there is no controversy. Does this occasionally put us in an awkward position? Yup. Smart agents who do not like to even get within sniffing distance of having to write out a personal check to cover a perceived, if not actual screw up (that be me, except my wife would probably dispute the "smart" assertion) will move heaven and earth to get quickly signed releases by both parties before releasing earnest money. If you find that one of your parties due to the stress of the failed deal ran instantly to consult with the yogi on the mountaintop and are not returning messages. You need to have a talk with your managing broker before doing something you may regret. It is always cooler to share the love and say "my managing broker said to do it and will make it good" then "how do I spell your name on my check".

All checks, deposit slips and bank statements must include the word "escrow" or "trust" as part of the account name The escrow account must be identified as such and the checks, deposit slips, and statements must have the name of the account and the name of the brokerage entity.

Listing Broker The listing broker usually establishes the escrow account, but the parties can always agree on any other practice they specify

be a signer on all trust accounts opened in the company name An employing broker must be able to write checks drawn on his trust account with just his signature, and must be a signer on all trust accounts opened in the company name.

broker is commingling and could have is license revoked Commingling is mixing money from the trust account and the operating account; conversion is using some of the trust account money for your own use.

within 3 business days after acceptance of contract

3 Rule E-1 (h) A broker who manages less than 7 single-family residences may deposit rental receipts and security deposits and disburse money collected for such purposes in the "sales escrow" account" Elsewise, you need one escrow account for earnest money, one for rental receipts and one for rental deposits.

should have deposited the money in a bank escrow or trust account and should have discussed the interest with the parties. The broker is in violation of Colorado Real Estate Rules he should have deposited the money in a bank escrow or trust account and should have discussed the interest with the parties.

minimum of four years Independent brokers and employing brokers must retain transaction records from their brokerage activities for four years.

All checks, deposit slips, and bank statements must include the word "escrow" or "trust" as part of the account name.

A check on the broker's escrow account his would be considered third party funds which are not considered good funds. From the Contract to Buy and Sell (Purchase Contract) Good Funds. All amounts payable by the parties at Closing, including any loan proceeds, Cash at Closing and closing costs, shall be in funds that comply with all applicable Colorado laws, including electronic transfer funds, certified check, savings and loan teller's check and cashier's check (Good Funds). This is also covered in Real Estate Commission Rule E-36: E-36. Good funds at closing Pursuant to 38-35-125, a real estate licensee who provides closing services shall not disburse funds or instruct an agent to disburse funds until those funds have been received and are either: (1) available for immediate withdrawal as a matter of right from the financial institution in which the funds have been deposited or (2) available for immediate withdrawal as a consequence of an agreement of a financial institution in which the funds are to be deposited or a financial institution upon which the funds are to be drawn. Such agreement with a financial institution must be for the benefit of the licensee providing the closing service. If the agreement contains contingencies or reservations no disbursements can be made until these are satisfied.

earnest money deposits must be place in a recognized depository not later than three business days following the day on which the broker receives notice of acceptance The earnest money must be deposited within three business days after acceptance of the contract to buy and sell.

The broker is in violation of regulations for improperly handling escrow funds. The broker improperly commingled funds and is in violation of regulations. When the broker used funds from the other account, the broker actually used another client's funds for the repair.

you send the earnest money check back to the buyer's broker with the counter offer

Name of the person who wrote the check out of the account Rule E-1 (p) Recordkeeping requirements A broker shall supervise and maintain, at the broker's licensed place of business, a record keeping system, subject to subsection (7) of this rule, consisting of at least the following elements for each required escrow or trust account: (1) A record called an "escrow or trust account journal" or an equivalent accounting system which records in chronological sequence all money belonging to others which is received or disbursed by the broker. For funds received, the records maintained in the system must include the date of receipt and deposit, the name of the person who is giving the money, the name of the person and property for which the money was received, the purpose of the receipt, the amount, and. a resulting cash balance for the account. For funds disbursed, the records maintained in the system must include the date of payment, the check number, the name of the payee, a reference to vendor documentation or other physical records verifying purpose for payment, the amount paid, and a resulting cash balance for the account.

money a broker would keep in a trust or escrow account

3 business days after notice of acceptance A check for the earnest money should either accompany the offer until accepted or be delivered prior to expiration of the Alternative Earnest Money Deadline. Most often, a buyer's agent holding the deposit forwards a copy of the earnest money check with the offer and then specifies a date in the Alternative Earnest Money Deadline when the actual check will be delivered after contract acceptance. If the deposit was tendered with the contract; it must be deposited no later than 3 business days after notice of acceptance of the contract. Unless otherwise agreed, earnest money deposits held by the specified broker must be deposited not later than the third business day after notice of acceptance of the contract. The broker should keep a copy of the validated escrow deposit slip and earnest money check in the office transaction file for later inspection."

the escrow bank account, the cash journal, the transaction ledgers, the broker's ledger card, monthly bank reconciliation, and proper transaction files Broker must maintain accurate accounts and reconcile them monthly.

Deposit security deposit into escrow account Short version: put it into the escrow account first even if you are going to immediately transfer it to the owner. However, before the owner transfer you need to provide appropriate written notification to the tenant as to who is holding the deposit and the holder's contact info. CP-5 Commission Position on Advance Rentals and Security Deposits Pursuant to C.R.S. 12-61-113 (l)(g.5) and Commission Rule E-l and E-16, all money belonging to others which is received by a broker must be placed in an escrow or trust account. This applies to tenant security deposits and advance rental deposits, including credit card receipts, held by a broker. A broker may not deliver a security deposit to an owner unless notice is given to the tenant in the lease, rental agreement, or in a separate written notice that the security deposit will be held by the owner. Such notice must be given in a manner so that the tenant will know who is holding the security deposit, and shall include either the true' name and current mailing address of the owner or the true name and current mailing address of a person authorized to receive legal notices on behalf of such owner, along with specific requirements for how the tenant is to request return of the deposit. If, after receipt by the broker, the security deposit is to be transferred to the owner or used for the owner's benefit, the broker, in addition to properly notifying the tenant, must secure the consent of the owner to assume full financial responsibility for the return of any deposit which may be refundable to the tenant. The broker shall not withhold the identity of the owner from the tenant if demand for the return of the deposit is properly

Listing Broker The listing broker usually establishes the escrow account, but the parties can always agree on any other practice they specify

is a chronological record of all receipts and disbursements made by the broker from the escrow bank account The journal must be updated every time a withdrawal or deposit is made.

Account Journal

monthly The purpose of reconciliation is to verify that the records for the account are in balance per the escrow accounting equation. Rule E-1(p)(3) requires the ending bank statement cash balance to be reconciled with the office journal and ledger account cards during any month when there has been escrow account activity

all transaction files for four years

hold the earnest money deposit in a secure place in the broker's real estate brokerage office until the offer is accepted. The broker should hold the earnest money deposit in a secure place in the broker's real estate brokerage office until the offer is accepted.

This is a tough one to answer without knowing the exact choices. Three months after the construction of a new home I would suspect the builder is at fault as negligence is clearly an issue on a roof that failed so soon. I am unaware of this being called a covenant. It is usually in the area of a warranty. Here is a write-up I found: "In addition to any express warranties that the homebuyer and contractor have articulated in the contract, there are some warranties that are implied into a construction contract by law. These are known as implied warranties of quality in new home sales. A majority of states have recognized an implied warranty of quality. States have identified two main types of implied warranties: Implied Warranty of Habitability : This warranty guarantees that the house will not have any major defects that render the house uninhabitable when completed. Implied Warranty of Skillful Construction : This warranty focuses on the manner in which the work is performed. Under such a warranty, the contractor has an obligation to fix the problem."

you send the earnest money check back to the buyer's broker with the counter offer This is a case of what you are supposed to do versus what really happens. It is not a statute item, but more of a best practice from the Real Estate Commission. Unfortunately, the Commission tests on what is official rather than what really happens. Officially - when a Seller counters an offer, the original offer is void and you as a listing broker have no legal right to retain the earnest money check therefore it should be returned with the counter. Practically - both agents consider this to be a period of negotiation and nobody wants to schlep a check back and forth, so the listing broker will not deposit or return the earnest money check until we have an accepted or dead deal, nor will the buyers agent expect anything else. Going even further into reality versus the Test - most deals these days are done electronically with contracts and copies of checks faxed, or signed electronically, or emailed back and forth. Few deals are being performed via physical paper copies. For the Test - assume everything is performed via paper.

Name of the person who wrote the check out of the account Rule E-1 (p) Recordkeeping requirements A broker shall supervise and maintain, at the broker's licensed place of business, a record keeping system, subject to subsection (7) of this rule, consisting of at least the following elements for each required escrow or trust account: (1) A record called an "escrow or trust account journal" or an equivalent accounting system which records in chronological sequence all money belonging to others which is received or disbursed by the broker. For funds received, the records maintained in the system must include the date of receipt and deposit, the name of the person who is giving the money, the name of the person and property for which the money was received, the purpose of the receipt, the amount, and. a resulting cash balance for the account. For funds disbursed, the records maintained in the system must include the date of payment, the check number, the name of the payee, a reference to vendor documentation or other physical records verifying purpose for payment, the amount paid, and a resulting cash balance for the account.

Any form the seller will accept The seller can accept any form the seller desires. The amount and form is specified in the listing agreement. Most often sellers accept personal checks as there is plenty of time before the closing for the check to clear.

no seller may require the buyer to purchase title insurance from a particular title company RESPA eliminates kickbacks, and prevents sellers from requiring the use of a specific title company.

withhold up to 2 per cent of the selling price as possible income tax liability When the seller is out of state after closing, the Colorado Department of Revenue requires withholding of the lesser of 2 per cent of the selling price or the entire net proceeds due to the seller at closing.

all of the above The closing statement is a detailed accounting of every dollar that changes hands at a closing.

Discrimination because of race is not allowed Discrimination is not a part of RESPA

A teller's check from a savings and loan From the Contract to Buy and Sell (Purchase Contract) Good Funds. All amounts payable by the parties at Closing, including any loan proceeds, Cash at Closing and closing costs, shall be in funds that comply with all applicable Colorado laws, including electronic transfer funds, certified check, savings and loan teller's check and cashier's check (Good Funds). This is also covered in Real Estate Commission Rule E-36: E-36. Good funds at closing Pursuant to 38-35-125, a real estate licensee who provides closing services shall not disburse funds or instruct an agent to disburse funds until those funds have been received and are either: (1) available for immediate withdrawal as a matter of right from the financial institution in which the funds have been deposited or (2) available for immediate withdrawal as a consequence of an agreement of a financial institution in which the funds are to be deposited or a financial institution upon which the funds are to be drawn. Such agreement with a financial institution must be for the benefit of the licensee providing the closing service. If the agreement contains contingencies or reservations no disbursements can be made until these are satisfied.

grantee The correct answer is "Grantee", better know as the "Buyer". The Seller purchases the insurance to protect the beneficiary, the Buyer from lawsuits against the title. The Buyer is known as the "Grantee" because the Seller as the "Grantor" transfers ownership by granting the property using a deed to the "Grantee" who is the Buyer.

General Warranty Deed

Debit to the seller, credit to the broker

436.5 $852 / 365 = $2.3342 X 187 = $436.50

that the mortgagor must be given an estimate of closing costs RESPA requires the disclosure within three days of loan application, of the good faith estimate of closing costs.

June 15 June 15 is the latest that the balance can be paid to avoid a penalty.

insist on a new settlement statement

May be paid by either party or a combination of both Whatever is agreed upon in the contract, determines who will pay for the discount points.

Debit seller, credit broker - The key phrase in this question is "Property taxes for the previous year have not been paid." This means the Seller owes back taxes. We take the money from the Seller with a "Debit Seller". But where does this money go? It gets deposited into the Escrow Account - which is "Credit Broker." A constant source of confusion is why is the "Broker" getting the "Credit." Legally, the listing broker is responsible for conducting the closing, but in practice, the Listing Broker delegates this to a Closing Clerk. Although the Closing Clerk is the one who will put the money into Escrow and write a check out of Escrow to the County to pay the taxes, since they are doing it in the name of the Broker - the worksheet says "Credit Broker." It would be easier for everyone if instead it said "Credit Closing Clerk" or Credit Escrow Account" but the State uses the term "Credit Broker."

buyer and seller are reaching a final settlement at time of closing, and no further adjustments will be made in the future The tax agreement is a final settlement, no adjustments will be made.

When the last known address at the time of closing was outside of the state of Colorado Only out of the state sellers selling property in excess of $100,000 are subject to Colorado tax withholding at the time of closing. Title Companies are generally required to withhold the lesser of (1) two percent of the sales price, or (2) the entire net proceeds, to cover any POTENTIAL tax liability on the sale of Colorado property when the seller has moved or will move out of state. In Simple-eze - the State is worried that they will not get their cut if someone lives out-of-state or is moving out-of-state as they may not file a Colorado Tax Return. Soooo, the State withholds some money from the closing to motivate the seller to file a Colorado Tax Return and settle a tax if any is owed.

t time of closing Copies of the signed settlement sheets are to be dispersed at the time of closing.

all of the above In order for a closing to happen the seller must provide merchantable title, the buyer must bring "good funds" to the closing and the buyer and seller must execute all required paperwork.

384.25 $850 / 365 = $2.3288 tax per day x 165 days seller owned house = $384.25

seller On a real estate closing the real estate commission is a debit to the seller.

The individual who has personally established a relationship with the buyer or seller and the alternate who attended the closing jointly The individual who establishes the brokerage relationship shares the responsibility with the individual who attends the closing.

all of the above A broker must provide a copy of any documents signed, to all parties who have signed the documents.

The broker who attended the closing The broker who attends the closing is responsible for the accuracy of the closing.

the individual who has personally established a relationship with the buyer or seller The individual, who attends the closing, shares the responsibility for accuracy of documents with the individual who establishes a relationship with the client.

buyer and seller Escrowing a transaction protects the buyer and the seller until the transaction is perfected.

agreement of the parties THe correct answer is by ageement of the parites. The purchase and sale contracts addresses who will pay the fee to the Title Company for the closing.

lender's financing the purchase of a borrower's residence RESPA applies to the purchase of land and a dwelling.

all of the above

Not later than June 15 in arrears

1% of the loan amount

proration Prorating is the process of dividing fees, taxes and other charges equitably between buyer and seller.

Debit seller, credit broker The key phrase in this question is "Property taxes for the previous year have not been paid." This means the Seller owes back taxes. We take the money from the Seller with a "Debit Seller". But where does this money go? It gets deposited into the Escrow Account - which is "Credit Broker." A constant source of confusion is why is the "Broker" getting the "Credit." Legally, the listing broker is responsible for conducting the closing, but in practice, the Listing Broker delegates this to a Closing Clerk. Although the Closing Clerk is the one who will put the money into Escrow and write a check out of Escrow to the County to pay the taxes, since they are doing it in the name of the Broker - the worksheet says "Credit Broker." It would be easier for everyone if instead it said "Credit Closing Clerk" or Credit Escrow Account" but the State uses the term "Credit Broker."

the seller The standard title insurance policy is paid for by the seller and names the buyer as a beneficiary. The mortgagee's title policy is paid for by the buyer and names the lender as a beneficiary.

beyond the control of either party to the escrow The escrow account is established by written instructions in the purchase and sale contract. It is beyond the control of the buyer or the seller individually, but may be modified by mutual agreement.

title, all paperwork, and funds are held in an escrow account until all documents are received by the closing agents and reviewed by the brokers. To close in escrow means that all parties provide the necessay documents to the closing agent. When the closing agent decides all is in order, he/she conducts the closing. The parties are not normally present. Escrow is for a definite period of time.

In the Purchase and Sale Contract The homeowner's association fees must be disclosed in the MLS, in the contract and to the lender.

May be paid by either party or a combination of both Whatever is agreed upon in the contract, determines who will pay for the discount points.

insist on a new settlement statement

no seller may require the buyer to purchase title insurance from a particular title company RESPA eliminates kickbacks, and prevents sellers from requiring the use of a specific title company.

preparation of the settlement statements The Title Company searches the title records and handles the wire transfer; it is the broker who is responsible for the preparation of the legal documents; the Title Company acts only as a scrivener for the broker.

3 business days after notice of acceptance A check for the earnest money should either accompany the offer until accepted or be delivered prior to expiration of the Alternative Earnest Money Deadline. Most often, a buyer's agent holding the deposit forwards a copy of the earnest money check with the offer and then specifies a date in the Alternative Earnest Money Deadline when the actual check will be delivered after contract acceptance. If the deposit was tendered with the contract; it must be deposited no later than 3 business days after notice of acceptance of the contract. From the real estate manual: "Unless otherwise agreed, earnest money deposits held by the specified broker must be deposited not later than the third business day after notice of acceptance of the contract. The broker should keep a copy of the validated escrow deposit slip and earnest money check in the office transaction file for later inspection."

the escrow bank account, the cash journal, the transaction ledgers, the broker's ledger card, monthly bank reconciliation, and proper transaction files Broker must maintain accurate accounts and reconcile them monthly.

monthly review and comparison of the bank statement with your records Reconciliation is required monthly to balance the escrow account against individual accounts.

Company name and employing broker's name How to Open Escrow Bank Accounts 1. Select a Colorado depository that offers FDIC insurance coverage or as authorized for the specific engagement. 2. Include the following "fiduciary elements" in the account title. These must identify the true owner of the account, specify the type or purpose of account being established (sales, management, homeowner association, etc.), include one of the fiduciary words "escrow" or "trust," state the employing broker's personal name, and show his or her fiduciary capacity as "broker." The employing broker must be able to independently control and operate all escrow bank accounts, but others may be designated as signatories as well. These elements may be abbreviated to facilitate printing the broker's monthly bank statement heading, checks, and deposit stock. The general account title format follows: Licensed brokerage name and/or d.b.a. (brokerage TIN/SSN) Type of escrow, broker's name, broker Statement mailing address

Deposit security deposit into escrow account Short version: put it into the escrow account first even if you are going to immediately transfer it to the owner. However, before the owner transfer you need to provide appropriate written notification to the tenant as to who is holding the deposit and the holder's contact info. CP-5 Commission Position on Advance Rentals and Security Deposits Pursuant to C.R.S. 12-61-113 (l)(g.5) and Commission Rule E-l and E-16, all money belonging to others which is received by a broker must be placed in an escrow or trust account. This applies to tenant security deposits and advance rental deposits, including credit card receipts, held by a broker. A broker may not deliver a security deposit to an owner unless notice is given to the tenant in the lease, rental agreement, or in a separate written notice that the security deposit will be held by the owner. Such notice must be given in a manner so that the tenant will know who is holding the security deposit, and shall include either the true' name and current mailing address of the owner or the true name and current mailing address of a person authorized to receive legal notices on behalf of such owner, along with specific requirements for how the tenant is to request return of the deposit. If, after receipt by the broker, the security deposit is to be transferred to the owner or used for the owner's benefit, the broker, in addition to properly notifying the tenant, must secure the consent of the owner to assume full financial responsibility for the return of any deposit which may be refundable to the tenant. The broker shall not withhold the identity of the owner from the tenant if demand for the return of the deposit is properly

Listing Broker The listing broker usually establishes the escrow account, but the parties can always agree on any other practice they specify

The broker is in violation of regulations for improperly handling escrow funds. The broker improperly commingled funds and is in violation of regulations. When the broker used funds from the other account, the broker actually used another client's funds for the repair.

Seven The law requires that a broker managing seven or more properties must have a property management trust account.

All checks, deposit slips, and bank statements must include the word "escrow" or "trust" as part of the account name. All checks, deposit slips, and bank statements must include the word "escrow" or "trust" as part of the account name.

should have deposited the money in a bank escrow or trust account and should have discussed the interest with the parties. The broker is in violation of Colorado Real Estate Rules he should have deposited the money in a bank escrow or trust account and should have discussed the interest with the parties.

within 3 business days after acceptance of contract

5, 3 Money received for property management and short-term rentals shall be deposited within five (5) business days after receipt unless the parties agree otherwise. All other types of money belonging to others shall be deposited not later than the third business day after receipt or as provided in the agreement with those concerned Rule E-1 (n)

is a chronological record of all receipts and disbursements made by the broker from the escrow bank account The journal must be updated every time a withdrawal or deposit is made.

earnest money deposits must be place in a recognized depository not later than three business days following the day on which the broker receives notice of acceptance The earnest money must be deposited within three business days after acceptance of the contract to buy and sell.

Earnest money must be deposited into a trust account or turned over to a title company who will deposit it in there trust account

3 Rule E-1 (h) A broker who manages less than 7 single-family residences may deposit rental receipts and security deposits and disburse money collected for such purposes in the "sales escrow" account" Elsewise, you need one escrow account for earnest money, one for rental receipts and one for rental deposits.

Account Journal The account journal lists the movement of all funs in and out of the escrow fund in chronological order

cashier's checks, certified checks, or wire transfers From the Contract to Buy and Sell (Purchase Contract) Good Funds. All amounts payable by the parties at Closing, including any loan proceeds, Cash at Closing and closing costs, shall be in funds that comply with all applicable Colorado laws, including electronic transfer funds, certified check, savings and loan teller's check and cashier's check (Good Funds). This is also covered in Real Estate Commission Rule E-36: E-36. Good funds at closing Pursuant to 38-35-125, a real estate licensee who provides closing services shall not disburse funds or instruct an agent to disburse funds until those funds have been received and are either: (1) available for immediate withdrawal as a matter of right from the financial institution in which the funds have been deposited or (2) available for immediate withdrawal as a consequence of an agreement of a financial institution in which the funds are to be deposited or a financial institution upon which the funds are to be drawn. Such agreement with a financial institution must be for the benefit of the licensee providing the closing service. If the agreement contains contingencies or reservations no disbursements can be made until these are satisfied.

A check on the broker's escrow account This would be considered third party funds which are not considered good funds.

monthly At least Monthly. From the real estate manual: The purpose of reconciliation is to verify that the records for the account are in balance per the escrow accounting equation. Rule E-1(p)(3) requires the ending bank statement cash balance to be reconciled with the office journal and ledger account cards during any month when there has been escrow account activity

all transaction files for four years Colorado Real Estate Commission rules require an office policy manual, reasonable supervision, and all records maintained for four years.

hold the earnest money deposit in a secure place in the broker's real estate brokerage office until the offer is accepted. The broker should hold the earnest money deposit in a secure place in the broker's real estate brokerage office until the offer is accepted.

Deposit them into your employing brokers escrow account Only employing broker or independat brokers can have escrow accounts. Licenses working for a brokerage cannot have one. .

you send the earnest money check back to the buyer's broker with the counter offer This is a case of what you are supposed to do versus what really happens. It is not a statute item, but more of a best practice from the Real Estate Commission. Unfortunately, the Commission tests on what is official rather than what really happens. Officially - when a Seller counters an offer, the original offer is void and you as a listing broker have no legal right to retain the earnest money check therefore it should be returned with the counter. Practically - both agents consider this to be a period of negotiation and nobody wants to schlep a check back and forth, so the listing broker will not deposit or return the earnest money check until we have an accepted or dead deal, nor will the buyers agent expect anything else. Going even further into reality versus the Test - most deals these days are done electronically with contracts and copies of checks faxed, or signed electronically, or emailed back and forth. Few deals are being performed via physical paper copies. For the Test - assume everything is performed via paper.

Name of the person who wrote the check out of the account Rule E-1 (p) Recordkeeping requirements A broker shall supervise and maintain, at the broker's licensed place of business, a record keeping system, subject to subsection (7) of this rule, consisting of at least the following elements for each required escrow or trust account: (1) A record called an "escrow or trust account journal" or an equivalent accounting system which records in chronological sequence all money belonging to others which is received or disbursed by the broker. For funds received, the records maintained in the system must include the date of receipt and deposit, the name of the person who is giving the money, the name of the person and property for which the money was received, the purpose of the receipt, the amount, and. a resulting cash balance for the account. For funds disbursed, the records maintained in the system must include the date of payment, the check number, the name of the payee, a reference to vendor documentation or other physical records verifying purpose for payment, the amount paid, and a resulting cash balance for the account.

Within 3 days of acceptance of the contract A check for the earnest money should either accompany the offer until accepted or be delivered prior to expiration of the Alternative Earnest Money Deadline. Most often, a buyer's agent holding the deposit forwards a copy of the earnest money check with the offer to prove s/he has it, and then specifies a date in the Alternative Earnest Money Deadline when the actual check will be delivered after contract acceptance. If the deposit was tendered with the contract; it must be deposited no later than 3 business days after notice of acceptance of the contract. From the real estate manual: Except as provided in Rule E-l (o), all money belonging to others which is received by a broker as a property manager shall be deposited in such broker's escrow or trust account not later than five business days following receipt. All other money belonging to others which is received by a broker shall be deposited in such broker's escrow or trust account not later than the third business day following receipt.

interest may accrue to a nonprofit affordable housing fund Interest may go to the benefit of a charity or one of the principals.

The broker has a choice to interplead the money or await written instructions from the parties The broker has two options - to interplead the money or await written instructions from the parties. If the money is in dispute, the only thing an agent cannot do is make a decision as to who gets the money. An agent is not a judge or arbiter. Interplead means the agent turns the money over to a court to determine the ownership rights of the rival claimants to the earnest money. More on the process of returning Earnest Money: The Colorado Contract to Buy and Sell Real Estate (AKA Purchase Contract) says the agent holding earnest money has 5 days to return earnest money to whomever is supposed to get it after receipt of written instructions to do do. This is covered in the Broker Acknowledgements sections of the purchase contact. The actual language reads like this - "Broker agrees that if Brokerage Firm is the Earnest Money Holder and, except as provided in § .., if the Earnest Money has not already been returned following receipt of a Notice to Terminate or other written notice of termination, Earnest Money Holder will release the Earnest Money as directed by the written mutual instructions. Such release of Earnest Money will be made within five days of Earnest Money Holder's receipt of the executed written mutual instructions, provided the Earnest Money check has cleared." BUT!!!!!! to make it even more fun for you, the Real Estate has issued Commission Position 6, whereby they say that if there is no controversy over who gets the earnest money, they want the money returned as quickly as possible and the agent does NOT have to get writen permission from all parties to do so. Most companies as a prudent measure have both parties sign that they agree who gets the earnest money, before they release it. This just makes sense, woe to the agent who releases the earnest money and one of the parties throws a fit over it. Safer to get the parties to agree in writing first. However, sometimes the party that is giving up the earnest money and their agent makes this a pretty low priority on their things-to-do-list. Keep in mind, they are grumpy the deal is dead and even if they know they need to release the earnest money, they are not happy about it. In the meantime, the other party wants their money. Buyers in particular are anxious as they are back on the market looking for a property and can't make an offer until they get their earnest money returned. Therefore, the Commission has made is very clear, that they do not want slow paperwork to hold things up when there is no controversy. Does this occasionally put us in an awkward position? Yup. Smart agents who do not like to even get within sniffing distance of having to write out a personal check to cover a perceived, if not actual screw up (that be me, except my wife would probably dispute the "smart" assertion) will move heaven and earth to get quickly signed releases by both parties before releasing earnest money. If you find that one of your parties due to the stress of the failed deal ran instantly to consult with the yogi on the mountaintop and are not returning messages. You need to have a talk with your managing broker before doing something you may regret. It is always cooler to share the love and say "my managing broker said to do it and will make it good" then "how do I spell your name on my check".

broker is commingling and could have is license revoked Commingling is mixing money from the trust account and the operating account; conversion is using some of the trust account money for your own use.

36.14 $95 / 92 days = $1.0326 X 35 days = $36.14

debit to the seller Typically the real estate commission is a charge to the seller.

Debit to the buyer Buyers pay for the extended policy (sometimes-called mortgagee policy or title insurance endorsements) naming the lender as beneficiary. On the 6 column worksheet this is shown as Debit Buyer and Credit Broker (so that the closer gets a check written to the title company for providing the insurance) More info: For more inquiring minds: This answer to this question refers to the 6 column worksheet which pre-personal computer days was used to calculate the numbers for a closing. The broker engages the title company to act as scrivener and conduct the closing which includes deposits and withdraws into and out of the closing escrow account. Although the escrow account used for closings is managed by the title company closer, legally the listing broker is still responsible for it. Therefore, on the 6 column settlement worksheet the columns pertaining to the closing escrow account are labeled "Broker Credit" and "Broker Debit." Deposits into the closing escrow account are placed into the Broker Debit Column and withdrawals are listed in the Broker Credit column. Wait a minute! How can a deposit be a debit? Unfortunately that is how it works. The 6 column settlement worksheet twists slightly the traditional rules of accounting so that the person responsible for the closing escrow account knows what checks to write and deposits to make. S/he does this by dedicating the "Broker Debit" column to deposits and the "Broker Credit" column to withdrawals. This way, for example, if the seller owes the County Treasurer for back taxes, the closer can take the money from the Seller by indicating Debit Seller and have a reminder to write a check to the County Treasurer by placing the corresponding credit into the Broker Credit column. When all is said and done accounting gods are happy as all debits and credits are in balance.

The promissory note The buyer signs the deed of trust; the lender signs the satisfaction of mortgage; the seller signs the warranty deed; they are all recorded.

$1,854 debit to the seller, credit to the broker Taxes for the prior year would be a debit to the seller and a credit to the broker. The previous years taxes are the seller's problem. Debit the seller for $1854. The broker receives the funds as a Credit. (remember - the "broker" is a proxy for the title company closing agent who controls the escrow account). The broker (closing agent) will then write a check from the escrow account and send it to the governement to pay the past due tax bill.

the proration of taxes for the final tax agreement The tax certificate is a breakdown of the current property tax liability for the property.

274 $960 / 365 days = $2.6301 per day the seller owned the property and owes the Buyer for 104 days. $2.6301 x 104 = $273.53

Debit to the buyer The broker (Title Company) is charged interest (loan balance times the interest rate divided by 365 days to find daily rate) from the day of closing until the last day of the month.C6600

$1127 debit to the seller, credit to the broker It will be shown on the settlement sheet as a debit to the seller and a credit to the broker. Remember, the broker represents the escrow account. The credit goes to the escrow account as the person in charge of it, represented by the broker, needs to write a check to the County to pay the seller's delinquent tax bill.

Credit to the buyer Earnest money is applied to the buyer's purchase price. Short answer for those with A.D.D. - Buyer gets credit for earnest money and broker has to depoist it into the escrow account. Credit Buyer Debit Broker For more inquiring minds: This question refers to two different escrow accounts. One account is maintained by the brokerage firm and is used to hold earnest money pending the closing. The other escrow account is used at the closing. This answer to this question refers to the 6 column worksheet which pre-personal computer days was used to calculate the numbers for a closing. The broker engages the title company to act as scrivener and conduct the closing which includes deposits and withdraws into and out of the closing escrow account. Although the escrow account used for closings is managed by the title company closer, legally the listing broker is still responsible for it. Therefore, on the 6 column settlement worksheet the columns pertaining to the closing escrow account are labeled "Broker Credit" and "Broker Debit." Deposits into the closing escrow account are placed into the Broker Debit Column and withdrawals are listed in the Broker Credit column. Wait a minute! How can a deposit be a debit? Unfortunately that is how it works. The 6 column settlement worksheet twists slightly the traditional rules of accounting so that the person responsible for the closing escrow account knows what checks to write and deposits to make. S/he does this by dedicating the "Broker Debit" column to deposits and the "Broker Credit" column to withdrawals. This way, for example, if the seller owes the County Treasurer for back taxes, the closer can take the money from the Seller by indicating Debit Seller and have a reminder to write a check to the County Treasurer by placing the corresponding credit into the Broker Credit column. When all is said and done the accounting gods are happy as all debits and credits are in balance.

Credit to the broker Title Company's collect the title insurance premium at closing - a check is later sent to the title insurance premium company. It is usually a debit to the seller and a credit to the broker at time of closing.

Credit to the buyer a debit to the seller.

252.81 Divide the total taxes $546 by 365 (number of days in the year = $1.4959 per day time the number of days from July 16 through Dec 31 remember that the day of closing goes to the buyer, therefore times 169 = $252.81

Buyer for the protection of the lender Standard Title insurance is paid for by the seller. Title insurance endorsements by the buyer, in favor of the lender. This is usually called mortgagee insurance, or the mortgagees policy.

Credit to the broker

Buyer for the protection of the lender

Appraisal and credit report fees Appraisal fees and credit reports are typically paid outside of the closing and are not calculated in the closing statement.

410.14 $578 / 365 = $1.5836 per day. Seller paid for 259 days; he didn't own the policy (Oct. 15 through June 30) 259 x $1.5836 = $410.14

It discloses the inclusion of personal property in the transfer The buyer customarily executes the real property transfer declaration; the seller could fill it out if the buyer was unable to.

Buyer, seller Buyers and sellers are parties to a purchase and sale contract. Sellers and brokers are parties to a listing contract. Buyers and brokers are parties to an exclusive right to buy contract.

debit seller, credit buyer The seller still owes the amount that is assumed (debit seller). On an assumption, that the buyer will be making payments against the loan does not relieve the seller of the obligation that it be paid in full. The buyer will not be required to bring this amount to the closing (credit buyer)

all of the above The closing is the finalization of the contract (and payday for the broker).

2400 80,000 x 3 % = 2,400 Definition of 'Discount Points' Discount Points are a form of prepaid interest. A borrower buys a point and in return gets a lower interest rate on the loan. Each discount point generally costs 1% of the total loan amount and depending on the borrower, each point lowers your interest rate by one-eighth to one one-quarter of your interest rate. As the IRS considers discount points to be prepaid interest they are tax deductible in the year in which they were paid. For example, on a $300,000 loan, each point would cost $3,000. Assuming the interest rate on the mortgage is 5% and each point lowers the interest rate by 0.25%. Buying 2 points will cost $6,000 and will result in an interest rate of 4.50%. Both lenders and borrowers gain benefits from discount points. Borrowers gain the benefit of lowered interest payments down the road, but the benefit applies only if the borrower plans on holding onto the mortgage long enough to save money from the decreased interest payments. Lenders benefit by receiving cash upfront instead of waiting for money in the form of interest payments over time, which enhances the lenders liquidity situation. On a practical basis; discount points are most often purchased by sellers as an incentive to prospective buyers. For most sellers, discount points are a cost of selling and thus tax-deductible. Buyers usually do not see enough benefit to purchase discount points. In the earlier example; spending $6,000 to reduce the interest rate to 4.5%, would have reduced the monthly payment by about $90. It would have taken a buyer 67 months to cover the cost of the points.

Credit to the seller

A $30,000 check the Seller will receive from this closing This DEBIT represents the Seller's proceeds from the sale (what they are getting). More info: This is a common spot of confusion, so do not let it break your head. The situation occurs at the bottom of the 6 column worksheet when you are reconciling the columns. Let's assume for a moment you are looking at a Buyer's columns. You have applied all the debits and credits and all you have to do is reconcile the columns which have $100,000 in the Credit column (money the buyer has proven they have) and $125,000 in the Debit column (what the Buyer owes). Looks like this Buyer is a little short, but by how much? To determine this amount, you have to make both columns equal. This enables the Closing Agent to determine how much the Buyer is short; which is also how much of a check the Buyer needs to bring and be deposited into the escrow account. So you add $25,000 to the Buyer's Credit column to make both columns equal. Therefore this $25,000 CREDIT represents how much the Buyer is short, meaning this CREDIT does not represent how much they have, it represents how much they still OWE. This is how a CREDIT becomes something you OWE. We are not done reconciling yet. We have a $25,000 Credit, to balance it out we need a $25,000 Debit. That debit goes to the Broker account which represents the Escrow Account. Back to practical language - the Buyers needs to bring a $25,000 check to the closing so that they can make their Credit column (what they got) equal to the Debit column (what they owe) and the Broker (Closing Agent) needs to deposit it into the Escrow Account ($25,000 Debit). For extra points - the reverse is most common with the Seller. When a Sellers Debit column (what they owe) is lower than their Credit column (what they sold their property for), the amount added to the DEBIT column to make both columns equal represents money the Seller is receiving. The balancing CREDIT in the Broker column, reminds the Closing Agent to cut a check to the Seller out of the escrow account.

Credit to the broker The Title Company or broker, whoever is doing the closing, collects money for title insurance endorsements most typically from the buyer (Debit Buyer) and then places the coresponding amount into the Credit Broker column to ensure a check gets written to the title company for providing the endorsement. Endorsements are generally requirements by the lender for additional converage to be added to the title insurance policy. More info: This answer to this question refers to the 6 column worksheet which pre-personal computer days was used to calculate the numbers for a closing. The broker engages the title company to act as scrivener and conduct the closing which includes deposits and withdraws into and out of the closing escrow account. Although the escrow account used for closings is managed by the title company closer, legally the listing broker is still responsible for it. Therefore, on the 6 column settlement worksheet the columns pertaining to the closing escrow account are labeled "Broker Credit" and "Broker Debit." Deposits into the closing escrow account are placed into the Broker Debit Column and withdrawals are listed in the Broker Credit column. Wait a minute! How can a deposit be a debit? Unfortunately that is how it works. The 6 column settlement worksheet twists slightly the traditional rules of accounting so that the person responsible for the closing escrow account knows what checks to write and deposits to make. S/he does this by dedicating the "Broker Debit" column to deposits and the "Broker Credit" column to withdrawals. This way, for example, if the seller owes the County Treasurer for back taxes, the closer can take the money from the Seller by indicating Debit Seller and have a reminder to write a check to the County Treasurer by placing the corresponding credit into the Broker Credit column. When all is said and done accounting gods are happy as all debits and credits are in balance.

the borrower's lender can report interest payments to the IRS A W-9 is prepared at closing so the borrowers lender can report interest payment to the IRS, and the borrower can claim the interest as a tax deduction.

All of the foregoing is true By custom in Colorado buyers and sellers share the cost of closing a transaction where the buyer is getting a conventional loan. VA requires the seller to pay the cost of closing. FHA allows the buyer to pay 1/2 of the closing fee. This is shown as a debit to whomever is paying it and a credit to the broker so that a check is written to the title company for providing the service. This debit and credit explained above refers to the 6 column worksheet which pre-personal computer days was used to calculate the numbers for a closing. The broker engages the title company to act as scrivener and conduct the closing which includes deposits and withdraws into and out of the closing escrow account. Although the escrow account used for closings is managed by the title company closer, legally the listing broker is still responsible for it. Therefore, on the 6 column settlement worksheet the columns pertaining to the closing escrow account are labeled "Broker Credit" and "Broker Debit." Deposits into the closing escrow account are placed into the Broker Debit Column and withdrawals are listed in the Broker Credit column. Wait a minute! How can a deposit be a debit? Unfortunately that is how it works. The 6 column settlement worksheet twists slightly the traditional rules of accounting so that the person responsible for the closing escrow account knows what checks to write and deposits to make. S/he does this by dedicating the "Broker Debit" column to deposits and the "Broker Credit" column to withdrawals. This way, for example, if the seller owes the County Treasurer for back taxes, the closer can take the money from the Seller by indicating Debit Seller and have a reminder to write a check to the County Treasurer by placing the corresponding credit into the Broker Credit column. When all is said and done accounting gods are happy as all debits and credits are in balance.

384.25 Jan. 1 - June 14 = 165 days. $850 / 365 = $2.3288 per day tax liability.165 days x $2.3288 = $384.25

Debit Seller & Credit Buyer $6,000 Security deposits are a surity against damage to a property. It belongs to the tenants and not the owner. When the property is sold - they must be transferred in whole to the new owner. Debit Seller Credit Buyer.

From the first day of the year until the day prior to closing The seller pays the daily tax rate times the number of days from Jan. 1st until the day before closing at the time of closing because the current years taxes aren't paid until next year.

3 The private lender will collect its loan in monthly installments, along with one month's taxes to be held in reserve so that sufficient funds are on hand to pay the yearly taxes when due. This reserve is based lender's own loan requirement and state law, C.R.S. 39-1-119. This law provides that any amount held on May 20 in excess of 3/12 of the taxes paid that year must be refunded to the borrower on or before May 30. Payments to a reserve escrow account must be adjusted annually upon reasonable belief of substantial improvements to the property or upon official notification of an increase in the actual amount of taxes levied. Failure to make a refund is subject to interest and penalty.

all of the alias' used by the borrowers A name affidavit identifies all of the names, nicknames, middle initials, etc., that a buyer may have used.

managing broker over Agent Smith The employing broker must pay the licensee. The commission checks are not made to the licensee.

Seller The seller pays interest from the first day of the month until the day of closing (sellers loan balance times the interest rate divided by 365 to get the daily rate) on the loan the seller's paying off.

are determined by agreement of the broker and his or her principal. Commissions are determined by agreement of the broker and his or her principal.

County Treasurer

all of the above Frequently two months reserves of taxes and insurance are collected at closing since it is often as much as 59 days until the buyer makes their first payment.

2% of the selling price as an INCOME tax liability.