Section 876 IAC 2-13-1 - Earnest money accountsAuthority: IC 25-34.1-2-5
Affected: IC 25-34.1-5
Sec. 1.
(a) The competency and instructional level for introduction and definition of earnest money accounts is Level 4.(b) The competency and instructional level for legal requirements of earnest money accounts is Level 4. The following are concepts of legal requirements of earnest money accounts: (1) Statutory provisions.(c) The competency and instructional level for trust funds is Level 4. The following are concepts of trust funds: (2) Examples including the following: (A) Earnest money deposits.(B) Tenant security deposits.(E) Money received as part of final settlement.(3) Funds that are not trust funds (not to be deposited in escrow account); money from nonreal estate transactions.(4) Money from transactions in which the broker is not acting as an agent.(d) The competency and instructional level for trust accounts is Level 4. The following are concepts of trust accounts: (2) Must be a "demand" account.(3) Purposes of requiring trust accounts.(4) Opening a trust account including the following: (A) Must be with an insured bank or savings and loan association in Indiana.(B) Only one (1) trust account is required, although separate accounts for sales and rentals may be a good idea.(C) Account must be designated as "trust" or "escrow" account.(D) Account may be subject to service charges which must be paid by broker. Broker may maintain one hundred dollars ($100) (or amount required) of personal funds in account to cover such charges.(5) Interest bearing trust accounts including the following: (A) Note specific requirements which broker must meet.(B) Investment of trust funds in securities, certificates of deposit, bonds, etc. is prohibited.(C) Treatment of interest earned.(e) The competency and instructional level for depositing trust funds is Level 4. The following are concepts related to the deposit of trust funds: (1) Broker (firm) is the trustee or escrow agent and should be named as such in the appropriate transaction document.(2) The listing broker in a cobrokered transaction is responsible for the earnest money.(3) Funds received by a salesperson must be immediately delivered to his/her broker.(4) Principal broker is strictly responsible for trust accounts and trust funds, regardless of who actually performs the day-today work.(5) Earnest money deposits must be deposited within two (2) banking days following acceptance of the offer to purchase or lease.(f) The competency and instructional level for disbursing trust funds is Level 4. The following are concepts related to disbursement of trust funds: (1) Transaction document should state how and when funds will be disbursed. Trust funds may not be used to pay for credit reports, surveys, appraisal fees, or other transaction expenses without the consent of all parties.(2) Access to trust funds should be limited and carefully controlled.(3) Disbursement in connection with "sales" transactions including the following: (A) Upon revocation or rejection of an offer. (Note: a counteroffer is a rejection of the offer.)(B) The following upon termination (other than closing) of a transaction: (i) Where there is no dispute between the parties (seller and buyer).(ii) Where there is a dispute between the parties (seller and buyer).(C) The following upon closing of a transaction: (i) Where attorney or lending officer conducts the closing.(ii) Where broker conducts the closing.(D) Disbursement of earned brokerage fees.(4) Disbursement in connection with "rental" ("lease") transactions including the following: (A) Rents should be promptly disbursed to property owner.(B) If so authorized by the property management agreement, broker-property managers may pay property operating expenses (utilities, repairs, maintenance, etc.) from rents received.(5) Earned brokerage fees should be promptly disbursed from the trust account to the broker's business or general operating account. Disbursement should be made within thirty (30) days of closing (in sales transactions) or receipt of rent (in rental transactions).(6) Trust account record keeping (bookkeeping) system must show (as a minimum) the following: (B) Amount, nature, and purpose of funds and from whom received.(C) Date funds deposited.(D) Amount, date, and purpose of each withdrawal and to whom paid.(E) Current running balance.(7) Use of a record keeping system involving a general journal and individual ledgers is recommended.(8) Review records retention requirements of federal and state agencies with the following sources: (A) Indiana real estate commission.(B) Internal Revenue Service.(C) Indiana secretary of state.(g) Student should be required to work practice trust account record keeping problems during the course as well as on the final course examination.Indiana Real Estate Commission; 876 IAC 2-13-1; filed Dec 1, 1989, 5:00 p.m.: 13 IR 665; readopted filed Jun 29, 2001, 9:56 a.m.: 24 IR 3824; readopted filed Jul 19, 2007, 12:57 p.m.: 20070808-IR-876070067RFA