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Check Your Brokerage’s Health with a Self-Audit

Why wait until you are the subject of a Division of Real Estate investigation or audit to find out whether your brokerage is license law compliant?  A self-audit can reveal deficiencies now and potentially head off liability later.  Here are some tips for to check your brokerage’s health:

  1. Pull all of the real estate licenses that are being held and compare them to the list the Division maintains of licensees affiliated with your brokerage. The Division’s list can be located by looking up your brokerage on the Division’s website. Are there any discrepancies?  If so, figure out why and take steps to clear them up.  For example you might be missing a license, in which case you’ll need to order a replacement from the Division.
  2. Scrutinize all business cards, stationery and envelopes. Does the brokerage’s name appear on these promotional items? Is there an equal prominence problem? Are team names more prominent than the brokerage’s name? If so
  3. Compile all of the brokerage’s forms: Consumer Guide to Agency Relationships, Brokerage Company Policy, Listing Agreement, Residential Property Disclosure Form and Buyer Agency Agreements. If your brokerage uses Board of Realtor forms, make sure you’re using the most recent version. Does your Consumer Guide to Agency Relationships have the most recent fair housing language? Does your Brokerage Company Policy have the mandatory confidentiality provision relating to social media? is your brokerage using the most recent Residential Property Disclosure Form?
  4. Randomly select 5 transaction files to review for completeness and correctness. Are all of the transaction documents maintained in the file? Are there written addendums signed by all parties reflecting the agreements? Is there a completed Consumer Guide to Agency Relationships? Was the Agency Disclosure Statement dated prior to the purchase agreement?
  5. Reconcile the brokerage trust account bank statement with the columnar ledger. For information on the columnar ledger see Ohio Administrative Code 1301:5-5-09. Are all credits and debits reconciled? Is the account non-interest bearing? Do the deposit tickets and checks have the words “trust” or “special account” on them? Have dormant funds been turned over to the Division of Unclaimed Funds?
  6. Has the brokerage paid commissions to a salesperson’s entity? If so, double check to be sure the brokerage has a copy of the entity’s operating agreement reflecting the salesperson’s ownership interest in the entity. Also confirm the brokerage has kept required records for each payment.  For more information on paying a commission to a salesperson’s entity, see R.C. 4735.20(C).
  7. Review the brokerage’s records retention policy. If records are maintained electronically, at what point are they destroyed? Are records being kept for the statutory three year minimum? Is there any protocol for which records are kept electronically and which are kept in paper form?

The Division’s website has a new brokerage/agent guide that is very helpful in navigating through all of the provisions of license law with citations to the relevant statute or rule.  The guide can be found at: http://www.com.state.oh.us/real/NewBrokerAgentGuide.aspx.  A compliant brokerage can not only aide in preventing problems but also can be critical in defending the brokerage in an investigation or litigation.  Your brokerage health check audit will be time well spent and will give you peace of mind that all is healthy and functioning properly.

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