Conversion
National Real Estate Exam glossary · Contracts
Definition
The unlawful appropriation of client or customer funds for the broker's own use. Conversion is more serious than commingling: the former involves spending the funds, the latter merely failing to keep them separate.
Conversion in plain English
When a real-estate agent holds a client's money (like a deposit on a house), it isn't theirs — it's being kept in trust, like a coat-check holding your jacket. "Conversion" is when the agent actually SPENDS that money on themselves, which is basically stealing. It's a step worse than "commingling," which just means sloppily mixing the client's money with the agent's own account without spending it. So: commingling is failing to keep the jacket on its own hook; conversion is walking out the door wearing it.
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