Conversion In Real Estate

Definition of "Conversion in Real Estate"

Paul  Tangalan real estate agent
Paul Tangalan, Real Estate Agent La Rosa Realty In Clermont

The legal definition of conversion is the act of using property or funds with which one has been entrusted for purposes other than those for which the property was intended to be used by those who entrusted it. 

Conversion Real Estate Meaning

The meaning of conversion in real estate is multifaceted. Real estate conversion can mean different things, and occur under a number of different circumstances. The most common type of real estate conversion is when a real estate agent is entrusted with funds to be deposited in a trust for use in repairing or improving a property. If the agent withdraws funds from the trust to make personal purchases, he has committed the crime of real estate conversion. 

At first glance, this can seem fairly innocuous. As long as the real estate agent replaces the money he “borrowed” from the account with his own money, it should be fine, right? Unfortunately, this is not the case. If the realtor puts his own money back into the account, he has actually committed another serious offense: commingling

Conversion Real Estate Example

Another example of real estate conversion might be the removal of property from a home listed on the market. If an agent removes furniture, decorations, appliances or any other property from the home for his or her own personal use, he has committed conversion. 

In general, real estate conversion can be avoided by carefully keeping all client accounts separate from personal or corporate accounts, and always using the funds in client accounts for their stated purpose.  

Consequences of Committing Real Estate Conversion

The consequences for committing conversion or commingling can be severe and life-altering. Both offenses are ethical and legal violations of the trust shared between a real estate agent and their client. Committing conversion or commingling can constitute grounds for the revocation of your realtors permit at the very least. 

In many jurisdictions, commingling and conversion also bear heavy legal penalties ranging from large fines to jail time. With this in mind, it is crucial to avoid committing either of these infractions at all costs.


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Comments for Conversion In Real Estate

Sharon Gutmann Sharon Gutmann said:

Who in the state, should be contacted if a condo HOA committed Conversion & Commingling?

Oct 18, 2020  16:47:06

Real Estate Agent

Hey Sharon,

The most reasonable thing to do if there is a complaint against an HOA is to address the issue with the companies management. That way, you can give them a chance to fix the problem. If the problem persists, some states have an agency that collects complaints and investigate them, or you could file a lawsuit against the management company if the claim is valid and legal.

Oct 23, 2020  10:10:39
Jack Miller Jack Miller said:

What's the difference between 'conversion' and 'commingling'?

Jun 10, 2019  23:12:52

Real Estate Agent

Hello, Jack! First of all, you have to know that both are illegal. When we speak about conversion in real estate, we say that a real estate agent or broker used his clients' money to cover his expenses. He/She changed the destination of the funds.  When a real estate agent is accused of commingling of funds, it means that he/she didn't keep client's money into a separate account, but mixed his/her own funds with earnest money, for example. We hope you find this answer useful. Please continue to explore our glossary for more definitions of real estate terms

Jun 11, 2019  09:43:32

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