Welcome back to your quarterly real estate industry roundup! The Winter 2023 edition of the California Department of Real Estate (DRE) Bulletin starts the new year with a reminder on updated licensing requirements, new legislation and more.
Scroll ahead for firsttuesday’s digest of DRE notices for real estate professionals in Q1 2023.
Commissioner’s Update
Licensing exams stand out as the focus of DRE Commissioner Doug McCauley’s message in the first bulletin of 2023.
The DRE’s exams do not fully prepare newcomers for the day-to-day tasks of selling homes. In truth, the licensing exam questions merely evaluate applicants for entry level competency with Real Estate Law, explains the Commissioner in the bulletin.
This is because consumer protection — not sales training — is the main function of the DRE’s exams. Exam questions center consumer issues to ensure only those with the knowledge and skill to adhere to relevant laws and regulations perform home sales transactions. After all, this consumer focus echoes other DRE entities, like its investigation and enforcement teams.
Industry subject matter experts can support consumers and industry professionals by volunteering their time and expertise to refine exam questions.
Also in the spirit of consumer protection, pre-license education is changing per the newly-signed Senate Bill (SB) 1495. Starting January 1, 2024, all sales agent and broker license exam applicants need to complete the revised real estate practice course, including education covering:
- bias — implicit, explicit, and systemic — on consumers;
- the historical and social impacts of bias;
- steps to recognize and address one’s own bias; and
- fair housing laws— an interactive participatory component.
firsttuesday shares the DRE’s commitment to a more equitable real estate industry and housing market. Click the related article ahead for our breakdown of the new requirements and order the Implicit Bias and Fair Housing Course for your license today.
Related article:
Implicit bias and fair housing soon required for licensing courses
New housing laws for 2023-2024
In addition to SB 1495, nine new real estate laws take effect in 2023 — and 2024.
Active agents and brokers need to keep track of:
- Assembly Bill (AB) 1410 (effective 2023) — which prevents the homeowner’s association (HOA) from prohibiting members and residents from discussing common interest development (CID)and any concerning issues on social media;
- AB 1837 & AB 2170 (effective 2023) — which ensure large-scale investors aren’t first in line to profit during the upcoming foreclosure wave, building upon Senate Bill (SB) 1079;
- AB 2503 (effective 2024) — which requires the California Law Revision Commission to examine the consistency of terminology used to describe participants in an agreement, lease, or contract for real estate property;
- AB 2559 (effective 2023) — which standardizes elements of and procedures for reusable tenant screening reports;
- AB 2745 (effective 2023) — which requires non-licenseesapplying for a broker’s license to show the required two years of general real estate experience accumulated within the five-year period prior to the exam application date;
- AB 2960 (effective 2023) — which ensures disclosure requirements in effect on the date participants enter into an agreement apply;
- SB 1005 (effective 2023) — which revises the provisions surrounding the sale of a conservatee’s present or former personal property, such as the action for partition; and
- SB 1017 (effective 2023) — which requires landlords to compensate tenants between $100 and $5,000 when they violate a tenant’s right to terminate their lease due to abusive living conditions.
Related article:
California real estate: 2022 in review and a forecast for 2023
Don’t be shady, be fiduciary!
Continuing the vein of consumer protection, mortgage loan originators (MLOs) owe fiduciary duties to borrowers — just as agents and brokers are beholden to their clients.
An MLO is violating their fiduciary duty to their client when pursuing higher interest rates in order to receive a higher commission, according to the Loan Originator Compensation (LO Comp) Rule. MLOs who put their own monetary interests above their clients’ will face consequences enforced by the DRE. Learn more about the LO Comp Rule.
When MLOs steer borrowers into mortgage products with unfavorable terms, it is a violation of the licensee’s duties. MLOs who provide impartial counseling ensure consumers adequately understand the mortgage products they are buying.
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Additionally, brokers are to disclose all costs and expenses regarding the loan to their client and refrain from taking any undisclosed compensation.
Yearly report on unclaimed property
California law requires unclaimed personal property be reported to the State Controller’s Office (SCO) when it has had no activity for an extended period (usually three years).
Real estate is not included in unclaimed property. However, unclaimed property does include:
- payroll and commissions (needs to be dormant for a year);
- savings and checking;
- trust accounts;
- accounts payable or receivable;
- rent deposits;
- vendor payments; and
- costumer refunds.
Report unclaimed property in five easy steps. To file a report, banks, insurance companies and corporations need to:
- identify the unclaimed property — search through records and confer with the SCO’s Dormancy Periods Table and Property Reporting Cycles to determine reportability;
- carry out due diligence by mailing notices to owners — confer with the SCO’s Guide to Due Diligence;
- submit a notice report to SCO before November 1st — check the SCO’s Notice Report checklist before submitting;
- respond to owners’ inquires and reunite property with owner even when an owner responds after the SCO notification; and
- submit Remit Report and Remittance between June 1st and June 15th — this will officially transfer the property to the Controller’s Office.
Additionally, when brokerages have brokerage trust accounts bearing unclaimed funds, they need to make a good faith effort to:
- reconcile trust accounts regularly;
- return funds to the owner; and
- report to the SCO after the dormancy time period has expired.
Learn more about reporting unclaimed property.
Related video:
It’s not over until escrow closes
Agents and brokers need to carry out their fiduciary duty through the entire transaction — including after opening escrow.
Agents need to thoroughly explain the necessary disclosures and any documents their client is to sign. As you guide client through one of the important purchases of their lives, take the time to ensure they understand their rights and responsibilities as homeowners.
When clients are properly informed, the DRE enforcement team has no reason to knock on your door.
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Visit the DRE website to download the full Winter 2023 DRE Bulletin and sign up for the Quilix newsletter to receive the next DRE Bulletin Digest in your inbox!
