Iowa Real Estate Practice Exam

What action must a broker take upon receiving commission from a sale?

1. Report it to the IRS

2. Execute a commission agreement

3. Deposit it into a trust account

4. Notify the seller

The correct answer is: Deposit it into a trust account

When a broker receives a commission from a sale, the appropriate action is to deposit that commission into a trust account. This is a standard practice in real estate transactions to ensure that the funds are handled properly and are protected until they can be disbursed according to the terms of the agreement. Trust accounts are designed to hold clients' funds securely and to maintain an accurate accounting of those funds. This protects the interests of all parties involved in the transaction and upholds the legal and ethical obligations of the broker. By depositing commission funds into a trust account, the broker ensures compliance with real estate regulations that require proper management of client funds. Additionally, it provides a clear audit trail, which is important for financial transparency and accountability. The other choices involve actions that may be relevant in different contexts, but they do not specifically address the immediate responsibility of a broker upon receiving commission funds. For example, while brokers do need to be aware of tax implications, reporting to the IRS is not the first action taken upon receipt of a commission. Similarly, executing a commission agreement is typically done prior to the transaction, and notifying the seller, although important, is not a requirement related to the handling of commission funds specifically.