8. A salesperson working with buyers secures an offer on a property. The offer calls for an initial deposit of $1,000 to be held in escrow. The salesperson instructs the buyer to issue a personal check in that amount payable to the salesperson.
Answer: C
Checks for deposit of funds in escrow must be payable to the broker’s escrow account.
The transaction is prohibited because checks for deposit in escrow must be made payable to the broker’s escrow account, not the salesperson personally. This ensures that the funds are securely held and managed according to legal standards.
A) Proper, because the salesperson can accept a personal check.
This option is incorrect as it overlooks the requirement that deposits must be made payable to the broker’s escrow account. While a salesperson can accept personal checks, it must be under the condition that they are directed to the appropriate escrow account.
B) Proper, because the salesperson is acting as agent for the broker.
This choice is misleading. Although the salesperson acts as an agent for the broker, any deposits must still be made in the name of the broker's escrow account. Personal checks to the salesperson do not meet this requirement.
C) Prohibited, because checks for deposit of funds in escrow must be payable to the broker’s escrow account.
This option is correct. It accurately reflects the legal requirement that deposits for escrow must be made out to the broker’s escrow account to ensure proper handling and accountability of the funds.
D) Permitted, as the salesperson may write the check over to the broker’s trust account later.
This statement is incorrect because it implies that a personal check can initially be made to the salesperson, which is not permissible. The funds must be deposited directly into the broker’s escrow account without any intermediary steps.
Conclusion
The correct answer is definitively option C, as it aligns with the legal standards governing escrow deposits. All other options fail to comply with these requirements, either by misrepresenting the role of the salesperson or by misunderstanding the protocol for handling escrow funds. Proper management of escrow funds is critical for maintaining trust and legal compliance in real estate transactions.