- Official section
- National X: Practice of Real Estate
- Broker weight
- 12% of the national broker portion
- Expected scored items
- Practice of Real Estate accounts for about 12 of 100 items
Practice of Real Estate topic guide
Confidential information and transaction funds
Information and money follow the same professional rule: receive only what the transaction requires, protect it while it is entrusted to the brokerage, use or disclose it only with authority, and leave a complete record. The exam often tests the moment a licensee chooses convenience over control.
What does this exam area cover?
Short answer: Protect client negotiating information and sensitive personal data from collection through secure disposal. Separate material property facts from confidential negotiating facts. Verify identity and wire instructions through trusted channels. Deliver transaction money to the sponsoring broker's system, keep escrow funds separate, document every receipt and disbursement, reconcile monthly, preserve records, release money only under lawful written authority, and distinguish commingling from conversion.
The national outline combines protection of confidential personal information with handling funds of others. Illinois adds a precise agency definition of confidential information and detailed special-account and recordkeeping rules. A brokerage may also face privacy, breach-notice, financial-data, contract, banking, and local security-deposit requirements depending on its activities and the transaction.
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What is on the official outline?
- Topic
- Illinois client confidentiality
- What to know
- Client, brokerage agreement, written request, written instruction, negotiating position, price, terms, urgency, motivation, financial limit, occupancy need, information that could materially harm negotiation, permission, legal requirement, public information, and continuing duty
- Best exam move
- Ask whether the information came from a client and whether disclosure could change that client's bargaining position.
- Topic
- Confidential fact or material property fact
- What to know
- Physical condition, latent material adverse fact, actual knowledge, reasonably diligent inspection, seller statement, defect, negotiation, motivation, stigma, protected medical information, customer honesty, false information, and required disclosure
- Best exam move
- Do not hide a known material physical defect by calling it confidential.
- Topic
- Dual agency and information barriers
- What to know
- Informed written consent, prior consent, confirmation, seller minimum, buyer maximum, preferred terms, motivation, confidential information, permission, designated agency, actual knowledge, no imputation, referral, and withdrawal
- Best exam move
- A dual agent may explain facts and options but cannot reveal either client's protected negotiating position without permission.
- Topic
- Sensitive personal information
- What to know
- Government identifier, driver's license, Social Security number, account number, access code, credit report, income, tax return, bank statement, wire instruction, signature, identification image, health information, biometric identifier, login credential, screening report, and application
- Best exam move
- Collect the minimum necessary and never send sensitive data through an unverified channel.
- Topic
- Access, storage, and disposal
- What to know
- Role-based access, need to know, secure office, locked cabinet, encrypted device, approved cloud, strong authentication, multifactor authentication, patching, backup, download restriction, vendor access, retention schedule, legal hold, deletion, shredding, device wipe, and audit log
- Best exam move
- Permission to view a transaction does not mean permission to copy or retain every document.
- Topic
- Breach and wire-fraud response
- What to know
- Phishing, spoofed domain, account takeover, changed instructions, urgent request, independent callback, known number, payment pause, bank recall, title company, attorney, incident escalation, evidence preservation, password reset, session revocation, insurer, law enforcement, IC3, scope, restoration, and notice
- Best exam move
- Stop the transfer first, verify independently, and escalate immediately instead of replying to the suspicious message.
- Topic
- What counts as escrow money
- What to know
- Accepted contract, agreed lease, mutual benefit, earnest money, security deposit, money, personal check, cashier's check, money order, promissory note, cash, recognized cryptocurrency, rent for transmittal under management agreement, owner-held deposit exception, and financial consideration
- Best exam move
- Classify the payment by who benefits and why it is held, not by the form of payment.
- Topic
- Receipt and deposit control
- What to know
- Sponsoring broker, designated managing broker, sponsored licensee, temporary custodian, written contract, office policy, receipt, copy of instrument, chain of custody, restrictive endorsement, special account, depository, interest-bearing direction, delivery date, deposit date, returned item, and notice
- Best exam move
- Follow the contract and current Illinois rule through the sponsoring broker's documented process.
- Topic
- Separation and account ownership
- What to know
- Special account, escrow account title, federally insured depository, funds of others, personal account, operating account, commission, service charge, bank fee, minimum broker funds permitted by rule, commingling, conversion, garnishment risk, authorized signer, and electronic access
- Best exam move
- Funds belonging to the parties stay separate from brokerage operating money.
- Topic
- Disbursement and disputes
- What to know
- Consummation, termination, written direction, signed contract, authorized agent, court order, release, competing demand, notice, continued holding, interpleader, legal advice, unclaimed property, stop payment, bank error, and audit trail
- Best exam move
- The escrow holder follows documented authority and does not become the judge of a disputed contract.
- Topic
- Books and monthly reconciliation
- What to know
- Journal, chronological receipt, chronological disbursement, property or transaction ledger, running balance, bank statement, outstanding check, deposit in transit, adjusted bank balance, total ledger balance, book balance, monthly reconciliation, preparer, reviewer, master log, exception, and correction
- Best exam move
- The reconciled bank balance, book balance, and total individual-ledger balance should agree after valid adjustments.
- Topic
- Records, inspection, and supervision
- What to know
- Escrow instruments, deposit proof, canceled check, electronic transfer, release, contract, offer, counteroffer, brokerage agreement, agency disclosure, closing statement, retention, secure original format, Department access, 24-hour production, loss or destruction report, training, audit, and corrective action
- Best exam move
- A correct balance without supporting records is not a complete escrow system.
Which distinctions produce the most mistakes?
- Terms
- Confidential information vs. personal information
- Difference
- Confidential information is an Illinois agency-law category centered on a client's protected negotiation. Personal information is a privacy and security category tied to an identifiable person and specified data.
- Question cue
- Bargaining harm versus identity or security harm.
- Terms
- Negotiating fact vs. material physical fact
- Difference
- A client's minimum price or urgency can be confidential. A known latent material adverse physical fact cannot be hidden merely because the client wants secrecy.
- Question cue
- Leverage in the deal versus condition of the property.
- Terms
- Client vs. customer information
- Difference
- A client is represented under a brokerage agreement and receives agency confidentiality. A customer still must be treated honestly and warned early enough not to reveal information to a licensee who does not represent that customer.
- Question cue
- Agency duty versus honest nonagency service.
- Terms
- Escrow money vs. brokerage income
- Difference
- Escrow money is held for the parties' mutual benefit. Earned brokerage compensation belongs to the brokerage only when the agreement and transaction establish that entitlement.
- Question cue
- Money held for others versus money actually earned.
- Terms
- Commingling vs. conversion
- Difference
- Commingling improperly mixes another person's funds with the licensee's funds. Conversion is unauthorized dominion or use, even if the funds are later replaced.
- Question cue
- Mixing versus taking or using.
- Terms
- Deposit vs. disbursement
- Difference
- Deposit places received escrow money into the proper special account. Disbursement removes or transfers it under documented authority.
- Question cue
- Money enters custody versus money leaves custody.
- Terms
- Journal vs. ledger
- Difference
- A journal records receipts and disbursements in chronological order. A ledger groups activity and running balance by transaction, property, or beneficiary.
- Question cue
- Time sequence versus individual account history.
- Terms
- Bank balance vs. ledger balance
- Difference
- The bank balance begins with the statement and valid timing adjustments. The total ledger balance is the sum owed across individual transactions. Reconciliation proves they match the books.
- Question cue
- Depository record versus brokerage liability detail.
- Terms
- Ordinary correction vs. disputed release
- Difference
- A documented bank or bookkeeping error can be corrected through the accounting process. A dispute between principals requires contractual, written, judicial, or other lawful authority.
- Question cue
- Accounting fact versus competing ownership claim.
The TRUST workflow for information and money
- Take only what is needed. Identify the lawful business purpose, relationship, amount, document, and minimum data required.
- Restrict access. Use the sponsoring broker's approved people, accounts, devices, systems, vendors, and physical controls.
- Use only with authority. Disclose information or disburse money only when the client, contract, statute, rule, or court provides authority.
- Secure and separate. Protect confidential data from unauthorized access and keep transaction funds apart from personal and operating money.
- Track every event. Preserve receipt, approval, deposit, transmission, change, reconciliation, disclosure, release, incident, and correction records.
- Item
- Seller's minimum price
- Primary rule
- Keep confidential without permission
- Best evidence
- Client instruction and communication log
- Item
- Known hidden structural defect
- Primary rule
- Disclose when law requires
- Best evidence
- Condition report and dated notice
- Item
- Bank statement in a buyer file
- Primary rule
- Limit and secure access
- Best evidence
- Role log and protected storage
- Item
- New wire instructions
- Primary rule
- Verify independently
- Best evidence
- Callback record using trusted number
- Item
- Earnest money
- Primary rule
- Deliver and deposit through broker system
- Best evidence
- Receipt, instrument copy, and journal
- Item
- Monthly escrow balance
- Primary rule
- Reconcile bank, books, and ledgers
- Best evidence
- Signed monthly reconciliation
- Item
- Competing release demands
- Primary rule
- Hold pending lawful authority
- Best evidence
- Contract, notices, releases, and counsel record
- Item
- Closed transaction record
- Primary rule
- Retain securely for required period
- Best evidence
- Indexed transaction file and audit trail
How do the rules work in scenarios?
The seller's urgency stays protected
Scenario: A seller tells the listing broker that a job relocation makes a quick closing more important than price. A buyer's broker asks whether the seller is desperate.
- The information came from the client during representation and could materially harm the seller's negotiating position.
- The buyer is entitled to truthful property and transaction information, but not the seller's private motivation.
Answer: The listing broker should not reveal the urgency without the seller's permission and should continue to present authorized price and timing terms.
A defect is not protected by a secrecy request
Scenario: A seller instructs the broker in writing not to mention a known hidden foundation failure that could not be discovered through a reasonably diligent buyer inspection.
- Illinois excludes material information about physical condition from the statutory definition of confidential information.
- A seller's secrecy instruction cannot override a licensee's duty to disclose an actually known latent material adverse physical fact to a prospective buyer customer.
Answer: The broker must follow the applicable disclosure duty and should not participate in concealment.
Changed wire instructions trigger a stop
Scenario: Two hours before closing, a buyer receives an email with a familiar display name, new wiring instructions, and a warning that delay will cancel the deal.
- Changed payment instructions, urgency, and a reply path controlled by the message are classic business-email-compromise signals.
- Replying or calling the number in the email would keep the buyer inside the attacker's channel.
Answer: Pause the transfer and call the known title company or attorney at an independently obtained number. If funds already moved, contact the financial institution and incident team immediately.
The broker cannot choose the escrow winner
Scenario: A contract terminates. Buyer and seller send conflicting demands for earnest money, and neither signs the other's proposed release.
- The money remains held for the parties, and each asserts a competing right.
- Personal belief about breach is not a substitute for written contractual authority, joint direction, or a court order.
Answer: The sponsoring broker should keep the funds protected and follow the contract, Illinois rules, company counsel, and lawful dispute procedures.
What are the common exam traps?
- Trap
- Everything a client says is confidential forever.
- Correction
- Illinois uses a defined category and statutory exceptions. The duty does continue after the brokerage relationship for information that qualifies.
- Trap
- A seller can label a physical defect confidential.
- Correction
- Material information about physical condition is excluded from the statutory confidentiality definition, and known latent adverse facts can require disclosure.
- Trap
- A dual agent may balance the deal by revealing each side's limit.
- Correction
- Dual agency does not authorize disclosure of either client's confidential negotiating position without permission.
- Trap
- Sensitive documents are safe because they are inside a transaction platform.
- Correction
- Access settings, exports, integrations, personal devices, vendor controls, retention, and account security still require management.
- Trap
- An email that looks familiar is enough verification for a wire.
- Correction
- Display names and domains can be spoofed. Verify changes through an independently trusted channel.
- Trap
- A sponsored licensee may keep an earnest-money check until contingencies clear.
- Correction
- The licensee should deliver it into the sponsoring broker's documented custody and deposit process.
- Trap
- A temporary shortage is only a bookkeeping mistake if repaid.
- Correction
- Unauthorized use can be conversion, and replacing money later does not erase the violation.
- Trap
- A buyer's demand alone authorizes release to the buyer.
- Correction
- The escrow holder needs authority under the signed contract, directions of the principals or authorized agents, a court order, or another lawful basis.
- Trap
- A bank statement is the escrow accounting system.
- Correction
- The brokerage also needs journals, individual ledgers, reconciliations, a master log, and supporting transaction records.
- Trap
- Outsourcing storage or accounting transfers all responsibility.
- Correction
- The sponsoring broker must supervise vendors, control access, preserve required records, and remain able to produce and explain the account.
Can you answer these original practice questions?
These questions are original study items aligned to the published outline. They are not copied, recalled, or predicted PSI questions.
1. A seller tells the listing broker the lowest acceptable price. How should the broker treat it?
- Publish it with the listing
- Keep it confidential unless authorized to disclose
- Tell only unrepresented buyers
- Share it after the first showing
Show answer and explanation
Answer: B
A client's acceptable terms are negotiating-position information and should not be disclosed without authority.
2. Which item is not made confidential merely by a client's request under the Illinois definition?
- Seller's moving deadline
- Buyer's maximum price
- Material information about physical condition
- Seller's preferred closing date
Show answer and explanation
Answer: C
The Act expressly excludes material information about the property's physical condition from confidential information.
3. A brokerage puts earnest money into its operating account for one night. What is the clearest issue?
- Commingling
- Novation
- Subrogation
- Accession
Show answer and explanation
Answer: A
Funds of others have been mixed with the brokerage's business money instead of held in the proper special account.
4. Buyer and seller dispute an earnest-money release. What should the escrow holder avoid?
- Reviewing the signed contract
- Keeping an audit trail
- Choosing a winner without lawful authority
- Seeking legal guidance
Show answer and explanation
Answer: C
An escrow holder protects the funds and follows documented contractual, written, judicial, or other lawful authority.
5. Which three figures should agree in a sound escrow reconciliation after valid adjustments?
- List price, appraisal, and loan amount
- Bank, book, and total individual-ledger balances
- Commission, tax, and insurance
- Rent, deposit, and late fee
Show answer and explanation
Answer: B
Reconciliation connects the depository record, the brokerage books, and the sum owed across transaction ledgers.
How should you study this area?
- Session
- 1. Define protected information
- Focus
- Client, customer, written request, negotiation, material harm, physical condition, permission, exception, and post-termination duty
- Proof you are ready
- Classify fifteen facts as confidential, disclosable, or requiring more facts.
- Session
- 2. Secure personal data
- Focus
- Minimum collection, access, storage, authentication, vendor, retention, disposal, breach, and privacy notice
- Proof you are ready
- Map every person and system that touches one buyer application.
- Session
- 3. Defeat wire fraud
- Focus
- Spoofing, changed instruction, urgency, trusted callback, payment pause, bank recall, escalation, IC3, and evidence
- Proof you are ready
- Write the first five actions after a suspicious instruction and after a misdirected wire.
- Session
- 4. Classify and receive funds
- Focus
- Escrow definition, earnest money, security deposit, rent, instrument, receipt, chain of custody, sponsor, special account, and separation
- Proof you are ready
- Classify twelve payments and identify the correct custody path.
- Session
- 5. Disburse and reconcile
- Focus
- Contract authority, written direction, court order, dispute, journal, ledger, bank statement, adjustment, reconciliation, and master log
- Proof you are ready
- Complete a three-way reconciliation and explain a disputed release.
- Session
- 6. Audit the complete system
- Focus
- Records, access, instrument copies, deposit proof, releases, retention, Department production, loss response, supervision, and correction
- Proof you are ready
- Score at least 90% and support every answer with a rule or control.
Do not count recognition as mastery. Close the notes and explain the rule, apply it to a new fact pattern, and identify why each distractor fails.
Confidential Information and Transaction Funds FAQ
What is confidential information under Illinois real estate law?
It is client information obtained during a brokerage agreement that the client made confidential in writing, concerns the client's negotiating position, or could materially harm that negotiating position if disclosed, subject to the Act's exceptions. Material information about the physical condition of the property is not confidential information under this definition.
Does an Illinois licensee's confidentiality duty end at closing?
No. Unless a written agreement provides otherwise, the duties that continue after termination, expiration, or completion include accounting for transaction money and property and keeping client confidential information confidential.
Can a listing broker reveal the lowest price a seller will accept?
Not without authority from the seller. A client's negotiating position is a core example of confidential information, and it remains protected during dual agency as well as ordinary representation.
What counts as escrow money in an Illinois real estate transaction?
Escrow money includes money, promissory notes, cryptocurrency recognized as legal tender or financial consideration, and other consideration deposited for the mutual benefit of the parties after an accepted purchase contract or agreed lease. Earnest money and many security deposits are included.
Who controls an Illinois brokerage escrow account?
The sponsoring broker is responsible for the special account, its authorized signers, records, deposits, reconciliation, and lawful disbursement. A sponsored licensee should deliver received funds and instruments according to the sponsoring broker's procedures rather than hold or redirect them personally.
When may escrow money be released before a transaction ends?
Illinois law permits release when supported by written directions of the principals or their authorized agents, directions in a signed contract, or an order of a court with jurisdiction. A broker should not decide a disputed entitlement based on personal preference.
What is the difference between commingling and conversion?
Commingling is improper mixing of money or property belonging to others with the licensee's own money or property. Conversion is unauthorized control, use, or taking of another person's funds or property. Both can support serious discipline.
What escrow records must an Illinois sponsoring broker maintain?
The rules identify journals, account ledgers, monthly bank statements, monthly reconciliations, and a master log, along with transaction instruments, deposit and disbursement support, releases, contracts, and related records. The records must be secure, organized, and accessible for Department inspection.
How should a buyer verify new wire instructions?
Use a trusted phone number obtained independently, not a number in the new message, and call the known title company, attorney, or financial institution. Treat any change in account number, timing, or payment procedure as a red flag. If money was misdirected, contact the financial institution immediately and report the incident promptly.
Are these questions copied from PSI?
No. Every practice question is original and aligned to the public exam outline and the cited Illinois and federal sources.
Primary sources
- PSI Illinois Candidate Information Booklet dated June 24, 2026
- Illinois Real Estate License Act of 2000
- Illinois Administrative Code Section 1450.750, Special Accounts
- Illinois Administrative Code Section 1450.755, Recordkeeping
- Illinois Personal Information Protection Act
- Federal Bureau of Investigation, business email compromise
- Cybersecurity and Infrastructure Security Agency, multifactor authentication
- Federal Trade Commission, Safeguards Rule guidance for covered businesses
The current official outline controls the tested scope. Statutes, regulations, and official agency materials control when a general study rule and a jurisdiction-specific rule differ.