Many real estate professionals who have been convicted of fraud are still in good standing with the California Department of Real Estate (DRE).

The Sacramento Bee compiled a list of people in California who have been charged with a real estate-related violation or recently sued by the state and cross-referenced this list of names with the DRE’s real estate license database. Of the 260 names on their list, 45 of these bad actors were still licensed and in good standing with the DRE. [To access the license status of a real estate agent or broker, go to]

DRE enforcement violations reached record numbers over the past two years. The DRE revoked 528 licenses in the fiscal year 2008-2009 and 484 in 2009-2010. This is compared to 236 in 2004-2005 and 227 in 2005-2006 during the height of the Millennium Boom.

The DRE insists it has increased the policing of its licensees since inordinate numbers of violations started showing up on their records in early 2007. Unfortunately, resources are limited at the department, and the increased numbers of bad actors created during the boom and ferreted-out by the crash are proving difficult for the DRE to manage.

first tuesday take: Ideally, the DRE would be capable of competently policing all bad actors in the real estate profession, thus ensuring all licensed real estate salespersons and brokers are indeed trustworthy and ethical gatekeepers to California’s real estate.

Unfortunately, the DRE is a labyrinthine bureaucracy ill-equipped to handle the spike in criminal activity blighting the face of the real estate industry. Just as in criminal courts, DRE licensees are afforded due process throughout the license suspension and revocation process, according to Charles “Bill” Koenig, a Managing Deputy Commissioner at the DRE. This means it could take over a year until those who have committed real estate-related fraud and other violations are stripped of their ability to deal in real estate.

Mr. Koenig insists the DRE is working vigilantly to protect the public interest. He points to the record number of disciplinary actions the DRE has taken in recent months as proof-positive that bad actors in the real estate industry are being held accountable for their unscrupulous and unsavory behavior.

When asked if the DRE was making any policy changes or increasing their licensing standards in light of the record violation numbers, Mr. Koenig maintained the DRE is always looking for new ways to ensure licensees have the appropriate qualifications and adhere to the highest ethical principles. When pressed, however, he was unable to provide any concrete example of actions taken by the DRE to increase either its policing or licensing standards. [For more information on the DRE’s failure to protect the public, see the December 2009 first tuesday article, DRE’s failure to oversee its licensees and protect consumers.]

Certainly the DRE does not have a crystal ball and cannot determine whether someone will perpetrate fraud on the public in the future, but it can ensure that those applying for a real estate salesperson or broker license are fully qualified to protect the public interest and of such status that they have something to lose besides their license if they become bad actors. This will begin only when the DRE ensures that real estate brokers are qualified to thoroughly manage and supervise their agents.

The broker/agent hierarchy structure was developed for this very purpose — supervision of less experienced real estate agents by real estate professionals who have proven they have superior ethical standards as well as the expertise to oversee the real estate sales agents of California. [For an in-depth study of broker involvement in the growing numbers of DRE enforcement violations, see the upcoming December 2010 first tuesday article, The rabbit and the greyhound: broker supervision and consumer protection.]

Sadly, first tuesday has little confidence that any substantial changes will be made to the licensing and continuing education procedures instituted by the DRE as long as the current commissioner is in office. The DRE needs an outsider acting as the commissioner, one who has experience policing a vast body politic (over 500,000 licensees) and has a penchant for legal investigations and enforcement, not the status quo.

Instead, the DRE is currently headed by a professional bureaucrat with deep roots in California’s political inner circles. After presiding as the president of the Monterey County Association of Realtors and serving as the Director for the California Association of Realtors (CAR), Mr. Davi was appointed to his current role by Governor Schwarzenegger.

Mr. Davi’s tenure at CAR clearly reveals the back scratching and conflict of interest that runs rampant throughout the current political administration of the DRE. CAR is a private, for-profit trade union that bears no affiliation whatsoever with the California DRE. CAR employs lobbyists who solicit the DRE to accommodate them and their members in order to make acquiring a license less difficult to increase their member base and thus turn greater revenues. [For more information on the misconceptions real estate agents and brokers have regarding CAR, see the November 2010 first tuesday real estate myth, I must be licensed by the real estate trade union to practice real estate in California.]

As California welcomes a new governor, one who has a profound respect for law enforcement and public protection as demonstsrated during his prior term as governor when appointing the DRE commissioner, hopefully we will see a changing of the political guard in California’s regulatory real estate agency as well — perhaps then convicted criminals and other bad actors among us will not be allowed to maintain their real estate license.

Re: “Many suspected, convicted of fraud still have real estate licenses” from the Sacramento Bee