The DRE takes regulatory compliance very seriously and audits realtors for two reasons: either in response to complaints from a customer (investigative audits), or as a result of random selection (routine audits).
In either instance, the process can be stressful and time-consuming, and it’s common for an audit to reveal violations. The DRE Auditor will typically be someone with an accounting background and an eye for detail. They’ll likely concentrate largely on your trust fund handling, zooming in on handling of trust funds, requisite records, proper accounting, trust fund reconciliations, and broker supervision over trust fund activities; but they’ll also cast a critical eye over your entire operation and all your licensed activities.
In some cases, the individual in charge of inspection will be a DRE Special Investigator. These investigations are known to the DRE as a broker office survey, and they involve an often unannounced and unscheduled visit to a broker’s place of business, paying particular attention to licensing compliance, trust account compliance, supervision, record-keeping and required disclosure.
DRE broker office surveys and audits are fundamentally adversarial: if violations are discovered, the next step of the process is for the DRE to file an accusation. The brokerage and agent then go through an administrative trial, with license revocation a potential outcome.
It’s definitely a good idea to have an experienced real estate attorney by your side during an audit and, afterward, to help you defend yourself against any accusations that arise from it.
