Key Takeaways
- Brokers must maintain a trust account at a federally insured financial institution if holding client funds
- Trust funds must be deposited immediately or by the next business day unless otherwise specified in the contract
- The amount deposited cannot exceed the federally insured amount (excess requires multiple accounts or sweep accounts)
- Commingling broker funds with client funds is strictly prohibited
- WVREC has authority to audit trust accounts and the bank must notify WVREC of any returned checks
West Virginia Trust Account Requirements
West Virginia brokers must maintain trust accounts to hold client funds separate from their operating funds.
Trust Account Basics
What is a Trust Account?
A trust account (escrow account) is a bank account where brokers hold funds belonging to others:
| Fund Type | Examples |
|---|---|
| Earnest money deposits | Buyer's good faith deposit |
| Security deposits | Tenant deposits on rentals |
| Rent collections | Collected on behalf of landlords |
| Auction proceeds | From real estate auctions |
| Escrow funds | Money held pending closing |
When is a Trust Account Required?
A broker is required to maintain a trust account if they hold any money in trust for another party.
Note: A broker who does not hold client funds is not required to maintain a trust account.
Where to Open
Trust accounts must be at:
- A federally insured financial institution
- An institution that has signed the WVREC Trust Fund Account Statement and Consent to Examine
Federal Insurance Requirement
| Requirement | Details |
|---|---|
| Insurance | FDIC or equivalent federal insurance |
| Amount limit | Cannot exceed insured amount |
| Excess funds | Must use multiple accounts or sweep accounts |
Important: If trust account funds exceed the federally insured amount, the broker must either use multiple trust accounts at different institutions or a cash sweep account.
Deposit Requirements
Timeline
| Situation | Deposit Deadline |
|---|---|
| Standard | Immediately or by next business day |
| Contract specifies | Per contract terms |
| Security deposits | Per lease agreement |
| Rent | Per management agreement |
Proper Deposits
All client funds must be deposited into the broker's trust account—not:
- Salesperson's personal account
- Broker's operating account
- Any other non-trust account
Critical Rule: Salespersons cannot hold client funds. Only brokers maintain trust accounts.
Prohibited Practices
Commingling
Commingling is mixing client funds with broker's personal or business funds. It is strictly prohibited.
| Allowed | NOT Allowed |
|---|---|
| Client funds in trust account | Client funds in operating account |
| Small broker deposit to maintain account | Large broker funds in trust account |
| Interest earned (per agreement) | Using client funds for business expenses |
Conversion
Conversion is using client funds for unauthorized purposes. It is a serious violation that can result in:
- License revocation
- Criminal charges
- Civil liability
- Financial restitution
Interest-Bearing Trust Accounts
Trust funds may be transferred to an interest-bearing account only if:
| Requirement | Details |
|---|---|
| Written agreement | All parties must authorize in writing |
| Express purpose | For placing funds in interest-bearing account |
| Interest allocation | Per written agreement |
Record Keeping
Required Records
Brokers must maintain:
| Record | Description |
|---|---|
| Bank statements | Monthly statements from financial institution |
| Deposit records | Documentation of each deposit |
| Disbursement records | Documentation of each payment |
| Client ledgers | Individual records for each client/transaction |
| Reconciliation records | Monthly trust account reconciliation |
Record Access
All records must be open to inspection by the WVREC or its authorized representative:
- At all times during regular business hours
- At the broker's place of business
WVREC Oversight
Bank Notification Requirement
The financial institution must execute a statement agreeing to:
| Notification | When |
|---|---|
| NSF checks | Notify WVREC if any checks returned for insufficient funds |
| Account issues | Report significant trust account problems |
WVREC Audits
WVREC has authority to:
- Audit trust accounts at any time
- Review records during investigations
- Take disciplinary action for violations
Common Audit Findings
| Issue | Consequence |
|---|---|
| Shortage of funds | Serious violation—potential revocation |
| Poor record keeping | Warning to suspension |
| Late deposits | Warning to fine |
| Commingling | Fine to revocation |
| Conversion | Revocation and possible criminal charges |
When must a West Virginia broker deposit earnest money into the trust account?
Who is authorized to maintain a trust account for client funds in West Virginia?
What must the financial institution do regarding trust account issues?