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Knowledge Development Topic 3: Trust
Accounts – Prohibited Acts, Disbursements,
and Shortages.
Q1. Under NC law, a broker may disburse earnest money from a trust account only with:
A) The buyer's verbal permission
B) The seller's verbal permission
C) Written authorization from all parties to the transaction or a court order
D) The broker's own discretion
✔ Correct Answer: C
Earnest money may only be disbursed with written authorization from all parties with an
interest in the funds, or pursuant to a court order.
Q2. A buyer and seller both sign a release authorizing the broker to return earnest money to the
buyer. The broker must:
A) Return the earnest money to the buyer immediately
B) Return the earnest money to the buyer within 3 business days of receiving the written
release
C) Wait 10 days
D) Obtain a court order
✔ Correct Answer: B
Once written authorization is received from all parties, the broker must disburse the funds within
3 business days.
,Q3. A buyer and seller both sign a release authorizing the broker to pay earnest money to the
seller. The broker must:
A) Pay the seller within 3 business days
B) Pay the seller within 10 days
C) Wait for the closing
D) Obtain a court order
✔ Correct Answer: A
Same as returning to buyer – disbursement within 3 business days of receiving written
authorization.
Q4. A buyer terminates the contract during the due diligence period. The seller refuses to sign a
release of earnest money. The broker should:
A) Give the money to the buyer
B) Give the money to the seller
C) Retain the money in the trust account until the dispute is resolved or interplead the funds
D) Split the money 50/50
✔ Correct Answer: C
The broker must not disburse without written agreement from both parties or a court order.
Interpleader (depositing funds with the court) is the proper remedy.
Q5. A buyer and seller dispute earnest money. The broker interpleads the funds. The broker:
A) Deposits the funds with the court
B) Gives the funds to the buyer
C) Gives the funds to the seller
D) Keeps the funds
✔ Correct Answer: A
Interpleader is a legal action where the escrow agent deposits disputed funds with the court and
lets the court decide who is entitled.
Q6. A broker interpleads disputed earnest money. The broker's attorney fees for the
interpleader action are typically:
A) Paid by the broker
B) Paid by the losing party
, C) Paid by the court
D) Split equally between buyer and seller
✔ Correct Answer: A
Unless the contract provides otherwise, the broker pays the costs of interpleader. Some
contracts may allow the broker to deduct costs from the disputed funds.
Q7. A buyer and seller dispute earnest money. The broker unilaterally gives the money to the
buyer without a release or court order. The broker may be liable for:
A) Conversion
B) Breach of fiduciary duty
C) License discipline
D) All of the above
✔ Correct Answer: D
Unauthorized disbursement is conversion, a breach of fiduciary duty, and grounds for license
discipline.
Q8. A buyer and seller dispute earnest money. The broker unilaterally gives the money to the
seller without a release or court order. The broker may be liable for:
A) Conversion
B) Breach of fiduciary duty
C) License discipline
D) All of the above
✔ Correct Answer: D
Unauthorized disbursement to either party is a violation.
Q9. Under the NC Offer to Purchase and Contract (Form 2-T), if the buyer wrongfully defaults,
the earnest money:
A) Is automatically returned to the buyer
B) Is automatically paid to the seller as liquidated damages
C) May be paid to the seller only with the buyer's written consent or court order
D) Is forfeited to the broker
Vault: High-Quality Exam Practice
Questions with Expertly Written, Accurate &
Detailed Answers for Comprehensive
Knowledge Development Topic 3: Trust
Accounts – Prohibited Acts, Disbursements,
and Shortages.
Q1. Under NC law, a broker may disburse earnest money from a trust account only with:
A) The buyer's verbal permission
B) The seller's verbal permission
C) Written authorization from all parties to the transaction or a court order
D) The broker's own discretion
✔ Correct Answer: C
Earnest money may only be disbursed with written authorization from all parties with an
interest in the funds, or pursuant to a court order.
Q2. A buyer and seller both sign a release authorizing the broker to return earnest money to the
buyer. The broker must:
A) Return the earnest money to the buyer immediately
B) Return the earnest money to the buyer within 3 business days of receiving the written
release
C) Wait 10 days
D) Obtain a court order
✔ Correct Answer: B
Once written authorization is received from all parties, the broker must disburse the funds within
3 business days.
,Q3. A buyer and seller both sign a release authorizing the broker to pay earnest money to the
seller. The broker must:
A) Pay the seller within 3 business days
B) Pay the seller within 10 days
C) Wait for the closing
D) Obtain a court order
✔ Correct Answer: A
Same as returning to buyer – disbursement within 3 business days of receiving written
authorization.
Q4. A buyer terminates the contract during the due diligence period. The seller refuses to sign a
release of earnest money. The broker should:
A) Give the money to the buyer
B) Give the money to the seller
C) Retain the money in the trust account until the dispute is resolved or interplead the funds
D) Split the money 50/50
✔ Correct Answer: C
The broker must not disburse without written agreement from both parties or a court order.
Interpleader (depositing funds with the court) is the proper remedy.
Q5. A buyer and seller dispute earnest money. The broker interpleads the funds. The broker:
A) Deposits the funds with the court
B) Gives the funds to the buyer
C) Gives the funds to the seller
D) Keeps the funds
✔ Correct Answer: A
Interpleader is a legal action where the escrow agent deposits disputed funds with the court and
lets the court decide who is entitled.
Q6. A broker interpleads disputed earnest money. The broker's attorney fees for the
interpleader action are typically:
A) Paid by the broker
B) Paid by the losing party
, C) Paid by the court
D) Split equally between buyer and seller
✔ Correct Answer: A
Unless the contract provides otherwise, the broker pays the costs of interpleader. Some
contracts may allow the broker to deduct costs from the disputed funds.
Q7. A buyer and seller dispute earnest money. The broker unilaterally gives the money to the
buyer without a release or court order. The broker may be liable for:
A) Conversion
B) Breach of fiduciary duty
C) License discipline
D) All of the above
✔ Correct Answer: D
Unauthorized disbursement is conversion, a breach of fiduciary duty, and grounds for license
discipline.
Q8. A buyer and seller dispute earnest money. The broker unilaterally gives the money to the
seller without a release or court order. The broker may be liable for:
A) Conversion
B) Breach of fiduciary duty
C) License discipline
D) All of the above
✔ Correct Answer: D
Unauthorized disbursement to either party is a violation.
Q9. Under the NC Offer to Purchase and Contract (Form 2-T), if the buyer wrongfully defaults,
the earnest money:
A) Is automatically returned to the buyer
B) Is automatically paid to the seller as liquidated damages
C) May be paid to the seller only with the buyer's written consent or court order
D) Is forfeited to the broker
