Earnest money and other client funds must be held in a brokerage escrow/trust account, separate from operating funds.
Before you read
Test yourself first: 5 questions
Question 1 of 5
An Illinois sponsoring broker must keep a complete record of each transaction. Which of the following is NOT typically a required transaction record?
Answer: D. Required transaction records include sales contracts, agency and dual-agency disclosures, the Residential Real Property Disclosure Report, and escrow/financial records. The private tax returns of the buyer and seller are not records the brokerage is required to keep.
Question 2 of 5
Under Illinois rules, when must a sponsoring broker deposit earnest money into the escrow account after the broker is directed to hold it?
Answer: A. Earnest money must be deposited in accordance with the contract's terms. When the contract does not specify a time, Illinois rules require the funds to be deposited by the next business day following the transaction's acceptance. Holding funds beyond the required time is a violation.
Question 3 of 5
Which statement about interest earned on an Illinois broker's escrow account is most accurate?
Answer: B. Escrow accounts are not required to be interest-bearing. If the broker places escrow funds in an interest-bearing account, the parties must agree in writing as to who receives the interest. The broker may not simply pocket the interest without authorization.
Question 4 of 5
An Illinois licensee deposits a client's earnest money into the licensee's personal checking account to cover a temporary cash shortfall, intending to repay it. This act is most accurately characterized as:
Answer: B. Escrow and earnest-money funds must be kept in a designated escrow/trust account, never mixed with personal or operating funds. Using client funds for personal purposes is conversion and commingling—prohibited conduct that can result in suspension or revocation regardless of intent to repay.
Question 5 of 5
Under the Illinois Real Estate License Act of 2000, where must a sponsoring broker deposit earnest money received in connection with a real estate transaction?
Answer: B. Illinois requires that escrow/trust funds such as earnest money be held in a special account, separate from the broker's personal funds and business operating funds, in a recognized federally insured depository institution. Keeping such funds in personal or operating accounts is commingling, a violation of the License Act.
Keep the streak going with more questions like these, each with a full rationale.
Must-know rules
- Sellers of residential property must provide the Residential Real Property Disclosure Report to the buyer.
- The disclosure report covers known material defects in the property as listed in the statutory form.
- Federal lead-based paint disclosure applies to most homes built before 1978.
- Earnest money and other client funds must be held in a brokerage escrow/trust account, separate from operating funds.
- Commingling client escrow funds with the brokerage's own money is prohibited.
- Illinois is NOT a community property state; it follows common-law / equitable-distribution principles for marital property.
- Disclosures and escrow handling must be documented and retained per IDFPR record-keeping requirements.
Illinois Required Disclosures & Escrow/Trust Timeframes: FAQs
Is Illinois Required Disclosures & Escrow/Trust Timeframes on the real estate exam?
Yes. State License Law is a scored domain on the Illinois real estate licensing exam, and this topic appears in the state license-law portion.
Is this cheat sheet free?
Yes — every page on Cinna RE's resource library is free to read, print and share. The app adds practice questions, mock exams and a readiness score.
Does Illinois test this differently?
Illinois applies its own license law on top of the national portion. This page covers the Illinois rules specifically, which is what the state section of your exam tests.
