Trust Account
A special bank account where real estate brokers and agents must deposit client funds, such as earnest money deposits, rent collections, or security deposits. These funds are kept separate from the broker's personal or business operating accounts and are held in trust for the rightful owners. The account is governed by strict state regulations to protect consumer funds.
Example
“The real estate agent immediately deposited the buyer's earnest money into the brokerage's trust account as required by state law.”
Memory Tip
Think 'trusted account' - it's where client money is safely held in trust, separate from the agent's personal funds.
Why It Matters
Trust accounts protect your earnest money and other deposits from being misused by real estate professionals, ensuring your funds are available when needed for closing or returned if a deal falls through.
Common Misconception
Many people think real estate agents can use trust account funds for their business expenses, but these funds must remain untouched except for their intended purpose.
In Practice
When you submit a $5,000 earnest money deposit with your home offer, your agent must deposit it into their brokerage's trust account within a few business days. At closing, this money is applied to your down payment or closing costs.
Etymology
The term combines 'trust' from Old Norse 'traust' meaning confidence, with 'account' from Latin 'computare' meaning to calculate, reflecting the fiduciary responsibility to carefully manage others' money.
Common Misspellings
Compare today's mortgage rates
More in real estate
Other real estate terms you should know
Need financial definitions?
Clear definitions for 2,500+ finance, insurance, and investing terms.