A broker places the buyer's earnest money deposit in the business operating account. The broker has...

Commingled funds refer to the mixing of a client’s or customer’s money with a broker's personal or business operating funds. In this scenario, placing the buyer's earnest money deposit into the business operating account indicates that the broker has merged the buyer's funds with the broker's own money. This is generally prohibited in real estate transactions as earnest money deposits are required to be held in a trust account that is separate from the broker's operational funds to ensure proper accounting and protection of client funds.

Maintaining separate accounts is crucial for ethical practices in real estate. The protection of clients’ funds ensures that they are used only for their intended purpose, such as securing a purchase agreement. Not adhering to these practices not only violates industry regulations but can also lead to serious ramifications for the broker, including legal penalties and damage to their professional reputation.