So you get a letter from the California Department of Real Estate (DRE) informing you that they are auditing or investigating you. You wonder which client complained and why you are subject to the audit. Then you take a look at all the documents they are requesting and you form a theory as to why they want to investigate your books, practices, and operation. You think to yourself, "should I hire a real estate lawyer to represent me in this matter" or "maybe I can just represent myself, give the DRE auditor the documents they are asking for and hope it all works out okay." After all, you have done nothing wrong or fraudulent. This is the common scenario we see.
Typical Documents the DRE auditor may request as part of a DRE audit or investigation (this is not an exclusive or exhaustive list - there may be other requirements)
(1) Copy of all salesperson agreements and licenses, and copy of broker licenses
(2) Copy of your corporate records (Articles of Incorporation, corporate information, Secretary of State information etc.), DBA's
(3) Bank statements for all corporate bank accounts and trust accounts used in connection with licensed activity
(4) Reconciliation statements for trust accounts (including separate records for each beneficiary)
(5) Trust fund records of receipts and disbursements
(6) Deposit Records and cancelled checks for trust accounts used in licensed activity
(7) Trust account and general bank account signature cards
(8) Escrow account records and bank statements
(9) Transaction files (ex. loan modifications / short sales / loans
(10) Advance Fee Contracts (ex. loan modification advance fee agreements that have received a letter of non-objection from DRE)
This is typical of the documents the DRE may request in your DRE audit. Typically you need to gather and locate all these documents and have them ready for fro DRE inspection on the date of the hearing. The DRE investigation may be conducted at the place of the brokerage business, or may be held at the DRE office in Los Angeles, California on 4th street or some other designated place.
Typical Questions you can expect in a DRE audit or investigation
When the DRE starts the questioning process, you can usually expect just one senior auditor (sometimes a DRE auditor traineee may be there) and you can expect about 1 hour worth of questioning (they will have a 10-15 page question package with them. Here is a sample of the types of questions you may hear.
(1) Do you have a copy of your corporate records? Is the corporation in good standing with the Secretary of State? Do you have DBA records?
(2) Are you the sole officer of your corporation? Any other owners of stock?
(3) Do you have any agreements with your corporation?
(4) Do you have a branch office?
(5) Do you hold any licenses with California Department of Corporations? HUD licensed?
(6) What types of loan activities are you engaged in (ex. escrow, loans, loan modifications, residential real estate sales, commercial sale or loan workouts, short sales etc.)
(7) Be prepared to describe the nature of your activities (who does what, etc.)
(8) How many files have you done? Do you have copies of each file?
(9) Do you collect advance fees? How many times? Do you negotiate loans? Do you place money in a trust account?
(10) Do you accept advance fees for appraisals or credit reports?
(11) Do you have written rate lock agreements for your loan clients?
(12) Do you fund any of your own loans?
(13) Expect DETAILED questions regarding your trust account activities.
(14) You may be asked to fill out a loan mod questionnaire or other documents on the spot
(15) You may be asked if your advertising materials for loan modifications were approved by the DRE prior to usage
(16) There are a whole host of other types of questions that may arise.
Should you hire a California Real Estate Lawyer for DRE audit or investigation? Factors to consider.
Now, you may be able to gather all your documents, appear at the hearing and represent yourself. Here are just a few reasons you may want to consider having a DRE lawyer available to appear with you at the DRE audit/investigation. My clients have normally been very pleased to have a lawyer at their side, and here are a few reasons.
(1) We first try to understand your case and try to figure out what they are looking for.
(2) A DRE Defense Lawyer can help you identify any potential legal issues you may be facing.
(3) Having a DRE Defense Lawyer show up and appear and serve as a "second set of ears" at the hearing. Usually, the DRE licensee is nervous during these hearings, and having a DRE defense attorney at your side provides a certain comfort level.
(4) We can have the DRE auditor clarify ambiguous questions that arise, so that we make an accurate of a record as possible (the initial hearing is not normally tape recorded)
(5) A DRE Defense lawyer can review any documents that they may present on the spot and confront you with. This serves a valuable role.
(6) Having the presence of a DRE defense attorney may prevent the DRE auditor from over-reaching in certain areas during the questioning process
(7) We can help follow up and provide the required documents the auditor has requested
(8) We can serve as your advocate in both oral and written discussions (much like an athlete COULD represent themselves in negotiations, sometimes it is better to have a third party fighting for you)
(9) In the event a further disciplinary action is required, you will already have counsel familiar with your case and the parties involved.
(10) Having a lawyer represent you at a DRE hearing sends a message that you take your real estate license very serious, and that it is important enough to have someone assist you in facilitating ful cooperation with the DRE representatives.
These are the TOP 10 REASONS TO HIRE A LAWYER TO REPRESENT YOU AT A DRE AUDIT, INVESTIGATION OR HEARING IN CALIFORNIA.
CONTACT ATTORNEY STEVE VONDRAN AT (877) 276-5084 FOR A FREE INITIAL CONSULTATION.
About Steve Vondran, DRE Defense Lawyer
Steve Vondran is licensed to practice law in both Arizona and California. He is also a DRE licensed real estate broker in both states. He has experience in commercial and residential real estate, as well as loan transactions (former loan officer), and loan modifications (he has setup over 50 companies to engage in loan modifications by having a DRE advance fee agreement approved receiving "letters of non-objection" for both loan modification agreements and verified accountings. He has also represented numerous brokers and licensee in DRE audits and investigations. Aside from DRE representation, Mr. Vondran is heavily involved in predatory lending litigation against major lenders and loan servicers, and he challenges certain loans in bankruptcy. Mr. Vondran can also be reached at email@example.com
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