Trust Accounts and Earnest Money Under Georgia License Law

Trust-account rules sit within the Georgia supplement's law and practice topics. Learn who holds the funds, where they are deposited, and what allows the broker to disburse them. Those distinctions matter both in practice questions and when handling a transaction.

Start with the earnest-money lesson for the rule framework. This article follows receipt, custody, deposit, and disbursement as separate decisions. Then try the Georgia trust-account practice set.

Whose money is it

Earnest money is stakeholder money held under the contract. The broker holds it but does not decide ownership by sympathy or personal judgment. The agreement and Rule 520-1-.08 determine custody and lawful disbursement.

The consequences follow from it:

• The funds sit in a trust or escrow account, separate from the brokerage's own money.
• The account is federally insured, designated as a trust account by the financial institution, registered with GREC, and controlled through the broker's accounting system.
• Records must show whose money is in there and how much, so the account can be reconciled at any time.
• The broker cannot use the balance as working capital, even briefly, even if they intend to put it back.

Commingling and conversion

Keep the two concepts separate. A transaction can involve both, so identify the act described before choosing an answer.

Commingling is mixing trust funds with the broker's own funds. Depositing earnest money into the general business account is commingling. So is leaving earned commission sitting in the trust account long after it should have been withdrawn.

Conversion is using trust funds for a purpose they were not entrusted for. Paying the office electricity bill with money held for a client is conversion. Repaying the money does not make that use authorized.

A broker is permitted to keep a small amount of their own money in the trust account to cover bank service charges and keep the account open. That narrow exception exists so the account does not close itself, and it does not open the door to anything else.

Timing

Deposit questions are lost when receipt, broker custody, and bank deposit are treated as one event. A licensee acting for another puts the item into the broker's custody as soon after receipt as practicably possible. Unless the interested parties agree otherwise in writing, the broker promptly deposits cash or checks and arranges safekeeping for other items of value.

A useful exam habit is to reject invented two-day or three-day rules. Quote the contract if it contains a lawful written direction, then apply the rule's "as soon as practicably possible" and "promptly" language to the right actor and step.

Disputes over the deposit

A disputed deposit requires an authorized disbursement basis. Neither party’s demand settles the issue by itself.

A transaction falls apart. The buyer says the deposit is theirs because a contingency failed. The seller says it is theirs because the buyer walked. The broker holds the money and both parties are shouting.

What the broker must not do is improvise. Rule 520-1-.08 lists seven circumstances in which a disbursement is treated as proper:

• Rejection of an offer.
• Withdrawal of an offer before acceptance.
• Closing of the transaction.
• A separate written agreement signed by all interested parties.
• Filing an interpleader action.
• An order of a court with jurisdiction.
• A reasonable interpretation of the contract that directed the deposit.

When the broker makes a disbursement to which all parties do not expressly agree, the broker must immediately notify all parties in writing. The broker also needs reasonable assurance that the financial institution credited the funds before disbursing them.

Advertising and other license law reflexes

The same chapter of Georgia law drives several other reflexes the supplement tests.

• Advertising of specific property must satisfy the firm-name and firm-phone requirements. A salesperson cannot advertise in a way that suggests independent operation.
• A salesperson cannot accept brokerage compensation from anyone other than the broker holding their license without that broker's consent. Consent does not authorize independent brokerage.
• A licensee must disclose their status as a licensee when buying or selling for their own account.
• The licensee works under the supervision of the broker, and the broker is responsible for the acts of the licensees in the firm.

The complete Georgia license guide covers the licensing lifecycle, the trap library has the distractors these rules generate, and the escrow and trust account glossary entry has the definition in one line.

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