A Department of Real Estate (DRE) special investigator calls your business, or a letter comes in the mail, announcing that the investigator wants to come your business to ask questions and review records.  This is, more likely than not, a “Broker Office Survey,” an enforcement tool used often in response to a complaint about a real estate brokerage to determine if there are compliance violations including lack of oversight of salespersons and trust fund violations.  A DRE investigator who visits a brokerage must complete a form RE 539, which contains 11 pages of questions for the broker regarding overall regulatory compliance, employee oversight and trust fund compliance.  The DRE investigator will also ask to pull a handful of transaction files and accounting records to test for compliance in the transaction and trust fund records.

There are certain basic steps that a real estate broker can take to survive a broker office survey.  For example, valid real estate licenses should be prominently displayed, and business cards must have only correct licensed or registered names and license numbers.  The DRE investigator must see that activities for which a license is required (for example, accepting rent payments for managed properties) are performed by DRE-licensed personnel.  The office should have proper locks to secure client information, trust accounts must be properly set up, and a broker must have a system for reviewing salesperson transactions.  These are just a small sample of the many, many items that are reviewed or inspected at the broker office survey.

As a basic strategy, a broker should use the Broker Self-Evaluation form, the RE 540, to detect and correct basic violations.  For a more comprehensive compliance solution, it is best to bring in legal counsel and/or a DRE compliance expert to review records and management practices to whip the business into shape before the investigator’s visit.  A problematic broker office survey can lead to a full BRE audit of the books and records of the brokerage, which can last days or weeks, and, if problems are found, must be paid for by the broker.  Worse, DRE may decide to discipline the license of the broker and the broker’s employees, and can even seek criminal sanctions for serious fraud or against unlicensed individuals engaging in real estate.

Our team of attorneys and experts can provide prompt attention to your impending DRE broker office survey to cure problems before they turn into DRE discipline.  Contact Ray & Bishop, PLC, to see how we can help you through a DRE investigation.