Trust Accounts and Earnest Money Under Georgia License Law

State laws and rules make up a meaningful slice of the Georgia supplement, and trust account questions appear in almost every practice set for a simple reason: this is what the Georgia Real Estate Commission actually disciplines people for.

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

These two words are worth separating cleanly, because questions offer both and only one fits.

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 So is leaving earned commission sitting in the trust account long after it should have been withdrawn.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 out of the trust account is conversion. It is the more serious of the two and carries consequences beyond the license.

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

This is where the real-world stakes are highest and where the exam likes scenarios.

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 is paid by their broker, not directly by a client or a co-operating firm.
• 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.

Check yourself

FAQ

Can a broker earn interest on a trust account?

Before depositing funds in an interest-bearing trust account, the broker obtains a written agreement from the parties stating who will receive the interest.

Does the salesperson ever hold the earnest money?

A salesperson may physically receive a check or other item, but must place it into the broker's custody as soon as practicably possible. The salesperson does not create a personal holding account or decide the disbursement.

What if the buyer's check bounces?

The broker notifies the parties. A failed deposit can be a breach of the contract term requiring the deposit, and it is the seller's decision what to do about it, not the broker's.

Is the trust account rule different for property management?

The principle is identical. Rents and security deposits held for an owner are other people's money and belong in a trust account, kept separate from the firm's funds.

Sources

• GREC Rule 520-1-.08, Managing Trust Accounts and Trust Funds
• O.C.G.A. § 43-40-20, trust or escrow accounts
• PSI Georgia Candidate Information Bulletin, 7/1/2026

Recommended next lesson

Continue with Georgia licensees acting as principals to learn the disclosure and advertising rules that apply when a licensee buys, sells, leases, or exchanges for their own account.