short-answer questions - macintosh real estate school_____ of the sales price or the net proceeds...

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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 _____________.

MacIntosh Real Estate School Rec Kpg Short-Answer Questions

Copyright 2016 – All Rights Reserved Record Keeping & Trust Accounts (8 credit hrs)

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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 operate escrow accounts: 1) _____________ _____________; 2) _____________ _____________ _____________; 3) _____________; 4) _____________; 5) _____________ _____________ _____________. Licensed associates may be designated as _____________ signers on any escrow or company bank account. 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.



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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 _____________.



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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.



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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.



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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.



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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. 61. “_____________-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.



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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 un-completed 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.



short-answer questions - macintosh real estate school_____ of the sales price or the net proceeds...

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