Tennessee Real Estate Exam Practice Question
A broker maintains a trust or escrow account. A $10000 earnest money deposit is received from a buyer and deposited in the account. Several weeks later and prior to closing the broker withdraws $7000 from the account and puts it in an operating account. This transaction is
Correct Answer: C
Rationale: Withdrawing funds from a trust or escrow account for personal use constitutes illegal conversion of funds. This action misappropriates client money, violating fiduciary duties.
Option A is incorrect; entitlement to commission does not justify accessing earnest money.
Option B is misleading; while it may violate regulations, the primary issue is the misappropriation of funds rather than banking regulations specifically.
Option D is also incorrect; informing the seller does not legitimize the broker's unauthorized withdrawal of funds from the escrow account.
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