Nevada Timeshare License Practice Exam

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If a developer uses a purchaser's deposit for personal expenses like buying snacks, this is known as what?

Embezzlement
Conversion
Commingling
Fraud

The correct answer is: Conversion

The situation described, where a developer uses a purchaser's deposit for personal expenses, is best classified as commingling. Commingling occurs when a developer combines a client’s funds with their own personal or business funds, which is against standard ethical and legal practices in real estate and timeshare transactions. This improper use of a client's deposit raises serious ethical concerns because it blurs the lines between the funds that belong to the purchaser and those that belong to the developer. This can lead to mismanagement of funds and potential loss for the consumer, as it removes the intended security that the deposit was supposed to provide during the buying process. While the act could also be seen as embezzlement, which refers specifically to unauthorized use of someone else's money with the intent to deprive the owner of it, in this context the usage of the deposit for personal expenses is more indicative of commingling. The emphasis here is on the improper mixing of funds rather than the deceptive act of stealing. Thus, commingling captures the essence of the scenario more accurately.