The controlling distinctions
What to remember when the answer choices are close.
Commingling is mixing a principal's money or property with the broker's own money or property.
Before the deposit is made, the money must be kept in a secure location that prevents loss or misappropriation.
The separate special account is used exclusively for principal money and must be held at a federally insured bank.
Escrow custody does not decide who ultimately owns disputed money. Entitlement depends on the agreement, the facts, and any applicable legal process.
A decision path
Work through the rule in this order.
- 1
Identify the money
Ask whether the broker is holding money belonging to a principal rather than earned brokerage compensation.
- 2
Separate and safeguard
Do not mix the funds with operating money, and protect them before deposit.
- 3
Apply the deadline
Use the three-business-day deposit rule stated in section 175.1.
- 4
Do not decide a dispute alone
When parties disagree about release, preserve the funds and follow the agreement, broker procedure, and appropriate legal direction.
Worked scenario
A deposit is received on Friday
A salesperson receives a buyer's deposit and considers keeping it in a desk until the transaction is fully signed the following week.
Best response
The salesperson should immediately follow the supervising broker's handling procedure. The funds must be safeguarded and the broker must comply with the three-business-day deposit rule.
Why
Personal custody and informal waiting create loss and commingling risks. The regulation assigns a specific safeguarding and special-account framework.
Exam lens
Words in the facts that should slow you down.
Common exam mistake
Assuming the broker may release a disputed deposit to whichever party appears more persuasive. Holding the funds and deciding entitlement are different issues.
Questions students ask
Short answers before you move on.
How quickly must principal money be deposited in New York?
Section 175.1 requires deposit into the separate special bank account within three business days.
Can escrow money be kept in the brokerage operating account?
No. Principal money must not be commingled with the broker's own money and must be kept in the required separate special account.
Can a salesperson choose the escrow account?
No. The salesperson follows the supervising broker's instructions and brokerage procedure. The broker is responsible for the compliant account and handling system.
Continue with the full subject lesson.
The subject hub adds definitions, scenarios, forms, misconceptions, worked examples, practice, and source context.
This guide supports exam preparation and general education. It does not decide duties in a specific transaction and is not legal advice.