What Is Conversion?
Conversion is the unauthorized use of funds held in trust — such as earnest money or escrow deposits — for a purpose other than the one the money was entrusted for, even temporarily.
Why it matters
Conversion is a serious legal and licensing violation distinct from commingling: commingling is improperly mixing client funds with personal or business funds, while conversion is actually spending or using those funds.
Conversion vs. Commingling (of Funds)
Improperly mixing a client's trust or escrow funds with an agent's or company's own operating funds — a violation even if every dollar is still accounted for.
Actually using a client's trust or escrow funds for a purpose other than what they were entrusted for — a more serious violation than commingling.
Commingling is a bookkeeping/account violation; conversion is misusing the money itself. Both are serious licensing violations, but conversion is treated far more severely.
Related Terms
More Commercial & Appraisal Terms
This definition is provided for general educational purposes and is not financial, legal, tax, or real estate advice. Verify important decisions with appropriately qualified professionals.
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