A broker maintains a trust or escrow account. A $10000 earnest money d

Tennessee Real Estate Exam

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Question 1 of 5.

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

A. permissible as long as the broker is entitled to at least $7000 in commission.

B. a violation of federal banking regulations.

C. an instance of illegal conversion of funds.

D. permissible if the seller was informed about the transfer of funds.

Explanation: Trust funds must be kept separate from the broker's operating funds and may not be converted for the broker's personal use or business expenses until the transaction has closed and the commission has been lawfully earned. Withdrawing funds early, regardless of notice or expected future commission, constitutes conversion.

Question 2 of 5.

The Real Estate Commission does NOT have the power to

A. suspend or revoke real estate licenses

B. subpoena witnesses for its investigations

C. regulate commission rates

D. review broker's escrow or trustee accounts

Explanation: Real Estate Commission (TREC) is empowered to suspend/revoke licenses (A), issue subpoenas (B) and audit escrow accounts (D). Regulating commission rates (C) is anti-competitive and is left to the marketplace; TREC has no statutory authority to dictate what brokers may charge.

Question 3 of 5.

A real estate broker wrote a full-price offer of $350000 for a buyer. The earnest-money deposit was $25000. The offer was accepted and the broker placed the deposit in her escrow account. The next week the parties cancelled the contract in writing and asked the broker to return the deposit. Which is TRUE?

A. The broker must negotiate for her commission out of the deposit

B. The broker must return the deposit unless specifically authorized otherwise

C. The broker may subtract one-half of her commission before returning the deposit

D. The broker has earned a commission and may automatically subtract the entire amount before returning the balance

Explanation: Under TREC and general trust-account law, earnest money is held for the parties, not the broker. Until the parties instruct otherwise or a court orders disbursement, the broker has no right to unilaterally withhold any portion for commission. Hence the broker must return the full $25,000 unless the parties expressly authorize a different disposition.

Question 4 of 5.

A firm has six branch offices. Each branch office MUST have

A. a separate principal broker for each branch office

B. a designated office manager

C. at least one affiliate broker at each branch office

D. an affiliate broker to supervise each branch office

Explanation: allows one principal broker to oversee multiple branches, but every branch must have a person (manager) responsible for that location. The manager need not be a principal broker (A) nor an affiliate broker (D), and there is no requirement that every branch have at least one affiliate broker (C).

Question 5 of 5.

A licensee can advertise property solely under their own name

A. with the principal broker's approval

B. if they own the property

C. as long as the listing price is included in the ad

D. under no circumstances

Explanation: Tennessee rules permit a licensee to advertise a property in their own name only when the licensee is the owner and the ad discloses the licensee's interest. Absent ownership, all advertising must be in the firm's name or with conspicuous firm identification. Therefore owning the property (B) is the correct trigger; approval (A) or price inclusion (C) does not suffice.