Summer Goralik's 10 Tips to Help Responsible Brokers Avoid Common Mistakes and Prioritize Compliance - Part 1

Written by Posted On Friday, 01 May 2020 05:00

Want to know how best to avoid a knock on the door from the DRE? Super Real State Compliance Expert, Summer Goralik, shares her 10 Top Tips on what mistakes brokers can avoid to avoid violations! Watch Part 1 of our series with Summer below:

10 Tips to Help Responsible Brokers Avoid Common Mistakes and Prioritize Compliance

1. Keep the Department of Real Estate (DRE) informed

• All licensees must report any change in mailing and office address, email address, and phone numbers within 30 days; All brokers must report any changes to their main office and/or branch office locations by the next business day
• When a licensee is terminated for violating the Real Estate Law, the responsible broker must immediately file a certified statement of facts with the Real Estate Commissioner
• All licensees must report criminal actions and/or other state/federal disciplinary actions to the DRE within 30 days
• The hiring of licensees must be reported to the DRE within 5 days; termination of licensees no later than 10 days
• Responsible brokers should educate their licensees about these reporting requirements

2. Avoid the use or advertising of “unlicensed” fictitious business names

• The use of unlicensed fictitious business names (or DBAs) are very common violations of the Real Estate Law by brokers and agents
• No licensee may use or advertise any name in the course of licensed real estate activity which is not first properly licensed by the DRE
• Any abbreviations or shortening of a licensee’s name constitutes a fictitious business name if such name is not first licensed by the DRE
• Responsible brokers must be the gatekeepers of compliance in this area to ensure that all names being used or advertised on behalf of the firm are licensed
• For DRE guidance, refer to DRE Form RE 282

3. “Team name” compliance

• When a team name is compliant, it does not constitute a fictitious business name or require a separate license under the Real Estate Law
• A team name is a professional identity or brand used by two or more licensees (operating under the same brokerage) for the purposes of providing real estate services
• A team name must include the surname of at least one of the licensed members; the term “team”, “group” or “associates”; cannot include terms like “real estate broker” or “brokerage”; and cannot represent itself or infer that it is an independent entity apart from the responsible broker
• All team name advertising, including “for sale” signage, must disclose in a conspicuous and prominent manner, the team name; the name and license number of at least one of the licensed members of the team; and the responsible broker’s identity shall be displayed as prominently and conspicuously as the team name in all advertising and solicitation materials
• Because DRE is honed in on these types of violations, broker supervision in this area is especially important to ensure that all team names and advertising are in strict compliance

4. Advertising compliance

• Responsible brokers must keep a watchful eye over their agents’ professional websites and social media. Advertising is “low-hanging fruit” for DRE Investigators
• All licensees must disclose their name, DRE license identification number (and unique identifier assigned by the NMLS if licensee is a mortgage loan originator), and responsible broker identity in all first point of contact advertising materials
• Any advertising materials which will be mailed or published in a newspaper or magazine, also require the disclosure of the licensee’s designation status as a Broker, Agent, loan correspondent, or Realtor, etc.
• The DRE license number can be no smaller than the smallest font
• “For Sale”, “For Rent”, “Open House”, and/or other directional signs: If only the responsible broker’s identity is disclosed, or if the sign is generic and displays no licensee identification information at all, then no other information is required
• For DRE guidance in this area, refer to DRE Form RE 559; for mortgage loan advertising, please refer to DRE Form RE 858

5. “Unlicensed” assistants

• This is an area where the DRE sees a lot of violations and takes seriously
• Responsible brokers should have established policies and procedures to ensure that non-licensed assistants do not inadvertently perform licensed acts on behalf of the broker
• Education in this area is important since DRE typically enforces a broad interpretation of unlicensed activity
• For DRE guidance in this area, refer to their “Guidelines for Unlicensed Assistants who Work in the Real Estate Industry”. This document outlines activities that can be safely performed by unlicensed assistants

6. Brokers must identify “Prohibited Activities”

• In addition to ensuring that licensees are not in violation of local, State or federal law, responsible brokers need to also consider and define “prohibited activities”, which may be legal, but are prohibited from being offered or performed by agents on behalf of the firm
• For example, DRE often receives complaints against agents who are engaged in property management, but without their responsible broker’s knowledge or approval
• Brokers may prohibit their agents from engaging in activities such as property management or mortgage loan activities, but those restrictions should be outlined in writing from the outset of the broker-salesperson relationship
• Another example is unlawful referral fee arrangements. Because there is only a small window when these activities are legal, it is important for the responsible broker to establish policies and procedures which outline permitted and prohibited activities
• The DRE’s Winter 2016 Real Estate Bulletin contains a comprehensive piece on the subject of referral fee activities and the differences between State and federal law

7. Keep a transaction and/or conversation log

• The details of a real estate transaction matter!
• If the DRE investigates a complaint involving a real estate transaction file, they will request a chronological summary of the transaction and statement from the responsible broker and/or agent
• Given DRE’s three year Statute of Limitations, it is imperative that responsible brokers make sure that their agents are recording and retaining all of the chronological events and pertinent information in connection with any real estate transaction
• The use of a transaction and/or conversation log by agents, while an “old school” practice, still holds value today. It not only helps brokerages properly address DRE inquiries, it may also help mitigate potential civil liability

8. All about disclosure

• The disclosure of material information is always tantamount in any real estate transaction, and responsible brokers must educate and supervise their agents in this area accordingly
• While the DRE does not enforce many of the laws governing sales contracts and forms provided and executed in a real estate transaction, as they fall under the authority of the California Civil Code, some major violations of the Real Estate Law that the DRE often comes across and pursues with discipline are fraud and dishonest dealing, misrepresentation, and false promise
• When agents perform multiple roles (wear “multiple hats”) on a transaction, and/or share common ownerships or affiliated business arrangements with other parties to the transaction, disclosure is required
• Avoid secret profit or undisclosed compensation by disclosing any and all fees, commission or other compensation earned in connection with licensed activity
• For DRE guidance, refer to DRE’s Summer 2019 Real Estate Bulletin

9. Trust fund handling

• Make sure your trust account is a “true” trust account and all signers have the responsible broker’s written authority
• The sole proprietor broker or designated officer of the licensed real estate corporation must be a signatory on the trust account
• Other authorized signers may be other licensed agents or brokers affiliated with the corporation. A non-licensed employee of the broker may be a signatory on the trust account as long as a compliant insurance policy or fidelity bond is in place
• Use and retain compliant, accurate and complete trust account records (e.g., Control Record, Separate Records, and Trust Account Reconciliation Report)
• Educate yourself about DRE’s requirements, establish and enforce policies and procedures, and implement an effective system of broker supervision to oversee any trust fund handling
For DRE guidance in this area, refer to DRE’s “Trust Funds” publication 

10. Broker supervision is the key to ensuring compliance

• Commissioner’s Regulation 2725 outlines “reasonable supervision” as enforced by the DRE. Every responsible broker should be aware of this regulation and the parameters of regulatory duties involved
• A responsible broker must have established policies, procedures, rules and systems in place to review, oversee, inspect and manage, including (without limitation), transaction files, material documents, trust fund handling, advertising, and familiarizing agents with State and federal anti-discrimination laws
• Responsible brokers may safely rely on other licensed brokers or agents in the firm to help assist them with their regulatory duties as long as they do not relinquish overall responsibility
• A policy manual is highly recommended, but it must be used, enforced, and updated from time to time

*All references to DRE Forms and Resources are located on DRE’s website,

For more information on coaching, consulting or speaking, contact
Summer Goralik | California DRE Real Estate Compliance Expert | or email: This email address is being protected from spambots. You need JavaScript enabled to view it.


SummerGoralikSummer Goralik is a Real Estate Compliance Consultant and licensed California Real Estate Broker (#02022805). Summer offers real estate brokers a variety of consulting services including assistance with California Department of Real Estate (DRE) audit preparation, mock audits, advertising review, and training. She helps licensees evaluate their regulatory compliance and correct any non-compliant activities. Summer has an extensive background in real estate which includes private sector, regulatory and law enforcement experience. Most recently, she worked for the Orange County District Attorney's Office as a Civilian Economic Crimes Investigator in their Real Estate Fraud Unit. Prior to that, Summer worked for the DRE for six years as an Investigator. Among many achievements, she wrote several articles for DRE, four of which were co-authored with former Commissioner Wayne Bell. Before she embarked on her career in government and law enforcement, Summer also worked in the escrow industry for nearly five years, for both an independent escrow company and broker-controlled escrow division. Aside from her consulting business, Summer is also an Instructor for The Escrow Training Institute.

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Terri Murphy

Terri Murphy, Communication engagement specialist, author, speaker, consultant, and Master Coach with Workman Success.  She is the author of 5 books, TedTalk speaker and co-radio host on Contact: or Email:

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