Attorney Steve's top five tips to avoid a real estate audit by the BRE
This article is a general legal overview of a few tips I have encountered over the years to help real estate brokers protect themselves and avoid a BRE audit. Basically, the BRE (Bureau of Real Estate) will respond to complaints against real estate licensees and they may call you up and want to ask you a few questions. Oftentimes it is in regard to a single transaction. Other times, there is a disgruntled ex-employee that has an axe to grind that reports some type of wrongdoing about the broker (for example, reports fraud in a short sale or fraud in a real estate transaction, failing to provide trust account records, failing to have an account designated as a trust fund, comingling personal and business funds etc.). Here are a few tips to try to help you "nip it in the bud" as they say.
1. The first advice I always have is to consult a real estate lawyer experienced with real estate law and compliance issues to discuss your case before responding to anyone. We have maintained a real estate compliance website for years (BRECompliance.com) that has addressed a wide variety of California and Arizona real estate legal compliance topics from business cards to duty to supervise and everything in between. Now, I don't say to speak with a real estate attorney familiar with BRE accusation issues to be self-serving. The point is, this is in my opinion the best first line defense to make sure what you are going to say is the true story and properly stated to the BRE.
2. Once you have consulted with your compliance counsel you then are usually in a better position to respond to the questions of an investigator, and most brokers in our experience have felt much more comfortable speaking about their reale estate transactions once speaking to their law firm. In speaking with the investigator we usually reccomend being honest, candid, and forthright with the investigator. The investigator is "investigating" and seeing if there is anything more serious that would require or warrant a real estate audit of your internal books, records and files. Being straight forward in responding to the questions of the BRE can go a long way to heading off a more detailed real estate audit.
3. Sometimes the BRE investigator will request a written response. Again, I would generally suggest going to step#1 and then preparing a formal written response. Many times our firm can help you write these responses but some brokers choose to do it on their own to save money. That is fine and your option. You do not need to hire a law firm to represent in responding to a BRE inquiry. One benefit of hiring a professional real estate law firm to help you is frankly, we write better responses than you do. You are in the business of selling or leasing real estate, doing short sales, or funding mortgages. We write letters, advociate for clients and negotiate deals. So for a low flat rate fee it might be wise to prepare a professional legal response from a law firm. The key issue is to respond to the questions being asked of you and not beat around the bush. When you beat around the bush and avoid responding to the questions you raise red flags.
Now a question we get a lot is "doesn't that show I am guilty if I hire a lawyer to respond to a BRE investigator." My general response is "what would Donald Trump do if a real estate auditor asked him some questions regarding a real estate transaction?" I think the answer is clear, he would have a firm represent his interests. Not because he had something to hide, but because he is busy, he understands the serious nature of these types if inquiries, and because in most cases a more professional response will be tendered to the bureau or department of real estate (Arizona has the DRE - Department of Real Estate).
4. Follow up with the BRE investigator. Often times they may come back for more information and might be requesting additional documents. Your obligation as a real estate broker is to have those documents and to provide them. Respond promptly and directly to their requests for information.
5. Don't treat the process as if it is a major pain in the b***. The BRE protects consumers in California and they have a tough job with the thousands of licenseees, thousands of transactions, and thousands of complaints they recieve in regard to the real estate purchase, sale, lease, property mangement, mortages, short sales, and yes, still some loan modification activity. In some cases the BRE may detect minor issues and they may refer you out to the "cite and fine" unit (less serious than a formal BRE accusation but this will still someting that will require attention in resolving). Regardless, real estate investigations happen during the course of a real estate career. Your attitude and responses will dicatate your future.
Conclusion
If you follow these simple steps, cooperate, act professionally, and assuming there are no "red flags" you may be able to head off a formal real estate audit, and the accusation (i.e the formal complaint the BRE will file if they have clear and convincing evidence of serious compliance violations) which can often follow.
This is just a general list and details may vary depending upon your case. If you need to speak with reale state counsel, a paid consulation could be the difference between trigggering a real estate audit, and just having to take some time to explain yourself to the BRE investigator.
We offer low flat rate fees and can be reached at (877) 276-5084. We have handled numerous cases with the BRE and saved many real estate licenses over the years.
We look forward to working with you.
- Attorney Steve -
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