5 Common Real Estate Violations
(and how you can avoid them)
Running a real estate business is hard work, and complicated government rules don't make your job any easier. Don't let these common real estate violations get in the way of your success.
Assigning responsibilities that require a real estate license to salespersons
- California requires real estate brokers to supervise their salespersons in the handling of transactions, trust funds, legal documents, and any activity that requires a real estate license. Brokers are often cited for allowing salespersons to perform tasks that only a licensed broker is permitted to do.
- To avoid this mistake, establish an oversight procedure with your employees that clearly outlines duties that are permitted by law. Hold periodic check-ins with employees to ensure correct procedures are being followed.
Operating under a name different from your state-issued license
- Brokers are frequently cited for operating under a DBA (doing business as) name that is different from what is listed on their license. California considers this a “fictitious name” and frequently penalizes brokers for this mistake.
- To avoid this trap, make sure you operate and advertise under the same name as your license. Or, apply for an updated license with the Real Estate Commissioner with your preferred business name.
Failure to keep a daily running balance for all transactions and beneficiaries
- In addition to keeping separate records of all transactions, California real estate brokers must keep a daily running balance for each record maintained. Brokers are often cited for not keeping a balance for individual records.
- Software programs make it easy to keep a daily running balance. Consider keeping electronic records with programs like QuickBooks or Excel that will automatically calculate the balance for each record.
Mixing personal money and property with money or property used in real estate transactions
- Real estate brokers can accidentally “commingle” property when they deposit credit report or appraisal fees into their general bank account. California considers these fees “trust funds” and requires they be deposited into a separate account.
- To avoid this mistake, always deposit fees into a separate trust fund account.
Failure to disclose license ID or license status
- Licensees often neglect to disclose their status in advertising or other materials that reach potential customers.
- To avoid this trap, always disclose your status in newspaper and/or television ads, business cards, and all other materials where you promote your services.
- Follow this general rule: when in doubt, disclose.
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