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Record Keeping In The Digital Age Is Not Just A Technological Issue

Written by on Monday, 27 January 2014 12:02 pm
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These days it is common that a seller and her agent might communicate via text messaging. Some of these texts might be what we would consider material to the transaction: "I will accept that price if they can close in thirty days." "We will pay for the roof repair if they will release $2,500 of the deposit money." Others, not so much: "They came by today with their decorator. What a hottie!" "Can you believe that car that their agent drives?!" Etc.

Should all messages such as these be retained (either electronically or in print) and kept in a broker’s transaction file? Apparently, if you’re a real estate agent in California, the answer is "yes."

Last spring the California Bureau of Real Estate (BRE) Bulletin contained an article entitled "Retention of Electronic Communications." We discussed some of those matters in an earlier article. Recently, at meetings of the directors of the California Association of Realtors® (CAR), members of the BRE staff made the point again.

At panel discussions, BRE representatives referred to California Business and Profession Code §10148 which says, in part, "...A licensed real estate broker shall retain for three years copies of all listings, deposit receipts...and other documents executed by him or her or obtained by him or her in connection with any transactions for which a real estate broker license is required..." [my emphasis] Even the BRE panelists seemed to lean toward the understanding that only documents that were material to the transaction needed to be retained, but, unfortunately, that is not what the code says. It says, all documents obtained in connection with the transaction. Apparently, we need to keep the documents that record the seller’s observation that the buyer’s agent was having a bad hair day.

Regardless of how we settle what is to be retained, there is also an issue as to how and when documents are retained. Thus, for example, some have suggested that all electronic communications be put on a disc and placed in the file at closing along with everything else. A sensible solution, no? Well, consider that one of the CAR participants related what was said at a session with a BRE field representative. That was: copies of electronic communications should be put in the file contemporaneously (i.e. when, or shortly thereafter, they have been received). This is because the broker, theoretically at least, should be monitoring the file as the transaction progresses. He or she should know what is going on as things happen.

If, for example, a seller sends a text proposing that the agent not disclose a known latent defect, the broker should know about this in real time, so to speak, not just after closing.

At the recent CAR director meetings, approval was given to a motion that CAR "sponsor legislation to prohibit short-lived communication like tweets or text messages from being considered ‘transactional documents’ that must be retained in a broker’s file." But this misses the mark. The issue is not about the method of communication; it is about the content. If a communication is material, it ought to be retained, regardless of how it was transmitted. If it is marginal or incidental ("What was she thinking when she chose those slacks?"), it need not be kept.

And what should an agent do? Err on the side of caution. As always.

Bob Hunt is a director of the California Association of Realtors®. He is the author of Real Estate the Ethical Way.

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