Why this matters: The California Department of Real Estate (DRE) in their Summer 2026 Real Estate Bulletin directs the attention of licensees towards suspicious sellers, audits, and when brokers need an MLO license endorsement.
A season of skeptics
Online meetings, online sales and an online signing — but have you met the seller?
In this bulletin’s list of reminders from the DRE, a theme emerges about licensee caution, disclosures and responsible practices.
Agents and brokers are there to protect their clients, but a new era of fraud is coming from the seller’s side.
Given the convenience of online interactions and sales, more and more nefarious parties are posing as sellers of real estate they have no connection to. This hurts the:
- true property owner;
- prospective buyers; and
- reputations of all agents involved.
These bad actors are emboldened by new technology and intend to steal the time and money of all participants.
Avoid these costly — and scary — schemes by always being diligent in your practice through:
- meeting in person or by video when possible;
- comparing IDs against the property profile you receive from a title company, or public records; and
- verifying contact information rather than trusting the individual reaching out to you when entering into a seller representation agreement.
Related article:
Trouble with trust funds
The DRE handles their policing of licensee activity using two types of audits:
- investigative, and
- proactive.
Any activities that require a real estate license could be audited, but the Audits Division narrows in on the handling of trust funds. Trust funds are made up of money or items of value held on behalf of another and when received by the broker or their agent create a fiduciary responsibility whether or not they are funds of a client.
On failure of an agent — broker — to properly manage their trust fund account, penalties for misuse of trust funds are levied by the DRE.
Accounts used by licensees must be properly designated in the name of:
- an individual broker;
- a corporation licensed as a broker; or
- a licensed fictitious business name.
Withdrawals from a trust fund account of an individual broker may only be made by the following when authorized in writing:
- a salesperson licensed under the broker;
- a broker-associate with a written agreement with the broker; and
- an unlicensed employee of the broker covered by a fidelity bond or insurance.
Different rules govern withdrawal for the trust fund of a corporate broker.
Following the rules is of no help in an audit when you fail to keep adequate records. Think long term before you use “suspense” or “clearing” account ledgers to cover up accounting differences.
Before compounding the issue, review the DRE’s Trust Account Reconciliation guidance.
Related article:
What’s in a fictitious business name?
Real estate licensees provide their names a lot. It is required nearly everywhere, from cards and stationery to flyers and advertisements of all media types. Individual and corporate brokers have the option to go with fictitious business names (FBN) rather than use their name for primary identification.
In this bulletin, the DRE clearly lays out steps, starting with whether you would rather go with a fictitious business name (FBN) or a simpler “Team Name.”
When choosing a “Team Name” you bypass the need for DRE approval. It also streamlines the number of choices at your disposal.
A FBN on the other hand opens your creativity to attract a more niche clientele or show the geography you specialize in.
For the full details to obtain a new name, view the DRE’s bulletin. Remember, marketing materials must still identify:
- the licensee names and numbers; and
- the broker of record.
Related video:
Fictitious Business Names, Teams and Identification Requirements
Do you need an MLO license endorsement?
Residential loans for one-to-four-unit properties require a licensed mortgage loan originator (MLO). But other transactions may also require the supervision of a trained MLO, such as:
- reverse mortgages;
- vacation homes; and
- developable residential land.
Private money brokers (not licensed as MLOs) work to make or arrange mortgage financing to fund non-consumer purposes other than one-to-four-unit buyer- or owner-occupied residential property. They make or arrange mortgages on agricultural, investment or business-use properties for non-consumer funding purposes.
However, these trust deed brokers might attempt to skew their mortgage originations secured by buyer- or owner-occupants on one-to-four unit residential property to appear as if they are funding a non-consumer purpose to avoid needing the MLO license endorsement. Doing so runs the risk of violating California licensing codes and facing disciplinary action. Confirming the categorization with the borrower is a necessary step in the transaction. [see RPI form 202-2]
All real estate licensees making or arranging a mortgage take on a responsibility to learn the purpose served by a mortgage origination as either consumer or commercial (non-consumer) and have the proper licensing and endorsements to be compliant.
Related article:
MLO recession side hustle guide Part 1: Originator fees are slashed
Learn more with firsttuesday
Keeping up to date on best practices remains a vital part of all licensees’ careers, and continuing education is no longer difficult or dull.
To review necessary information, sign up for one of firsttuesday’s CE courses today at www.firsttuesday.us to complete your 45-hour renewal — complete with video!
Related video
Video Renewal Course: Real Estate Matters™ — the 2026 cinematic CE release for your DRE renewal
My experience with these types of sellers varied significantly.