When real estate agents receive funds to be distributed to other parties, they put these funds into a trust account. Unfortunately what often happens is the agents don’t appreciate the difficulty of managing funds from multiple clients comingled in the same account and get themselves into trouble. Without a good trust accounting system they can end up in serious trouble.
This isn’t to say agents are careless or unethical. However even highly qualified professionals can get so focused on the complexities of completing the HUD 1 settlement statement correctly that fund management is more of an afterthought. They know the numbers balance in the HUD form so they tend to assume it will work out when monies are received and paid out.
The biggest problem occurs when agents accidentally use one client’s funds to pay another client’s charges. While this might seem an innocent oversight as long as it all balances in the end, this is actually a serious error that could lead to loss of a real estate license and even criminal penalties. The “oops I didn’t know” defense typically doesn’t go over well.
Nowadays agents have access to simple and affordable HUD settlement statement software so it’s rare that agents fill out real estate papers by hand. However when shopping for real estate software it’s important to find a product that includes trust functions or interfaces with real estate accounting software that includes trust fund management capabilities. This is why we have made it easy to transfer closing ledgers from Easy HUD to Easy Trust so you can automate your trust handling functions.
You may ask if you really need a robust legal practice management software package rather than a commercial accounting program, and we would say that you do. Standard business accounting packages don’t include features such as the ability to easily track each client’s funds in one account, three-way reconciliation reports or built-in conflict checking.