DRE Bulletin Digest Summer 2019

It’s already well into July, and here at first tuesday, that can mean only one thing: the release of the Department of Real Estate (DRE)’s Summer Bulletin. So without further ado, let’s dive into what’s on the Department’s agenda this season.

Preparing for a broker office survey

A big part of the DRE’s enforcement of real estate law is preventative, rather than reactionary, meaning the Department investigates broker offices at random to ensure compliance with rules and regulations. These routine investigations, known as Broker Office Surveys, are primarily on the lookout for violations regarding:

licensing;
trust accounts and record keeping;
disclosures; and
broker supervision.

The investigator will ask the broker questions and review transaction files to make sure everything is in compliance with real estate law, and will follow up if violations are found.

In order to help brokers prepare for these random surveys, the DRE has published a Broker Compliance Evaluation Manual, which contains many of the questions brokers may be asked when surveyed by a DRE investigator.

Any broker with proper knowledge of real estate law and sound recordkeeping practices will have no problem getting through one the DRE’s Broker Office Surveys with flying colors.

Corporate broker-officers may renew via eLicensing

Thankfully, the DRE’s eLicensing system keeps expanding to allow more and more licensed individuals to renew online. This time around, the Department is opening their online renewal system for corporate broker-officer licenses, making the process of renewal for these licensees hassle-free.

As with any California real estate license, to be eligible for renewal:

the licensee needs to be in a “licensed” status; and
the license needs to be renewed within 90 days before the expiration of the license.

While this is great news for corporate license holders, we can’t help but wonder when the DRE will get around to expanding this service to prospective licensees. The process of obtaining a real estate license is still required to be completed by mail — a potentially maddening procedure that can just as easily be completed online, if only the DRE would extend their eLicensing service to cover…well, licensing.

The trouble with cross-qualification

The practice of cross-qualification — wherein a buyer in a real estate transaction is required to qualify for a mortgage through the seller’s preferred lender, regardless of whether the buyer already qualifies through their own — is a tricky subject.

While cross-qualification is allowed, it is a contractual agreement between the buyer and the seller. Even when the seller’s agent is familiar with a lender, the agent may not require the buyer to qualify through that lender — especially if they are receiving compensation from the lender, known as a kickback.

The seller’s agent also may not receive documents required by the lender in a cross-qualification situation, as this creates an agency relationship between the agent and the lender, or the agent and the buyer, which then needs to be disclosed.

If the subject cross-qualification comes up in a transaction, make sure you know all the ins and outs of the situation before diving in.

Always disclose compensation

Finally, when involved in any real estate transaction, remember to disclose all compensation. Anything directly related to the transaction that results in income or profit for the licensee is compensation, and needs to be disclosed to your client.

Compensation that needs to be disclosed may include:

marking up invoices to make a profit;
earning points on credit card purchases;
keeping any portion of a late charge; or
returned check or automated clearing house fees.

A bevvy of other activities may result in compensation for the agent, and nondisclosure of any of them may result in a suspension or revocation of a real estate license.

That’s it for this time — catch our next bulletin digest when it rolls around this fall. Ciao!