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Pass California

Practice and Disclosures, 25% of the examination

Conversion

Using trust funds for a purpose other than the one for which they were entrusted.

Conversion is the act of spending money that belongs to a client. It supports discipline up to revocation, a claim against the Real Estate Recovery Fund, and criminal liability. On the exam, look for the word 'used' or 'paid' in the fact pattern rather than merely 'deposited' or 'held'.

See also

ComminglingMixing a client's trust funds with the broker's own funds.Real Estate Recovery FundA fund of last resort paying consumers who hold an uncollectable judgment against a licensee for fraud, misrepresentation, deceit or conversion of trust funds.

See it in a question

One question from Practice and Disclosures, so the term lands in the context the exam uses it in.

Practice and Disclosures ยท 25%Trust Account Management

A salesperson receives a $5,000 good-faith deposit check made payable to the seller. What must happen to it?

Written to DRE's published topic list. Not a real examination question, since reproducing those is a misdemeanour under B&P Code section 123.

Where this is tested

Practice of Real Estate and DisclosuresThe largest area by a wide margin, and the one most study plans leave until last. It is where trust accounts, fair housing, advertising, supervision, DRE discipline and every mandated disclosure live.25%Practise Practice and Disclosures50 questions on this area, every option explained.Practice

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