California Real Estate Practice Exam

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The wording "all monies paid on the property are to be held in trust until a release is obtained from the blanket encumbrance" is required to protect which party?

Broker
Holder of blanket encumbrance
Purchaser
Subdivider

The correct answer is: Broker

The phrasing "all monies paid on the property are to be held in trust until a release is obtained from the blanket encumbrance" indicates a measure put in place to safeguard a specific party's interests. In this scenario, the correct party being protected is the broker. Holding the funds in trust ensures that the broker has a clear and responsible role in managing the financial transaction between the parties involved. This protects the broker by affirming their fiduciary duty, ensuring they do not release the funds prematurely, which could lead to financial liability if the blanket encumbrance isn’t resolved to allow for the free and clear transfer of the property. The focus here is on the broker's role in handling the funds diligently, ensuring that all conditions are met before the transfer of money, which is crucial in transactions that may involve existing liens or encumbrances. This practice maintains the integrity of the transaction and aligns with the broker's ethical obligations to act in the best interest of their clients.