When working as a real estate broker we hold deposits in our escrow account. This money is not our money and must always be accounted for. The laws state we must keep it in a separate escrow or trust account. What this means is we can not put it in our working accounts. If we did put it into our working accounts it would be called commingling.
Commingling is the act of taking deposit funds and putting them into your working capital accounts. Not only is this a bad idea, furthermore it is illegal. While we all go through ups and downs in life no matter what this is not your money. Failure to follow this could lead to revocation of your real estate broker license and even criminal penalties.
Worse yet is when you take it to the next level which is called conversion. Conversion is where not only have you commingled your accounts you are now using this money. This is highly illegal and will probably lead to license loss and criminal penalties as it is theft. I know it can be tempting to “borrow” this money but this is not borrowing. This is clear theft and there would be consequences.
No matter where you are financially you must think of other places to borrow money from. As a broker you need to be responsible with other people’s money. This is something that sets being a broker apart as a professional and fiduciary. I hope this blog better helps you understand the legality of being broke as a broker. Please check out our Podcast, Facebook Group, Newsletter, and website all found at www.realfactsonrealestate.com . If you have any questions or comments please leave them below.