California Real Estate Practice Exam

Under what circumstances would a real estate broker be excused from recording a trust deed?

1. When he has a financial interest in the trust deed

2. When the buyer instructs him not to record

3. When the escrow officer "promises" that she/he will see that the trust deed is properly recorded

4. None of the above

The correct answer is: When he has a financial interest in the trust deed

When a real estate broker has a financial interest in the trust deed, this situation often creates a conflict of interest regarding the recording process. Brokers typically have a fiduciary duty to act in the best interest of their clients. If the broker holds a financial interest, it could skew their decisions, leading to circumstances where they may be inclined to prioritize their gain over the client's needs or legal obligations. Trust deeds are generally required to be recorded to provide public notice of the security interest, which protects all parties involved, including the borrower and lender. If the broker stands to gain financially from keeping the trust deed off the public record, they may choose not to record it, which could potentially harm the borrower by not ensuring proper legal protections. In contrast, situations in which a buyer instructs the broker not to record or where an escrow officer promises to handle the recording are typically not valid grounds for the broker to forgo recording the trust deed. These scenarios still require adherence to legal standards and fiduciary responsibilities that mandate prompt and proper recording of such documents to safeguard the interests of all parties involved.