SHORT-ANSWER QUESTIONS

Transcription

1 SHORT-ANSWER QUESTIONS 1. The Escrow Accounting states that the bank escrow account cash must equal the corresponding escrow account per contract. 2. List the file obligations when an Employing Broker receives any money belonging to others. 1) ; 2) ; 3) ; 4) ; 5). 3. Escrow bank accounts are separate in and from other real estate business accounts. 4. and are synonymous for the broker s fiduciary account. It does not include money for personal business income,, commissions or business transactions not requiring a license. Funds for the same class of beneficiaries are normally deposited in a escrow account. However, the broker may choose to open a escrow account for a certain transaction, such as luxury homes. 5. The goal of the bank reconciliation process for escrow accounts is ensure proper are kept for events and to verify the information recorded in the office records agrees with the activity on the monthly bank. First, you must examine the business records; the resulting contractual is reconciled to the escrow account balance. The results are summarized on the bank worksheet, which is a snapshot of the overall condition of the escrow account. 6. To avoid illegal of funds, you must maintain over paying. Overspending or misuse of the beneficiary s cash balance is called, stealing, or, which is borrowing money without authorization. Such practices endanger the interest, because if the business terminates after the misuse of funds, some can not be paid from the available escrow account balance. List the other four examples of practices that could cause an escrow shortage: 1) ; 2) ; 3) ; 4). 7. The function of a is similar to a check register. It gives information about all events changing the escrow account. 58

2 8. The broker, another owner, and an independent internal audit should perform the following supervisory functions: 1) Examine all banking and activity for each operation; 2) review the quality of all of all associates; 3) maintain effective channels of ; 4) correct practices or violations of company ; 5) provide adequate, and to minimize the motivation for financial harm to the public. 9. The FDIC provides insurance per account. If escrow money is in the broker s business account, the escrow funds for each would not qualify for this coverage. To avoid this, the bank s agreement identifies the broker as, and the title of the account must reflect this. 10. List the only five persons authorized by statute to own and accounts: 1) ; 2) ; 3) ; 4) ; 5). Licensed associates may be signers on any escrow or company bank account. operate escrow designated as 11. List the five steps involved in opening an escrow bank account: 1) Select a(n) insured depository; 2) Include the elements in the title: a) true of the account; b) of the account; c) one of the fiduciary words - or ; d) broker s personal name; e) his or her fiduciary capacity by using the word. 3) Obtain copies of the customer agreement and signature ; 4) Execute the Commission Notice of Trust or Escrow ; 5) Design company checking supplies that provide a clear record of individual for banking operations on the broker s behalf; 6) The line of the account heading is reserved for the legal identification and TIN/SSN number. 12. Written disclosure and consent must be obtained by the beneficiary for use of an bearing account or a certificate of. If not, any interest earnings belong to the. 13. The city of requires payment of interest on security deposits to tenants. 14. Credit may not be used for escrow accounts unless the beneficiary is a member. 59

3 15. Participation in a CARHOF (Colorado Association of Realtors Housing Fund) program is voluntary. If used, a notice must be posted. Interest earned is transferred to the program as an interest only. 16. When the contract states that earnest money may be transferred to a party or closing, the broker must retain in the file the following accounting records: 1) signed and dated ; 2) copy of the earnest money ; 3) copy of the needs for the transfer. 17. Rule E-1(i) allows the broker to manage less than residential units in the sales escrow account. However, a property management broker must place earnest money deposits in the deposit account or held in the owner s escrow account. 18. Rule allows the financial responsibility for the return of a tenant s security deposit to be transferred from the broker to the property owner. 19. When a broker has an ownership interest in a partnership, joint venture, or syndication and receives for selling or leasing, Rule E-1(f)(5) requires use of a separate escrow account. The broker may open a escrow account for each significant accounting entity, (i.e., each building or property managed.) For a licensee who receipts deposits for properties owned on his or her own behalf, the obligation is and an escrow account isn t required. 20. A cash receipts is maintained when a broker receipts money belonging to. This should be maintained on the basis of accounting, meaning that receipts and payments are recorded when deposited or paid. 21. The journal balance includes all money held in escrow for all. 22. Earnest money may be held: 1) in an account specifically identified in the sales ; 2) in buyer s agent s account; 3) in agent s escrow account; or 4) any acceptable to and. 23. A check for the earnest money should accompany the offer until it is. Buyer s agent may forward a of the check with the offer. If rejected, the broker may simply return the check. 24. Earnest money deposits shall be deposited not later than the business day after of the contract. The broker should keep a copy of the deposit slip and earnest money in the file for later inspection. If a note is received as the deposit, no entry of the deposit is made until the note is. 60

4 25. Money received for property management shall be deposited within business day(s) after receipt. 26. Brokers must make reasonable efforts to return deposits to the proper beneficiary, and if the beneficiary is not locatable, then the funds must be transferred to a state fund. 27. If a dispute arises over an earnest money deposit, then the broker may either the money until the dispute is resolved, or deposit it with a court which is hearing the dispute, in a process called interpleader. 28. The Ledger separates one person s activity from all other activity in the journal and escrow bank account. 29. There are two types of ledgers for beneficiaries such as the buyer and seller, and for the broker who maintains the account and/or provides financing services for beneficiaries. 30. The Ledger maintained for each guest stay in hotel-type property management is called a. 31. A new ledger record is opened when the broker money, or when the broker places funds in the escrow account to pay bank operating. The ledger is closed when all funds for the transaction have been. 32. All on-going owner expenses and net proceeds should be paid from the escrow account; they should not be transferred to the company account. 33. The broker may keep money in an escrow account to pay monthly fees, and offset advances for repairs of other unexpected items. 34. The purpose of reconciliation is to verify that the records for the account are in. The ending bank statement balance must be reconciled with the journal and account cards in any month where there has been escrow account activity. 35. Accounting records must be retained for years. They should be kept at the broker s. 36. signatures are acceptable for all records maintained in the broker s transaction file. The broker shall maintain a duplicate of any prepared by (or on behalf of) the broker for a transaction in which the broker participates. This does not include deeds, notes or deeds of trust from lenders. It does include the seller s statement and the buyer s new loan (settlement) statement. The cooperating (buyer) broker need not retain a copy of the listing contract or settlement statement. 61

5 37. The broker need not retain copies of existing records, title, loan applications, lender disclosures or affirmations from closing companies. The broker must retain copies of signed Commission affirmations. The student should be familiar with all the documents listed under SALES FILES and MANAGEMENT FILES required for retention in the broker s files. 38. The employing or broker is responsible for the maintenance of records. If that broker leaves that licensed (corporation, partnership, LLC), the entity is still responsible for escrow records. If the business entity is dissolved, however, the acting broker is personally responsible for the final and for all funds. That broker must maintain all records for years. 39. Good funds is defined as: 1) immediately available for as a matter of right from the institution where deposited; 2) available for withdrawal because of an of a financial institution. 40. Examples of good funds are: 1) cash; 2) wire ; 3) telephone transfers between accounts in the same ; 4) cashier s or checks; 5) teller ; 6) - agreements; 7) earnest money which clears the s bank before closing; 8) of earnest money deposits against earned commissions by the agent; and 9) Federal Loan Bank checks. 41. Instructions must be provided to the closing company in every real estate transaction. 42. The licensee must the settlement statement of the party they assist or. It must also show the of the employing broker. Original are no longer required for the broker s transaction file. 43. A licensee is not obligated to prepare any document, but must bear the cost of any fees for their preparation. The broker may charge for the preparation of non-legal or in-house closings. 44. Broker must file IRS form 8300 when they receive or more in cash from one person in any one year. 45. Closing entities must withhold of the sales price or the net proceeds from the sale of Colorado property of $100,000 or more by non-residents. 46. Commission audits are conducted in response to complaints or on a basis. 62

6 47. According to the graphs on R-23, list the types of accounts a property management company would keep: 1) ; 2) ; 3) ; 4) ; 5) ; 6) ; 7). 48. Management of associations of more than units require the use of separate bank accounts for each association and individual fund. 49. The internal structure in property management must be adequately separate to ensure that the three incompatible functions are not all performed by the same person. These functions are: 1) transaction and approval; 2) physical control of the escrow and/or records creating; 3) accounting, record-keeping and external functions. 50. A self- cash receipt form should be used to account for the physical custody and of cash. 51. In short-term (i.e., hotel) management, all guest receipts should be deposited directly into the rental/security deposit account. 52. In long-term management, payments to vendors, owners and tenants should be made for the account where the amount was first. 53. No trust account is required when the broker merely acts as a only collecting money on behalf of an owner and depositing it into the owner s bank account. 54. The Tenant/Guest Rental shows each tenant s or guest s payment history. A guest is used for short-term management. 55. All cash received or paid in managing the owner s property is recorded in the ledger. If capital is short for one property, the broker may the funds, if available, from another identically-owned property, or the broker may advance the money from the ledger. 56. The Owner s Property File is similar to the closing file in sales transactions. It contains all records of the broker s of duties and obligations of the agreement. 63

7 57. The broker must provide reports to the, accounting for funds received on their behalf. The most common forms of reports are: 1) sheet and income statement, and owner s statement of, which is a tabulation of the beginning cash balance plus, less, equals ending cash balance. 58. According to Rule E-1(f)(6), if there is no written agreement stating otherwise, commissions are considered and available for use by the broker only after all contracted services have been and there is no remaining right of by others for such money. 59. There are two rules for the withdrawal of fees and commissions. The rule says that the fees are not earned by the broker until the services have been performed and the occupant leaves the premises; The rule says that the broker earns the fees according to what the contract states. Because of Rule E-1(f)(6), use of the rule is recommended. 60. The Guest Policy specifies when the prospective guest s advance deposit becomes non-refundable term rentals do not require a broker s license, but if these activities are conducted through a brokerage, all real estate commission Rules and accounting practices must be followed. 62. Although a broker managing a homeowner association is the temporary for association records, they belong to the association, not the broker. The records must be promptly returned to the association upon the of the broker s employment. 63. Use of an affiliated business entity (a business in which the broker has some vested interest providing services to the owner) may lead to questions over the validity of added costs. Therefore, the broker should obtain consent from the owner in the management agreement after proper. 64. Rule E-16 states that a broker shall not deliver tenant deposits to the property owner without the tenant s written (in the lease) or written notice by first-class mail. The deposit then becomes the property and of the owner. 65. A broker has no interest (or right to use) security deposits, and therefore may not use them to offset (repay) broker expenses. 66. Rule E-31 requires the use of Office Manuals to demonstrate employee supervision in management activities. 64

8 67. The goal of the regulatory process governing subdivision Developers is to ensure that there is reasonable at the time of the sale and buyer s ownership interest is conveyed according to contract, free and clear of any overriding or superior. 68. Subdivision property registered in Colorado must be sold by actively- brokers. Any contract for the sale of property is voidable by the buyer and unenforceable by the developer unless the developer is duly under the Subdivision Developers Act. This is required if they sell property divided into or more residential units or timeshares. Registration is not required for: 1) selling memberships in ; 2) bulk sales (of personal property such as lumber) between developers; 3) residential property not previously occupied (= vacant) which is yet to be constructed and the price to be paid includes the cost of building the home; 4) lots (where the streets are already improved with utility infrastructures); or ) any already-approved subdivision. 69. Commission Rule S-36 requires developers to retain the following records: 1) copies of the contract, financing agreement, settlement statements, title commitment/ insurance, trust deed, escrow agreement, and any other ; 2) an accounting of the receipt and of money received or paid on behalf of any purchaser; 3) any agreement with a third-party closing company and the records showing transfer of funds from potential purchasers of in an uncompleted project; 4) the developer must pay all association dues on unsold. 70. Pooled bank accounts are not allowed for the management of any common-interest homeowner association of or more units; separate accounts are required for each association and association reserve account. 65