SHORT
INTRODUCTION TO CALIFORNIA
© 1994 by Home Study, Inc. dba American Schools
Click on link to go to:
Table of Contents; Chapter
I: Real Property; Chapter II: Legal Ownership; Chapter III: Agency & Ethics; Chapter
IV: Contracts; Chapter V: Real Estate Mathematics; Chapter VI: Financing; Chapter VII:
Mortgage Insurance; Chapter VIII: Appraisal; Chapter IX: Transfers of Real Estate; Chapter
X: Property Management; Chapter XI: Land Control; Chapter XII: Taxation; Chapter XIII:
Fair Housing Laws; Chapter XIV: Macroeconomics; Chapter XV: Legal Professional Requirements; Chapter XVI: Notarial Law; Chapter XVII: Selling Real Estate; Chapter XVIII: Trust Funds Handling; Glossary; Index.
READING REQUIREMENT IN THIS SECTION:
Chapter XV: Legal Requirements of Employment in Real Estate
Educational Objectives: Learn about GOVERNMENT
REGULATION IN BROKERAGE TRANSACTIONS, Real Estate
Act Brief History, Real Estate Advisory Commission, REAL ESTATE
LICENSING GENERAL REQUIREMENTS, ORIGINAL
REAL ESTATE BROKER LICENSE, CORPORATE
REAL ESTATE LICENSES, ORIGINAL
SALESPERSON LICENSE, CONTINUING
EDUCATION, VIOLATIONS OF
REAL ESTATE LAW AND PENAL CODE, The
Real Estate Recovery Fund, MINERAL, OIL
AND GAS BROKERAGE,BUSINESS
OPPORTUNITIES, Franchises,
EXAMPLES OF POSSIBLE REAL ESTATE LAW VIOLATIONS, R. E.
TERMS GLOSSARY, INDEX.
Educational Objectives:
Learn about Appointment and qualifications, Requirements for qualifying and time
limit, Notary public bonds, Geographic
jurisdictions, Notaries may not refuse services, Notary seal, Notarial records,
JURAT,
Notarization of incomplete documents, Certified copies, Common questions and answers, R.
E. TERMS GLOSSARY,
INDEX.
Chapter XVII: Real Estate Salesmanship
Educational
Objectives:
Learn about
Educational
Objectives:
TRUST FUNDS - GENERAL INFORMATION; ADVANCE FEE TRUST
FUNDS; TRUST FUND BANK ACCOUNTS; ACCOUNTING
RECORDS; RECONCILIATION OF ACCOUNTING RECORDS;
DOCUMENTATION REQUIREMENTS;
AUDITS
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Chapter XV: Legal Requirements of Employment in Real Estate
Educational Objectives: Learn about GOVERNMENT
REGULATION IN BROKERAGE TRANSACTIONS,
Real Estate Act Brief History, Real Estate Advisory Commission, REAL ESTATE LICENSING GENERAL
REQUIREMENTS, ORIGINAL REAL ESTATE BROKER LICENSE,
CORPORATE
REAL ESTATE LICENSES, ORIGINAL
SALESPERSON LICENSE, CONTINUING
EDUCATION, VIOLATIONS OF REAL ESTATE LAW AND PENAL
CODE, The Real Estate Recovery Fund,
MINERAL,
OIL AND GAS BROKERAGE, BUSINESS
OPPORTUNITIES, Franchises,
EXAMPLES OF POSSIBLE REAL ESTATE LAW VIOLATIONS, R. E.
TERMS GLOSSARY, INDEX.
(The following is
reprinted by permission from the
GOVERNMENT REGULATION IN BROKERAGE TRANSACTIONS
As America outgrew its pioneering and homesteading stages of development and moved steadily toward greater and greater urbanization, city dwellers across the land found they personally could no longer satisfactorily "strike a deal" with strangers in bargaining for land and homes.
The need for an intermediary to provide basic real estate knowledge and services, to negotiate and bring about desired results was very real. This need was met in the person of the real estate agent, who continues to fill this important role in today's society.
However, along with increasing opportunities to provide real estate services to the maturing nation came certain abuses of the public trust in the form of unethical, illegal or sharp practices by dishonest or incompetent agents operating in a climate of unorganized and often unscrupulous competition. Real estate practitioners themselves began to see the need for some type of controlling organization. The general public's legitimate interest in the buying, selling, exchanging and financing of real property predictably led to the regulation of the real estate business through the adoption, state by state and over time, of reasonable legislative and administrative controls. The enactment of such controls is within the general power of a stat e to regulate any occupation whose membership should meet specified qualifications.
The Legislative and Administrative Roles
Today
all fifty states and the District of Columbia have enacted statutes governing,
to some degree, the licensing, regulation and conduct of real estate
agents. The nation's first Real estate licensing law was passed in California
in 1917. It was challenged in the
courts and declared to be unconstitutional.
The Real Estate Act of 1919 was then adopted and upheld by the State
Supreme Court as being a reasonable exercise of the power of the state to
regulate the conduct of its citizens in the interest of the common good. With subsequent amendments and additions the
law has been in effect ever since.
Real estate agents operating in the 1980s
provide both basic services and specializations to the real estate
consumer. General brokerage, property
management, development, financing, counseling, franchising and appraising are
examples of the services offered by today's real estate professionals in the
fields of residential, commercial and industrial, investment special purpose,
raw land and agricultural real estate.
Consumer concern that high business standards be maintained by today's
broker professional is no less than it was when the real estate profession first
came under regulation.
During past years, as weaknesses in
existing laws to control abuses in real estate activities were revealed,
corrective legislation was passed by socially responsive legislators, until
today a complete set of reasonable licensing, regulatory, and subdivision
marketing controls are in place and enforced by the California Real Estate
Commissioner.
This power of government regulation and
supervision is called "police power.
" Since the Real Estate Law is upheld under police power, it is
important to know more about it.
THE POLICE POWER
To many laypersons "police
power" means that power exercised by police of officers and police
departments. It is, however, much more
than the business of detecting crime and criminals, and the maintaining of
public order and tranquility. It is
almost as broad as the power of the people to govern through their chosen
representatives.
A full and satisfactory definition of
police power is not easily given. Courts
and writers rather declare its nature and extent. A quotation from an opinion from the United
States Supreme Court gives this comprehensive description: ''By means of it ,
the legislature exercises a supervision over matters affecting the commonwealth
and enforces the observance by each individual member of society of duties
which he owes to others and the community at large. The possession and enjoyment of all rights
are subject to this power. Under it the
state may prescribe regulations promoting the health, peace, morals, education
and good order of the people, and legislate so as to increase the industries of
the state, develop its resources and add to its welfare and prosperity. "
In short, police power is the power in
the state to enact laws within constitutional limits to promote the order,
safety, health, morals and general welfare of the commonwealth.
Power Not Arbitrary
This power does not give the legislature
capricious authority of regulation or permit it to pass laws arbitrarily taking
the life, liberty or property of the citizen.
Each statute must be justified as necessary and proper for the
protection or advancement of a genuine public interest.
Under our system of government, the
federal government has only those powers granted to it by the United States
Constitution. This includes all powers
necessary and proper to carry into effect the powers expressly granted. This latter doctrine of implied powers is
necessary for the federal government to function. Implied powers have been vastly increased in
recent years by all three branches of the federal government.
The states have all powers of sovereignty
except those exclusively granted to the United States, those prohibited to them
by the federal Constitution and those powers limited by their own respective
constitutions. Hence, the state
legislative branch is possessed of the entire police power of the state, except
as so limited.
By the California Constitution this power
of legislation is also vested in counties, cities and towns to make and enforce
within their respective limits all such local police and other regulations as
are not in conflict with general laws.
Real Estate Act A Brief History
The California Bureau of Real Estate,
whose chief officer is the Real Estate Commissioner, was created by legislative
act in 1917. It was the first law of
its kind providing for the licensing and regulation of real estate agents. It has served as a pattern for similar
legislation in many other states.
As first enacted, the law was declared
unconstitutional by the State Supreme Court (In re Raleigh, 177) C. 746 on
The court noted the requirements for
obtaining licenses from the Insurance Commissioner were much simpler and far
less burdensome than those imposed upon real estate brokers and salespersons by
the real estate act, e. g. , insurance licensees did not require
recommendations vouching for their truthfulness and honesty; did not need a
bond; and did not need to maintain an office.
The court could not discern any reason for these special conditions or
concessions but raised no other objections to the act.
Constitutionality of Act Declared
The constitutionality of the act was
still in question when a new Real Estate Commissioner, Ray L. Riley, was appointed on
Among the strongest supporters of the
real estate licensing law was the organized real estate industry itself. The industry believed the reasonable
regulation of those engaged in the real estate business would benefit the
public and assist in creating and maintaining higher professional standards and
ethical practices in the conduct of real estate brokerage activities.
Thus, the law has been designed primarily
for the protection of the public in real estate transactions in which the
services of an agent are employed. By
requiring qualifications for licensing (the original act did not require a
licensing examination) the Commissioner is able to ascertain that persons
acting in the capacity of a broker or salesperson have certain knowledge
qualifications.
This power given to the Commissioner is
not arbitrary and is not without control or guidance. If the Commissioner finds that an applicant
for a license is not honest and truthful, that finding must be based upon facts
which reasonably justify this conclusion.
When an applicant in fact has the qualifications required by the law,
the Commissioner must issue the license.
By requiring qualifications for license
and by the establishment and enforcement of definite standards and practices,
the law has also played an important part in the continuing industry drive for
professional designations and recognition for those engaged in real estate
practice.
Commissioner's Jurisdiction Extended
Since the passage of the original act
creating the California Bureau of Real Estate, the jurisdiction of the Real Estate
Commissioner, at first only over the licensing of real estate brokers and
salespersons, has been gradually extended.
Beginning in 1933 the administration and
enforcement of those provisions of the Business and Professions Code regulating
the sale or lease of subdivided lands (Subdivided Lands Law) have been a
responsibility of the Commissioner and the Department, with gradual yet
consistent increases over time in the degree of authority given to the
Commissioner by law.
As with the licensing law, the subdivided
lands provisions were attacked as being unconstitutional in that they placed
unreasonable burdens on the exercise of property rights. They
were vague and uncertain, and they benefited only a special class and not the
whole public. Again, our Supreme Court
held these contentions were not sound.
The court held that the object of the law
was the prevention of fraud and sharp practices in a type of real estate
transaction particularly open to abuses.
The court said the method of furnishing information to real property
purchasers which involved investigation and written disclosure of certain essential
facts was protection for innocent purchasers.
Law Codified
On
The full text of the law, and Regulations
of the Real Estate Commissioner, which clarify, implement, interpret or make
specific the various sections of the law appear in the Real Estate Law, a book
published and sold by the California Bureau of Real Estate.
Extensions of Authority
Distinct licenses as well as regulatory controls for mineral, oil and gas and business opportunity brokers and salespersons were enacted by law in 1943. Later legislation permitted and still allows any licensed real estate broker or salesperson to engage in the business opportunity field under a general real estate license. There is no longer a special license required to engage in business opportunity transactions. In 1967 the mineral oil and gas salesperson license was discontinued, but the broker licensing was retained.
In 1955 because of complaints about practices of some brokers which were clearly adverse to the public good, the Legislature passed statutes regulating the handling of real property loans by licensees since amended and strengthened. Substantial new laws and regulations were adopted in 1982 regulating disclosures in mortgage loan broker activities.
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Public Trust
In the brief history given, it can readily be understood that brokers and salespersons are engaged in many activities, as representatives of others in a confidential and fiduciary capacity. The public has more than a passing interest in seeing that the trust of the community is well placed in the real estate professional. To that end, the state seeks to help justify this trust and confidence by prescribing certain educational, experience and ethical requirements for real estate practitioners, subjecting to discipline those licensees who violate this trust.
Decisions And Rulings Affecting Real Estate Law
What is commonly referred to throughout this Reference Book as the "Real Estate Law" must clearly be distinguished from what is known as real property law, law of agency, contract law, or other legal aspects of real estate ownership and conveyancing. Although these sets of laws interrelate and overlap, they are at the same time distinct and should therefore be perceived separately.
The Real Estate Law affects the licensing and conduct of persons acting as real estate agents. The law is enforced at special administrative hearings by the Commissioner rather than by a court of law. The Real Estate Law or license law, as it is sometimes referred to, has two principal purposes: ( 1 ) the protection of the general public from harm at the hands of dishonest and incompetent agents and (2) the protection of the reputation of honest agents against the adverse publicity and public resentment often caused by the unprincipled and unscrupulous who would infiltrate the agents' ranks.
In upholding legislation of this character the court in Hall v. Geiger Jones, 242 U. S. 539 ( 1917) ruled licensing regulation was a proper exercise of the police power of the state. Other courts have held that license law regulation must be reason able and that no enforcement officer can be vested with an arbitrary power to grant or refuse a license (see Riley v. Chambers, 181 Cal. 589).
An unlicensed person who acts as a real estate broker or real estate salesperson violates the Real Estate Law and is guilty of a misdemeanor. This portion of the law is upheld in the case of Haas v. Greenwald, 196 Cal. 236. In the same case it was also held that an attorney at law performing a real estate broker's service is required to obtain a real estate broker license in order to collect a commission and that an attorney does not come within the exception of the law unless it can be shown that he or she is acting as an attorney and not as a real estate broker in the transaction.
The statutes vesting the Real Estate Commissioner with certain responsibilities and authority over the offering of subdivided real property have had their constitutionality upheld several times, the leading case being in re Sidebotham, 12 C. 2d 434.
Administration by Commissioner
The Commissioner,
appointed by the governor to serve at the governor's pleasure, is chief
executive of the California Bureau of Real Estate and presides at the meetings of the Real
Estate Advisory Commission. It is the
Commissioner's duty to determine administrative policy and enforce the
provisions of the Real Estate Law in a manner which achieves maximum protection
for the purchasers of real property and those persons dealing with real estate
licensees.
The Commissioner shall have been a real
estate broker for five years and actively engaged in business as such in
California, or shall possess related experience associated with real estate
activity in California for five years within the last ten years.
Among the Commissioner's duties in
administering the provisions of the law are: the investigation of complaints
against licensees, regulating in specified respects the sale of subdivisions;
real property securities;
The Commissioner has the power to hold
formal hearings within the terms of the Administrative Procedure Act for
determination of issues involving a licensee, license applicant or a subdivider. After the hearing the Commissioner may
revoke or suspend the license, deny or issue a license to an applicant, and in
a proper case, order restitution. The
Commissioner is empowered to issue orders to desist and refrain to prevent
violation of the Real Estate Law and the Subdivided Lands Law. The law requires that on demand of the
subject of the order a speedy hearing and decision must follow and that failure
to do so will void the order.
There are definite limitations to the
authority of the Commissioner, including a lack of authority to settle
commission disputes. Sometimes
complainants seeking the return of a deposit cannot understand why the
Commissioner has no authority to determine who is legally entitled to the
funds. It must be remembered that the
Commissioner does not take the place of a court of law and does not give legal
advice.
Real Estate Advisory Commission
A State Real Estate Board was established
by legislative act in 1937. The name was
changed to the State Real Estate Commission in 1957. The Commission was abolished
The Commissioner shall meet and consult
and advise with the commission on the functions and policies of the Department,
and how it may best serve the people of the State and recognize the legitimate
needs of the industry and the licensees of the department which it
regulates. At such meetings the views
and suggestions of the public and of the licensees of the Department shall be
solicited. The commission may make such
recommendations and suggestions of policy to the Commissioner as it deems beneficial
and appropriate. The Commissioner shall
call meetings of the commission at least four times each year. Written notice of the time and place of each
meeting shall be given to the members and such other persons who shall have
requested notice at least 10 days before such meeting.
Real Estate License When Required
Without a license one cannot receive compensation, a commission or fee for the performance of any of the acts defined as being within the purview of a licensed broker or salesperson. In addition the law sets up severe penalties for the person who acts or purports to act as a real estate broker or salesperson without being duly licensed. Such a person, upon conviction, may be punished by a fine not to exceed ten thousand dollars ($10,000), or by imprisonment up to six months, or by both such fine and imprisonment. If a corporation is found guilty of such action it may be fined up to fifty thousand dollars ($50,000). Furthermore any person who pays a compensation to a nonlicensee for performing services which require a license is guilty of a misdemeanor and may be fined up to one hundred dollars ($100) for each such offense (Sections 10138, 10139).
Exemptions From License Requirements
The law contains a lengthy list of special exemptions to the license requirement. These include, among others: resident managers of apartment buildings and complexes or their employees; employees of certain lending institutions; lenders making loans guaranteed or insured by an agency of the federal government; certain agricultural associations; licensed personal property brokers, cemetery authorities, certain collectors of payments for lenders or on notes for owners in connection with loans secured directly or collaterally by liens on real property, provided such collectors annually meet exemption criteria; clerical help, etc. (Sections 10131. 01, 10133, 10133. 1, 10133. 15 and 10133. 2. )
License Term
Original broker and salesperson licenses are issued for a four-year period. A broker or salesperson license may be renewed every four years upon filing a proper application and payment of the required fee unless the license has been revoked as a disciplinary measure (Sections 10153. 6 and 10153. 7); and the continuing education prerequisite for the renewal of a real estate license has been completed (completion of specified approved continuing education offerings totaling 45 clock-hours).
An applicant for a real estate license meeting the prerequisite requirements for the requested license is scheduled for the applicable qualifying examination. No restrictions are placed on the number of times an applicant who fails the qualifying examination may apply for reexamination. Applicants may apply for reexamination by filing the application and fee. An examination application and fee are good for a maximum period of two years after filing; after two years another application and fee must be submitted. When a qualifying examination is passed, the successful examinee is entitled to apply for a four-year license. (Sections 10153,10153. 6, 10153. 7, 10153. 8, 10153. 9. )
Examinations Required
The law requires the Commissioner to ascertain by written examination that the license applicant is qualified to act in the capacity of a broker or salesperson. Under no circumstances can the examination requirement be waived.
Applications for Real Estate Licenses
Applications for all examinations and for all licenses issued by the Commissioner must be made on forms furnished by the department. Forms can be obtained by calling at any one of the department's offices or writing to the main office in Sacramento . Detailed instructions are furnished with the application forms.
Note: When the application for license or license examination is completed, it may be presented at any one of the Department's offices or mailed to Sacramento. The application must be accompanied by the appropriate license and one set of classifiable fingerprints and the fingerprint processing fees.
Fingerprinting Requirement. A set of fingerprints is also required of
all license applicants who have not had a real estate license in current status
within the immediately preceding two year period. Fingerprints must be taken on
"California License Applicant" fingerprint cards (Form
Any office of the California Bureau of Real Estate and the Sacramento office of the California Department of Justice will take fingerprints without charge. The Department of Motor Vehicles' 149 field offices, most sheriffs offices, police stations, private fingerprint companies (listed under identification bureaus), passport service companies, and the California State Police Offices in San Francisco, Los Angeles, and Sacramento, and other facilities will take prints for an additional charge, by arrangement. Both sides of fingerprint cards must be completed including the applicant's signature and the signature of the official taking the prints. Applicants should clearly indicate on the reverse side of the fingerprint cards that the submission is made for "Real Estate License. '' As all fingerprints must be classifiable the fingerprint cards should be handled carefully to avoid smearing. Any unclassifiable fingerprints will require a new set of prints to be taken.
Some law enforcement agencies are reluctant to supply fingerprint cards because their agency name is printed on the cards. If applicants encounter this problem they should assure the printing agency that their name and address will be deleted from the fingerprint cards when they are processed by the Department of Real Estate. If the printing agency wishes, they may delete this information from the fingerprint cards prior to taking the applicant's prints.
The Real Estate Law permits the Commissioner to suspend without hearing, within 90 days after issuance, the license of any real estate licensee who procured a license by fraud, misrepresentation or deceit, or made any material misstatement of fact in the application (Section 10177. 1 of the Business and Professions Code).
The individual broker license is by far the most common type of broker license. It licenses one to act for one's own personal account in conducting a brokerage business under one's own name or under a fictitious business name (Sections 10131-10131. 6,10150,10150. 6,10159. 5 of the Business and Professions Code, and Section 2731 Regulations of the Commissioner).
The applicant for an original real estate broker license must: (1) be at least 18 years old, (2) have had previous experience and education as required by law, (3) be honest and truthful; (4) make application on a form prescribed by the Commissioner; and (5) pass the qualifying examination. The Real Estate Law requires that every applicant for real estate broker license must either have been actively engaged as a real estate salesperson for at least two years during the five years immediately preceding the application or prove to the satisfaction of the Commissioner that applicant has general real estate experience which would be the equivalent of two years of full-time experience as a salesperson, and must have successfully completed the following statutory three-semester-unit (or equivalent) college level courses:
1. Real Estate Practice
2 Legal Aspects of Real Estate
3. Real Estate Finance
4. Real Estate Appraisal
5. Accounting or Real Estate Economics
6. And three from the following group:
Real Estate Principles
Business Law
Property Management
Real Estate Office Administration
Escrows
Advanced Legal Aspects of Real Estate
Advanced Real Estate Finance
Advanced Real Estate Appraisal.
* NOTE: If the Applicant completes both Accounting and Economics, only two group 6 courses are required.
As an alternative means of qualification, the applicant may show graduation from an accredited four-year university or college and completion of the above described real estate courses.
Some private vocational schools offer
these required courses, both in residence (classroom) and through
correspondence study. However, only
those schools which have obtained formal approval from the Real Estate
Commissioner may offer these courses for
3000. Equivalent Courses of Study at private vocational Schools.
(a) In making a determination under authority of section 10153. 5of the Code as to whether a course of study at a private vocational school is equivalent in qualify to real estate courses offered by colleges and universities accredited by the Western Association of Schools and Colleges, the commissioner shall consider, but shall not be limited to the following criteria:
(1) An attended course must provide at least 45 periods of classroom instruction, each of which shall be not less than 50minutes duration. A correspondence course shall consist of not less than 15 separate lesson assignments.
(2) (A) An attended course must provide for a final examination administered and supervised by the school in a classroom setting.
(B)A correspondence course must provide for a final examination administered and supervised by a person designated by the school for that purpose. The School shall send the final examination materials to the person so designated and the completed final examination should be returned to the school by the person so designated.
(3) The school must provide instructors, instructional material and classroom facilities adequate to achieve the objective of the course offered.
(4) The school shall maintain records of for each student sufficient to allow for the preparation of a duplicate certificate upon request by a student.
(5) The school shall not use advertising or other promotional devices that are deceptive or misleading.
(6) The school shall, within 15 days of a student's successful completion of the course, deliver a document to the student evidencing such completion. The document shall contain the following information:
(A) California Bureau of Real Estate course approval number.
(B) Name of student.
(C) Course title.
(D) Dates of course completion
(E) Name and address of school.
The school may include such additional information in this document as it deems necessary.
(7) The school shall have an appropriate method of assessing student knowledge of the subject, such as, but not limited to, multiple choice, essay or oral examinations.
(b) The simultaneous instruction of two or more students in one of the courses enumerated in sections 10153. 2, 10153. 3 or 10153. 4of the Code constitutes a "private vocational school" as that term is used in section 10153. 5.
Experience Qualification
Many candidates for a real estate broker license base their claims of qualification on two years of experience as a licensed real estate salesperson in California. A section of the application form provides space for making such claims. However, even though the Department's records show the applicant has been licensed for two or more years as a salesperson, that fact does not in itself qualify the applicant; evidence that applicant has worked full time as a salesperson for at least two years must be provided. The Commissioner's office furnishes forms on which the employing broker or brokers can certify as to the extent and scope of the applicant's activity as a real estate salesperson. The completed verification forms must be mailed with the application.
An applicant for real estate broker license claiming qualification on the basis of general real estate experience equivalent to two years of full-time work as a licensed salesperson is expected to furnish a detailed account of this claimed experience. This account may be presented in a letter over the applicant's signature, however, it must be corroborated in writing by others. Letters of recommendation will not suffice.
Equivalency Claims
All claims of "equivalent" - qualifying real estate experience must be supported by valid evidence. Usually this is furnished in the form of letters or statements from employers or other responsible parties who have been in a position to note the applicant's duties or activities as they have related to the general field of real estate and will certify to them in some detail. In cases where the applicant has been licensed as a real estate agent in another state, the applicant is expected to present an official statement from the licensing authority of that state giving the complete license record of the applicant. In addition, the applicant is expected to furnish reasonable evidence that the applicant's activities as a real estate agent were on a full-time basis.
Claims of qualification based on education with specialization in subjects relating strictly to real estate must be supported by transcripts of record or certificates of achievement.
In some instances persons are in a position to claim qualification by combining certain experience and education. For example, the applicant may have been actively engaged as a licensed salesperson in California for one year, had additional experience as an escrow officer or a loan officer and also had certain education relating to real estate. In such cases a combination claim for experience can be made.
All claims of experience qualification for real estate broker license other than those based upon two years of full-time work as a licensed salesperson in California, are individually evaluated. The Commissioner decides whether the claim of qualifications meets the Commissioner's standards. If the claim is approved the candidate is scheduled for examination; if rejected the candidate may eventually qualify for a real estate broker license examination by working the required time as a salesperson. Often a claim of qualification is rejected, but the applicant is given a certain amount of credit toward two years as a salesperson.
The applicant who fails to qualify for a license because of lack of experience and/or educational prerequisites is not entitled to a refund of the fee paid with the application. The fee, however, remains to applicant's credit for two years.
Examination for Original Broker License
All applicants for an original broker license must take and pass a written qualifying examination before the license can be granted.
An applicant failing the examination may apply for reexamination. There is no limit to the number of reexaminations which may be taken (Section 10153. 8 of the Business and Professions Code) but an application is valid for only two years. A broker applicant who fails to take the examination on the scheduled date may apply for another examination date by completing, signing, and returning the Examination Schedule Notice (RE 401) along with the appropriate fee to the Examination Section of the Department. The rescheduling request can also be made on an Examination Change Application (RE 415) after the originally scheduled examination date has passed and the test results have been released. The first request for a new examination date must be accompanied by a fee; another fee is charged for the second and any subsequent rescheduling requests (Section 10213. 6 of the Business and Professions Code). A person who fails to pass the examination during this two-year period must file a new application as the original application is lapsed (Section 10208. 5 of the Business and Professions Code).
An applicant who passes the examination is notified and must then within one year of the examination date (Section 10201. 6 of the Business and Professions Code. ) apply for the original broker license, which is issued for a four-year period. The broker license is renewable.
CORPORATE
In some cases brokers will elect to do business as a corporation. A corporation may be licensed as a real estate broker provided at least one officer of the corporation is a duly qualified real estate broker willing to act as the corporation's responsible designated broker-officer. The corporation must submit with the corporation's license applications and fee, a Certificate of Status from the Secretary of State before the Commissioner will issue the corporation a real estate broker license. ( Business and Professions Code Sections 10211,10158,10159 and Commissioner's Regulations 2740, 2742. )
No real estate salesperson may be licensed in the employ of a corporate real estate broker licensee, or perform acts for which a real estate license is required on behalf of or in the name of the corporation, if: (a) the salesperson singly or together with other real estate salespersons licensed in the employ of the corporation owns or controls, directly or indirectly, a majority of the outstanding shares of stock of the corporation, or (b) the salesperson is a director or an officer of the corporation.
The provisions above shall not apply in the case of a corporation which is licensed to act through an individual real estate broker who is an officer and director of the corporation, and who has the responsibility to supervise the performance of acts for which a real estate license is required by those real estate salespersons who are shareholders, officers or directors of the corporation. (Section 10159. 2 and Regulation 2741. )
Licensing a Corporation as a Real Estate
Broker
When a corporation is to act as a real
estate broker, the firm must be licensed by the California Bureau of Real Estate
through a qualified broker, i. e. a person who is now licensed as a broker, or
who has passed the broker license examination and is now qualified to obtain a
broker license.
Application
Each broker who is to act for and on
behalf of a corporation as a broker-officer must submit a completed Corporation
License Application (RE Form 201) and the appropriate license fee. Broker-officer applicants without individual
broker status will be required to furnish evidence of completion of continuing
education requirements.
Certificate of Status
A Certificate of Status, obtained from
the Office of the California Secretary of State must be submitted. The Certificate of Status must be executed
within thirty days from the date the corporation applications are submitted. In the case of a foreign corporation, a
Certificate of Qualification is also acceptable.
Fictitious Business Name
If the firm desires to use any name other
than its own, a copy of the Fictitious Business Name Statement filed with the
County Clerk's office showing the d.
b. a. filed on behalf of the corporation in the
county where the corporation's principal place of business is located must be
submitted. (Section 10159. 5. )
Salesperson Licensed to Corporation
For each currently licensed salesperson
to be placed in the employ of the corporation, a completed Salesperson Change
Application (RE Form 214) must be submitted.
Licensed Corporate Directors and/or
Officers not Acting as the Designated
Broker-Officer
Refer to Sections 10131 10158, and 10159
of the Business and Professions Code to determine if additional corporation
licenses may be required. Any broker
conducting business for and on behalf of the corporation which requires a real
estate license will be at variance with the Real Estate Law if not licensed as
a broker-officer. NOTE: All documents
relating to a corporation submitted to this office must be signed by the
licensed broker-officer(s) of the corporation.
Restrictions on Employment of
Salespersons
The Commissioner's Regulations restrict
the employment of a salesperson by the corporation when (a) the salesperson is
a director or officer of the firm, or (b) the controlling interest of the firm
is owned by one OF more salespersons, unless the responsible corporate
broker-director-officer supervises the licensed acts of such salespersons
(Commissioners Regulation 2741).
Additional Officers
Additional broker/officers may be
licensed by submitting a completed Corporation License Application (RE Form
201) and the appropriate license fee.
Broker-officer applicants without individual broker status will be
required to furnish evidence of completion of continuing education
requirements.
Replacing The Designated Broker-Officer
The licensed designated broker-officer of
a corporation may be replaced by another qualified broker for the balance of
the license period by submitting (a) a completed Corporation License
Application (RE 201) and (b) a copy of the personally signed resignation of the
officer leaving the firm, or a copy of the Resolution of the Board of Directors
with the corporate seal, or a signed statement giving the date of death of the
currently licensed designated broker-officer.
Adding A New Officer As The Designated
Officer
A new designated officer may be licensed
upon receipt of a completed Corporation License Application (RE 201) the
appropriate license fee and statement that the currently designated
broker-officer will remain with the firm as an "additional"
officer. Broker-officer applicants
without individual broker status will be required to furnish evidence of
completion of continuing education requirements. Branch licenses will be reissued to match
the term of the new "designated" officer without any additional
fee.
Change Of Designated Officer When Both
Currently Hold A Broker-Officer
License With Corporation
Submit a completed Corporation Change
Application (RE 204A). No new license
certificate will be issued to either officer.
However, if the license terms differ, new branch office licenses will be
issued.
Change Of Main Office Or Mailing Address
Submit a completed Corporation Change
Application (RE 204A) signed by licensed officer.
This license covers those individuals who are to be employed as salespersons under the control and supervision of a licensed broker. The license permits licensed activity in the employ of a broker only, and never as an independent agent. Salespersons' licenses must be available for inspection in the broker's principal office and not at branches (Commissioner's Regulation 2753). The salesperson can be compensated for work as an agent only by the salesperson's employing broker (Business and Professions Sections 10132, 10160 and 10137).
License Requirements
The candidate for an original real estate
salesperson license must: (1 ) be at least 18 years old; (2) make application
on a form prescribed by the Commissioner; (3) be honest and truthful; and (4)
pass a qualifying examination as required.
On and after
real estate practice
real estate appraisal
accounting
business law
property management
legal aspects of real estate
real estate finance
real estate economics
escrows
real estate office administration
All courses must be three semester unit courses, or the quarter-unit equivalents, completed at an accredited institution of higher learning or an equivalent course of study offered by a private vocational school approved by the Commissioner.
The application for a salesperson examination must be made on R/E Form 400 and be accompanied by the examination fee.
There is no limitation on the number of reexaminations which may be taken by the candidate for salesperson license who fails the qualifying examination. There is a reexamination fee.
An applicant who fails to take the examination on the scheduled date may apply for another examination date by completing, signing and submitting the Examination Schedule Notice (RE 401) along with the appropriate fee to the Examination Section. The rescheduling request can also be made on an Examination Change Application (RE 415) after the originally scheduled examination date has passed and after the test results have been released. A fee is charged for the first rescheduling; another fee is charged for any subsequent rescheduling requests.
An applicant who successfully passes the salesperson examination may apply for a four-year original license by submitting, within one year of the examination date, an application for the real estate salesperson license (RE 202) together with a $120 license fee, a set of classifiable fingerprints, the fingerprint processing fee, and transcripts showing completion of the remaining required courses. If the applicant does not submit evidence of completion of the two remaining required courses when applying for the license, the fee for the license is $145. The license will then be issued on the condition that evidence of the remaining courses will be submitted within 18 months of licensure or the license will automatically be suspended.
LICENSE RENEWALS
BROKERS
All
real estate licenses are issued for a period of four years. An original four-year license is renewable
upon payment of appropriate fees without examination, but continuing education
requirements must be satisfied. The
application for license renewal must be postmarked prior to
Since
Late Renewal
The holder of a license who fails to
renew it prior to the expiration of the period for which it was issued may
renew it within two years from such expiration upon proper application and the
payment of a late renewal fee. However,
this two year grace period does not authorize a continuation of licensed real
estate activity (that must cease upon the expiration of the license) .
Two years after a license expires, all
license rights lapse. The individual
will be required to requalify through the examination process again before
being licensed in real estate.
OTHER LICENSE INFORMATION
Inactive License Status Eliminated
Effective
Partnerships
The department no longer issues formal
partnership licenses, following a change in the law in 1968. Real estate business partnerships continue
to exist and partnerships may be formed under the general law relating to such
entities. A partnership ma y perform
acts for which a real estate broker license is required, provided every partner
through whom the partnership so acts is a licensed real estate broker.
Broker members of a partnership formed by
written agreement may operate from the branch offices of the partnership
without obtaining an individual branch office license, provided one member of
the partnership is licensed at that location (Commissioner's Regulation
2728).
A salesperson whose employing broker is a
member of the partnership (formed by written agreement) may work out of any
branch office maintained by any one of the members of the partnership and may
perform acts on behalf of the partnership (Commissioner's Regulation
2755).
Restricted License
There are certain types of restricted
licenses sometimes issued by the Commissioner when a license has been
suspended, revoked or denied after a hearing.
In effect, they are probationary licenses and contain specific
restrictions. (Business and Professions
Code Sections 1O156. 5, 10156. 6, 10156.
7, 10156. 8 and 10177(k).
Note: The Commissioner can restrict
licenses by: term (one month, three months, etc. ); employment by a particular broker (for a
salesperson); limitation to a certain area or type of activity; requiring
detailed reports of each transaction; the filing of a surety bond; or by other
conditions or combination of conditions.
EXAMINATION
License or examination fees must
accompany the application for the different types of examinations or
licenses.
Under the law, fees paid to the
Other fees
Fees for license changes are no longer
required, such as: address changes of any kind, salesperson employment
transfers, personal or corporate name change, adding or deleting fictitious
business names, branch offices and duplicate license certificates.
Since
Course Requirements
Since
(1) A 3 clock-hour offering (minimum) in ethics, professional conduct and legal aspects of real estate.
(3) Not less than 18 clock-hours (minimum) of offerings designated under the category of consumer protection, and;
(4) Other offerings which will enable the licensee to achieve a high level of competence in serving the objectives of consumers. These offerings generally related to business skills are designated under the category of consumer service and may make up the remaining 21 clock-hours needed to complete the total of 45 clock-hours required for license renewal.
Testing
The law provides that all continuing education offerings will require the successful completion by attendants of an appropriate form of testing examination or evaluation in order to receive credit.
Certificate of Attendance
Upon successful completion of an offering
the offering entity (
FAIR
HOUSING
As a result of recent legislation (AB 1902 - Knowles), the continuing education renewal requirements will change, effective January 1, 1996. The changes affect all licensees, salespersons and brokers. Licensees with an expiration date of December 31, 1995 will be subject to these new requirements, since the effective date of their license will be January 1, 1996. These changes are somewhat complicated, because the requirements change depending on whether it is the first renewal on or after January 1, 1996 or a subsequent renewal on or after January 1, 2000.
Every broker and salesperson who renews his or her license on or after January 1, 1996 will be required, as part of the continuing education renewal requirement, to successfully complete a 3-hour course in each of the following subjects: Agency, Ethics, Trust Fund Handling, and Fair Housing. Except for salespersons who are renewing for the first time after qualifying for their license (by completing Real Estate Principles and the two additional courses required by Section 10153. 4 of the Business and Professions Code), licensees will also be required to complete a minimum of 18 additional hours of courses related to consumer protection. The remaining hours required to satisfy the 45-hour continuing education requirement may be related to either consumer service or consumer protection at the option of the licensee.
New salespersons who renew their licenses for the first time on or after January 1, 1996 will only have to complete the four courses specified, instead of the full 45-hour continuing education requirement.
When licensees renew their license for the second time on or after January 1, 2000 (i. e. , the second renewal period after January 1, 1996), they will be required to complete, as part of the standard 45 hours of continuing education, either a 4-hour survey course covering the four mandatory subjects (Agency, Ethics, Trust Fund Handling, and Fair Housing) or separate 3-hour courses in any two of the four mandatory courses. Those licensees who select the option of taking two separate 3-hour courses in any two of the four mandatory subject areas are required, on their next renewal, to take either the two mandatory courses that were not taken for the immediate prior renewal, or the 4-hour survey course.
Exemption from CE Requirement
The only exemption to the continuing education requirement is for those individuals who have been a licensee in good standing for 30 continuous years in the state and who are 70 years of age or older.
Transfer of Salesperson License
To effect a transfer of employment, a salesperson, the former broker, and new employing broker should take the following steps:
(1) The former employing broker must immediately notify the Department's headquarters in Sacramento of the action in writing.
(2) The former employer gives the transferring salesperson the latter's license certificate and signs Salesperson Change Application.
(3) The salesperson strikes out the former broker's name and address on the license and types or writes in ink the new employer's name with the date and salesperson's initials and gives the license certificate to new broker to maintain at the main office.
(4) Within five days a Salesperson Change Application is to be completed by the salesperson and the new employing broker and sent to the California Bureau of Real Estate. A new license certificate will not be issued.
Discharge of Salesperson. When a salesperson is discharged by an employing broker for a violation of any of the provisions of the Real Estate Law, the employing broker must immediately file a certified written statement of the facts with the Commissioner.
Effect of Revocation or Suspension. When a real estate broker license is revoked or suspended, the licenses of every real estate salesperson in the broker's employ are automatically canceled. Such salespersons may transfer their licenses to a new employing broker.
Loss of License Status. This occurs when a person holding a license allows two years to elapse from the expiration date without applying for renewal, submitting evidence of completion of the statutory continuing education requirements, and paying the required fee. Another example of loss of status is revocation.
VIOLATIONS OF REAL ESTATE LAW AND PENAL CODE
Sections 10176 and 10177 of the Business and Professions Code constitute the foundation for most license suspensions or revocations. Section 10176 is concerned with the actions of the real estate licensee performing or attempting to perform any of the acts licensed within the scope of the Real Estate Law. As a general rule the licensee must have been acting as an agent in a real estate transaction before the section will apply.
Types of Violations
The following is a brief discussion of the various grounds in the Business and Professions Code for disciplinary action against a licensee and the reasons for which a real estate license may be denied:
Real Estate Law concerns the conduct of licensees rather than the settling of disputes about damages or injuries between licensees and their clients.
Continued Misrepresentation. This section gives the Commissioner the
right to discipline a licensee for "a continued and flagrant course of
misrepresentation or making of false promises through real estate agents or
sales-persons. "
Dual Agency. This section requires a licensee to inform
all principals if the licensee is acting as agent for more than one party in a
transaction. An example is the licensee
who receives a selling commission from the owner of a piece of property and, at
the same time, receives an additional fee from the buyer without the knowledge
of both.
Definite Termination Date. This section requires a specified termination date on all exclusive listings relating to transactions for which a real estate license is required, including loan authorizations and bonds, not just exclusives for sale, purchase or exchange of real estate or business opportunities. What is a definite termination date has been the subject of a number of lawsuits. Generally, it can be said that if a definite date is specified, or if a definite period of time is indicated , the requirement is satisfied. However, where it cannot be determined from the listing itself when the listing is to expire, then the listing would not be in compliance with the law.
Secret Profit. Secret profit cases usually arise when the broker, who already has a higher offer from another buyer, makes a low offer, usually through a "dummy" purchaser. The broker then sells the property to the interested buyer for the higher price. The difference is the secret profit.
Listing Option. This section requires a licensee who has used a form which is both an option and a listing to inform the principal of the amount of profit the licensee will make, and to obtain the written consent of the principal approving the amount of such profit, before the licensee may exercise the option. This section does not apply where a licensee is using an option only.
The reason for this requirement in the law is that a licensee, acting as an agent occupies a highly confidential position of a fiduciary nature. The law imposes upon an agent the responsibility to do nothing which will act to the detriment of the principal, and to keep the principal informed of any fact of which the principal should be aware. This section is provided to prevent unauthorized profits by requiring the broker to give the principal full information. This section of the Real Estate Law has had the effect of minimizing the use of combination option-listings.
Dishonest Dealing. "Dishonest dealing" is a sort of
catch-all section.
Signatures of Prospective
Purchasers. This strikes at what was
once a common practice in some areas in the sale of business opportunities,
where brokers used an agreement form known as a "send-out list. " They had no written or oral listings
from the owners of the businesses included in these lists. The agreement provided that the prospective
purchaser should either deal with the broker who furnished the list of
businesses for sale, or pay the broker a fee, if the purchaser bought directly
from the owner or through any other agent.
Brokers must now obtain a written authorization to sell from a business
owner before securing the signature of a prospective purchaser to any such
agreement. Obtaining a License by
Fraud. This section gives the
Commissioner the power to proceed against a licensee for misstatements of fact
in an application for a license, and in those instances where licenses have been
procured by fraud, misrepresentation, or deceit. Generally, cases arise under this section
when the applicant has falsified an application or failed to reveal a previous
criminal record.
Convictions. This section permits proceeding against a
licensee after a criminal conviction for either a felony or a misdemeanor which
involves moral turpitude and is substantially related to the qualifications,
functions, or duties of a real estate licensee. A court has defined moral turpitude as
everything done contrary to justice, honesty, modesty, or good morals.
Nonpayment of Child Support. Section 11350. 6 of the Welfare and Institutions Code has been modified to take care of the so-called dead-beat parents, who do not pay court ordered child support. Any state board issuing any kind of professional license, thus also the Department of Real Estate, will withhold renewal of such license to any licensee of whose name it was notified by the State Department of Social Services.
False Advertising. This section makes licensees who are parties to false advertising subject to disciplinary action. The ban extends to subdivision sales as well as general property sales. A related section in the subdivision law, Business and Professions Code Section 11092, permits the Department to proceed against a person for criminal prosecution when not a licensee, and to discipline when such person is a licensee.
The Department has authority to proceed against the licensee for violation of any of the other sections of the Real Estate Law, the Regulations of the Commissioner, and the subdivision laws.
Misuse of Trade Name. Only active members of the national association or local associations of real estate boards are permitted to use the term "Realtor(R)". This is a term belonging exclusively to such members, and no licensees may advertise or h old themselves out as "Realtors" without proper entitlement. The section applies to any "term" or insignia of any real estate organization.
Conduct Warranting Denial. This is a general section of the Real Estate Law. Almost any act involving a crime or dishonesty will fall within the purview of this section including the denial, or suspension of a license issued by another government agency. An essential requirement to the issuance of a license is that the applicant be honest and truthful. If any of the acts of a licensee establishes that a licensee is not possessed of these characteristics, then Section 10177(f1) will apply. This section also provides for disciplinary actions to be taken where a real estate licensee has either had a license denied or a license issued by another agency of this state, another state, or the federal government, revoked or suspended for acts which if done by a real estate licensee would be grounds for the suspension or revocation of a California real estate license.
Negligence or Incompetence. Demonstrated negligence or incompetence, while acting as a licensee, is cause for disciplinary action. The Department proceeds in those cases where the licensee is so careless or unqualified that to allow the licensee to handle a transaction would endanger the interests of clients or customers.
Supervision of Salespersons. This section provides that a broker is subject to disciplinary action if the broker fails to exercise reasonable supervision over the activities of the broker's salespersons.
Violating Government Trust. This section prescribes disciplinary liability for using government employment to violate the confidential nature of records thereby made available.
Other Dishonest Conduct. Specifies that any other conduct which constitutes fraud or dishonest dealing may subject the one so involved to license suspension or revocation.
Restricted License Violation. Makes violation of the terms conditions, restrictions and limitations contained in any order granting a restricted license grounds for disciplinary action.
Violation of Corporations Code. Violates any of the provisions of the
Corporations Code or of the regulations of the Commissioner of Corporations
relating to securities as specified in Section 25206 of the Corporations
Code.
Other Penalty Sections
There are further sections in the
Business and Professions Code which provide for the revocation or suspension of
licenses for acts other than those set out under the general disciplinary
action sections just described.
Sections 10137 and 10138 provide that the
license of any real estate broker may be revoked or suspended for employing or
compensating any unlicensed person to perform acts requiring a license.
Section 10140 provides that the real
estate license of any licensee may be revoked or suspended for false
advertising.
Section 10140. 6 provides that advertising of acts which
require a license must contain a designation disclosing that the licensee is
performing such acts.
Section 10141 provides that a broker must
cause notice of sales price to be given to both buyers and sellers within one
month after the sale is completed.
Section 10141. 5 specifies a broker's responsibility for
recording trust deeds.
Section 10142 provides that a licensee
must give a copy of any contract to the party signing it at the time it is
signed.
Section 10145 specifies licensee's
responsibilities in handling trust funds.
Section 10148 requires retention and
availability for inspection of all listings, deposit receipts, cancelled
checks, trust records, etc. for a three
year period.
Section 10160 provides that brokers shall
retain and make available for inspection licenses of salespersons in the
broker's employ.
Section 10161. 8 requires a broker to notify the Department
when a salesperson is employed or terminated.
Section 10162 provides that all active
brokers must maintain a definite place of business in the State of
California.
Section 10163 provides that brokers
maintaining more than one place of business must first procure a branch office
license for each branch.
Section 10165 provides for penalties for
failure to make licenses available for inspection and to maintain a place of
business.
Section 10167 requires the licensing of
individuals, other than real estate licensees, engaged in prepaid rental
listing services and makes a willful violation of the law a misdemeanor.
Section 10175. 2 provides for a monetary penalty in lieu of
suspension.
Section 10177. 1 provides that the Commissioner may, without
a hearing, suspend the license of any person who procured the license by fraud,
misrepresentation, deceit, or by the making of any material misstatement of
fact in the application for such a license.
Section 10177. 2 authorizes the Commissioner to investigate
complaints and take action against a licensee who while performing acts under
Section 10131. 6 (used mobilehome sales)
is guilty of specified acts of false advertising, misrepresentation, vehicle
transfers. and unjustified costs.
Section 10177. 4 provides for a suspension or revocation of
a license if a licensee claims, demands or receives compensation for referring
customers to any of the following companies: escrow, pest control, home
warranty, title insurer or underwritten title company or controlled
escrow.
Section 10177. 5 provides for a revocation or suspension of
a license in a transaction for which a license is required when a final
judgment is obtained in a civil action against the licensee upon the grounds of
fraud, misrepresentation or deceit.
Section 10178 makes it a violation if a broker
discharges a salesperson for cause and then fails to notify the
Commissioner.
Section 10238. 6 provides fine and imprisonment penalties
for the real property securities dealer or an employee of a real property
securities dealer who makes false statements, uses or is responsible for false
advertising, willfully violates or conspires to violate statutory or
commissioner's regulations of conduct relative to real property securities or
loans.
Section 10475 provides for automatic
suspension of a real estate license if the Commissioner pays a claim against a
licensee from the Recovery Account. No
license reinstatement shall be granted until full reimbursement to the fund has
been made.
Section 11023 provides that any person
who violates any part of Sections 11010, 11010.
1, 11013. 1, 11013. 2, 11013.
4, 11018. 2, 11018. 7, 11019, or Section 11022, having to do with
subdivision controls is guilty of a public offense punishable by a maximum fine
of $10,000 or by a maximum imprisonment of one year or both. Violation of these sections of the law is
cause for discipline under Section 10177 (d) .
The Real Estate Recovery Fund
This fund was established to provide financial restitution for any wronged party participating in a real estate transaction. Most states require the posting of a bond for the expressed purpose of satisfying a claim against a licensed real estate professional. States vary in the method of assessment and administration of the fund. The states governments determine management, policy and procedure.
Broker/Agent
The licensed real estate broker and frequently the owner of the brokerage firm is legally responsible for the actions of the agent. The broker, depending upon the size of the firm supervises himself. The broker is responsible for preparing or overseeing all documents resulting in the sale, lease and purchase of property including land.
The real estate broker is also responsible for all funds or trust monies resulting from transactions generated by the firm. If a brokerage firm has more than one office or branch, an experienced sales agent or broker must supervise all real estate transactions conducted in that branch. The broker and sales agent's license must be displayed in each branch.
The licensed sales agent performs essentially the same functions as the broker with few exceptions. The broker must supervise property closing or be responsible for trust monies. The sales agent cannot work independently of the broker. All documents and advertisements must have the broker's name, also.
Broker Required to Initial and Review Instruments, and Delegation of Authority
Commissioner's Regulation 2725 requires that every instrument prepared or signed by a real estate salesperson in connection with any transaction for which a real estate license is required that may have a material effect upon the right or obligations of a party to the transaction shall be reviewed, initialed, and dated by the salesperson's broker within five working days after preparation or signing by the salesperson or before the close of escrow, whichever occurs first. As long as the broker does not relinquish his overall responsibility for supervision of the acts of salespersons licensed to him, the broker may delegate this responsibility or authority as follows:
1. To any licensed real estate broker who has entered into a written agreement with the broker relating to the delegation;
2. To a real estate salesperson licensed to the broker if the salesperson has accumulated at least two years full-time experience as a salesperson licensee during the immediately preceding five year period and has entered into a written agreement with the broker with respect to the delegation of responsibility.
In the case of any real property or business opportunity transaction where an escrow is conducted by a real estate broker under the exemption of Section 17006 of the Financial Code, the broker's responsibility to review and initial instruments extends to escrow instructions and closing statements if rendered to the parties to a transaction prior to close of escrow, and which were prepared or signed by a salesperson licensed to the broker or by an associate or employee of the broker.
Unlawful Practice of Law
In 1943 in People v. Sipper (61 CA 2d 844), California District
Court of Appeal stated that the practice of law is the doing and performing
services in a court of justice in any matter pending therein throughout its
various stages and in conformity with the adopted rules of procedure. The court recited the larger traditional
definition that includes legal advice and counsel and the preparation of legal
instruments and contracts by which legal rights are secured, although such
matters may not be pending in a court.
In the Sipper case a married couple had
asked the real estate broker "to make out a paper to protect Mrs. Hetman for the money" which they had
borrowed from her in order to pay off the indebtedness on their real
property. This request was made when
they first met the defendant broker, and he proceeded to prepare a trust deed,
and later a mortgage. He charged $15
for his services, later reducing the charge to $10.
The appellate court held that the trial
jury was justified in concluding the defendant broker undertook to, and did,
advise his clients as to the kind of legal document that they should execute in
order to secure the loan. He made a
charge which clearly indicated "that he considered he was called upon to
do something more than the mere clerical work of typing in certain furnished
information on a blank form. " This
was practicing law.
Significantly the court stated that if
the defendant ". . .
had only been called upon to perform and had only undertaken to perform
the clerical service of filling in the blanks on a particular form in
accordance with information furnished by the parties, or had merely acted as a
scrivener to record the stated agreement of the parties to the transaction, he
would not have been guilty of practicing law without a license. "
Licensees may, however, in the course of
exercising their profession be helpful to their clients and such efforts would
be recognized as proper where:
(1) the instrument is simple or
standardized;
(2) the draftsman or intermediary does
not charge any fee for such work (other than his regular commission for the
transaction); and,
(3) the drafting is incidental to his other
activities in the transaction.
Selection and use of a form by the broker
may sometimes require a lawyer's help.
Criminal Law
A felony is a crime which is punishable
with death or by imprisonment in the state prison. Every other crime is a misdemeanor or an
infraction. Many crimes may, in the
discretion of the court, be punishable by imprisonment in the state prison on
the one hand or in the county jail or fine on the other. Such a crime is a misdemeanor for all
purposes if the court's judgment imposes punishment other than imprisonment in
the state prison or where the court grants probation without imposition of
sentence and declares the offense to be a misdemeanor.
The punishment for a felony varies
depending on many factors. In general
punishment is not for less than 16 months in state prison, and often is much
longer. Misdemeanors are punishable by
a maximum of one year in the county jail and in general not more than six
months, or by a fine, or both. Terms of
probation may include a period of imprisonment as well.
There are many other statutes which
provide for criminal penalties. If the
broker is in doubt as to whether the structure of a transaction constitutes a
crime, he or she would do well to obtain legal advice.
The definitions which follow are
paraphrased from the actual code sections in the interest of brevity and
clarity. Reference to the actual code
language is necessary to learn the precise meaning and effect. No attempt has been made to include every
crime that may be related to the real estate business.
The Penal Code
Grand Theft and Petty Theft References to "larceny," "embezzlement," or "stealing" in California laws or statutes have been consolidated to" theft. " Grand theft is committed when the money, labor, or real or personal property taken exceeds four hundred dollars ($400) in value. There are provisions however which define theft of property of lesser value as grand theft, such as some farm crops, farm animals and real property severed from the land. (Penal Code Sections 484, 487a through 487g, 488)
Real Estate Related Crimes
Receiving funds for the purpose of construction, and wrongfully diverting that money from the intended purpose is theft, as is receiving such funds by submitting a false voucher for construction loan funds. (P. C. Sections 484b, 484c)
Copying without permission, and with intent to use, documents owned by a title company is theft. (P. C. Section 496c)
Removing a structure from mortgaged real property, or after foreclosure sale, with intent to defraud or to injure the mortgagee or purchaser is theft. (P. C . Section 502. 5)
A debtor who sells property covered by a security agreement and fails to pay to the secured party the amounts due under the security agreement, or the proceeds (whichever is the lesser), commits embezzlement. (P. C. Section 504b)
A broker or other fiduciary fraudulently appropriating or secreting trust funds commits embezzlement. (P. C. Section 506)
Making or procuring a false financial
statement to benefit oneself or another person in obtaining credit is a
misdemeanor or a felony. (P. C.
Section 532a)
Offering or giving parcels of real
property with winning numbers at any drawing of members or with admission
tickets, and collecting fees in connection with the land transfer are
misdemeanors. (P. C.
Section 532c)
Giving a kickback of construction funds is a misdemeanor. (P. C. Section 532e)
Selling the same land twice to different persons is a felony. (P. C. Section 533)
A broker or agent "holding out" on a principal, or rendering a principal, on demand, a false accounting is committing a misdemeanor. (P. C. Sections 536, 536a)
Except for posting legal notices, placing advertising signs on public or private property without permission is a misdemeanor. (P. C. Sections 556, 556. 1, 556. 2)
Signing the name of another person, or of a fictitious person, without authority to do so or falsely making, altering, forging or counterfeiting certain documents such as leases, deeds or checks or passing such documents as true and genuine, wit h intent to defraud is a misdemeanor or a felony. (P. C. Sections 470, 473)
The Civil Code
The Civil Code sets out various crimes. Several are for regulation of real property sales contracts, which are defined as agreements to convey title to land upon satisfaction of specified conditions set forth in the contract and which do not require conveyance within one year of formation of the contract. These are also known as contracts of sale or land installment contracts.
a. A seller under an unrecorded contract of sale who, without the buyer's consent, encumbers the land in an amount exceeding the present contract balance, commits a crime. (Civil Code Section 2985. 2)
b. A seller under a contract of sale who knowingly, while there is a payment due on an obligation secured by the land, appropriates a payment received from the buyer to any purpose except payment on that obligation commits a crime. (Civil Code Sect ion 2985. 3) This does not apply to any difference between the payment received by the seller over the amount due on the seller's obligation.
c. If the seller under a contract of sale receives pro rated tax and insurance payments from the buyer, seller must hold those sums in trust and disburse the funds only for that purpose, unless seller has the consent of the buyer and any holder of a n encumbrance. To violate this Section 2985. 4 of the Civil Code is a crime by virtue of Penal Code Section 506b, which also, redundantly, makes a crime of violation of Civil Code Section 2985. 3.
d. Any real property sales contracts entered into after January 1, 1978, describing property created by a division of land after and before that date, must contain a statement by the vendor that the parcel or parcels conveyed either comply with the Subdivision Map Act or meet other criteria. A willful violation of some aspects of this law is a misdemeanor. (Civil Code Section 2985. 5 1) .
The Business and Professions Code
The Business and Professions Code provisions which specifically regulate the real estate business and real estate licensees are set out in the book entitled Real Estate Law. Several crimes are defined in the real estate law. The index in the law book lists them under the category of "crimes. " (These prohibitions have mainly to do with false advertising and the use of unfair trade practices in connection with the sale of real estate. )
The Corporations Code
The sale of fractionalized interests in promissory notes secured by deeds of trust may result in the sale of corporate securities subject to qualification or exemption with the California Department of Corporations. Without such qualification or exemption, the sales are illegal and the broker or offeror could be convicted of a misdemeanor or a felony.
MINERAL, OIL AND GAS BROKERAGE
Broker applicants must pass an examination and meet the requirements of honesty and truthfulness. The general requirements and licensing provisions relating to real estate licensees also apply to Mineral, Oil and Gas (M. O. G. ) licensees. The same penalties are imposed for performing any acts which are at variance with the requirements of the Real Estate Law. In general, causes for disciplinary action against the M. O. G. Licenses are much the same as those pertaining to real estate licenses.
Mineral, Oil and Gas License Examinations
As mineral, oil and gas brokerage is a specialized branch of the general real estate brokerage business. The primary prerequisite is a broad knowledge of the elementary principles of geology relating to this field and sound knowledge of the fundamentals of real estate practice and ethics.
It is suggested that a person interested in obtaining a M. O. G. license develop a keen knowledge of subject matter such as that discussed in the California Bureau of Real Estate's Reference Book, with particular emphasis upon the functions and duties of a real estate broker as they relate to practice in the field of mineral, oil and gas brokerage. Any of the subjects included in this book may be the basis for questions in the mineral, oil and gas broker examination.
The mineral, oil and gas broker examination is not designed for persons with backgrounds restricted to geology or engineering, as it incorporates the precepts of the practice of real estate which are required for any applicant for a real estate broker license. The applicant should become familiar with real estate law, public control, appraisal, finance and practice, in addition to the field of geology which is specific to the mineral, oil and
gas broker examination.
Study References
Many of the subjects are covered in a number of geology text books available in bookstores, including California's Changing Landscapes by Gordon B. Oakeshott, which focuses on the geology of California in particular.
Considerable information concerning the oil and gas fields of this state their structural conditions, importance, quality of oil or gas produced, etc. , may be obtained in the various publications of the California Division of Oil and Gas, Department of Conservation, listed in their publications listing PR2S. The booklet California Oil, Gas, and Geothermal Resources An Introduction (TR03) is available free on request. The Annual Report of the State Oil and Gas Supervisor may be obtained free upon request, as may various technical reports, papers and pamphlets. It covers in general terms the highlights of the state's energy resources oil and gas origin and accumulation, oil and gas exploration methods, drilling methods, well completion and production methods, oil reservoirs, production simulation methods, offshore fields, conservation, transportation of oil and gas, refining, history of production in California, environmental protection and enhancement and geothermal resources.
The California Division of Mines and Geology Bulletin 176 (out of print but available at most libraries) together with Bulletin 191 provide a condensed history of the geologic occurrence, economic development and utilization of the state's mineral, oil and gas resources.
Additional source material is the Mineral Yearbook, United States Bureau of Mines and California Laws for Conservation of Petroleum and Gas both available from the California Division of Oil and Gas.
Special Permits for Real Estate Licenses
Under the law, licensed real estate brokers are not required to have an M. O. G. license to engage in transactions wherein the transfer of mineral, oil or gas property is purely incidental to the sale, lease or exchange of real property.
Further, the law provides that any real estate broker who occasionally negotiates a transfer of mineral, oil or gas property incidental to the real estate business may secure a permit for such transactions from the Commissioner and is not required to have a mineral, oil and gas license. Not more than 10 such transactions may be performed by a real estate broker and real estate sales persons employed by a broker in any calendar year.
A licensee who has occasion to negotiate more than 10 mineral, oil or gas transactions within any one calendar year must secure a mineral, oil and gas license. An application form for a special permit to engage in mineral, oil and gas transactions may be obtained at any office of the department.
Mineral, oil and gas subdivisions are those created for the sale of speculative parcels of land or leases. The property may be located in California or in any other state or country. If it is proposed to make sales in this state, the department assumes jurisdiction.
(End of the CalBRE Reference Book excerpt)
The sale involves usually either the sale
of assets in case of individual business owners or the sale of both of assets
and stock in case of corporations. In
the last case the licensee needs to have also a broker-dealer securities
license from the California Department of Corporations or the Securities
Exchange Commission.
Especially in the sale of assets, the
licensee should be familiar with the Bulk Sales Law of the Uniform Commercial
Code, Sections 6105-6107. A bulk
transfer is a transfer of a substantial part of materials, supplies merchandise
and other inventory which takes place outside the ordinary course of business
of the transferor. The transfer
involves certain requirements of recordation and public notice. The main purpose of the law is to afford
creditors of the business notice to make claim on the business prior to its
transfer to a bona fide purchaser. If
the statutory filing and publication requirements are not met the transfer is
fraudulent and void.
The licensee would be well advised to
proceed with the sale through an escrow company specialized in the transfer of
business opportunities. In the case of
professional businesses, bars or restaurants, other state licenses are
involved, like an alcoholic beverage license, a sales license, a city business
license, board of health or other boards permits, and sometimes a fictitious
name statement in the county or counties where the business wants to legally
preserve its name. Government agencies
which might be involved in the supervision of the business like the Internal
Revenue Service, the State Board of Equalization, Employment Development
Department, State Department of Industrial Relations, County and City agencies
need also be notified of the transfer of the business.
The necessity for complete disclosure in
the sale of a business cannot be impressed enough upon the real estate
licensee. More than in any other type
of transaction, the licensee may unwillingly end up a party in numerous
lawsuits started by disappointed buyers.
It is incumbent upon the licensee to make sure that the operation of the
business and the transaction is legal in all respects and in conformity with
all codes and regulations.
EXAMPLES OF POSSIBLE REAL ESTATE LAW VIOLATIONS
Situation 1. Betty has listed the Jones' home for sale. In showing the property to a prospective buyer, Betty casually mentions that the Jones are going through a very messy divorce. This statement implies that the sellers may be willing to accept a "lowball" offer, given their personal situation.
Discussion. As an agent of the seller, the listing broker has a fiduciary duty to protect and enhance the financial position of the principal. A cooperating broker, likewise, has this same duty. In either case, a broker has no business conveying anything at all about the marital difficulties of a principal to a prospective buyer. Not only is this unethical, but it violates the agency agreement and could lead to suspension of the broker's license.
Situation 2. The situation is the same as described above, except instead of a divorce, the Jones' are having financial problems. Mr. Jones has been unemployed for six months and has a child in need of surgery. In attempting to find a buyer for the Jones' home, Broker Smith tells his prospects that the sellers are in such dire straits they would accept just about any offer to get out from under the monthly payments.
Discussion. A broker who would use the financial position of a principal in this manner to promote a sale would be guilty of violating the fiduciary trust, as well as engaging in an extremely unethical practice. Only if the Jones authorize the broker to mention this information to prospective buyers would the broker be justified in doing so. While some may argue that the broker is doing the Jones family a favor by "helping" them get some debt relief, such an argument is specious, for the broker is hired to get the best price possible for the principal. Rarely would the best price be obtained by capitalizing on the financial problems of the seller.
Situation 3. Early in the business day, Broker John receives an offer to purchase a property considerably below the asking price. The owner of the property may be reached at his place of employment at any time during the day to convey the offer. John, however, has an appointment to show the same property later that day to another prospect who has expressed an interest in seeing it. Rather than telling the owner of the offer, John delays in hopes that the other prospect will be interested enough to submit an offer closer to the asking price than the first offer. Of course, John will let the prospect know of the existing offer in some casual manner so as to elicit an immediate offer if the second prospect is at all interested.
Discussion. By delaying, or actually concealing, an offer, a broker may lose the sale altogether if the offeror changes his/her mind and decides he/she does not want the property. If the broker had not presented the offer to the seller, the person making the offer could cancel it without recourse. While the broker hopes for a larger commission, this practice violates the fiduciary relationship between agent and principal. A licensee who delays making known an offer to the principal is not protecting or promoting the interest of the client and is in fact guilty of concealment.
Situation 4. Broker Betty is working with a prospective buyer who asks her how much he should offer for a property he likes. Betty, says she would pay no more than $90,000. The buyer offers $85,000 thinking that he will go to $90,000 if necessary. The asking price is $100,000.
Discussion. It is unethical for a licensee to set an offer price for a prospective buyer. An offer should be based on what the prospect-- not the broker--believes the property is worth. Although a broker can assist by providing a prospective buyer with comparable sales data, the final decision on the offer price is the buyer's alone. In this situation Betty has also violated the fiduciary trust by not attempting to get the highest price possible for her client's property.
Situation 5. Broker Sue tells a prospective buyer she can get him "a good deal" on a certain property listed with her.
Discussion. The student and licensee should immediately recognize the potential problem. Assuming Sue gets the prospect a so-called "good deal" and a sales contract is signed, she has almost certainly created the grounds for an accusation of dual agency. The buyer has every reason to believe that Sue, who told him directly that she can get a good deal, is working directly for him. Without disclosure of her dual agency status, the buyer may never know that Sue truly represents the seller. This practice is unethical and could eventually be the basis of a suit to overturn the sale.
Situation 6. Broker Wayne is contemplating the purchase of a dwelling that has been offered for sale by the owner. Wayne is interested in the property as his residence and has no intention of offering it for resale. After approaching the owner of the property and disclaiming any agency relationship, Wayne purchases the home. After closing, however, a prospective buyer approaches Wayne's firm and expresses an interest in the very same property Wayne purchased. The buyer makes Wayne an offer that is too good to pass up, and Wayne accepts. After closing, the former owner becomes aware of the sale and the details of the transaction. The former owner lets it be known to all who should care to listen that he feels Wayne and Wayne's firm took advantage of him. Did Wayne do anything wrong-
Discussion. Legally, ethically, or otherwise, the answer is NO. Wayne did nothing wrong. The semblance of wrongdoing was present, however, and that is enough potentially to ruin a broker's reputation. In this situation, what started innocently could taint or even ruin Wayne's reputation and that of his firm. Even though Wayne might explain the circumstances satisfactorily to some, others will have serious doubts about Wayne's integrity.
Situation 7. Broker Fred is approaching retirement and, after a bout of ill health, finds that he has more listings than he can comfortably handle. One of the homeowners who has listed with Fred has begun complaining that her house is not being shown. Fred asks other agents in his firm to take any of their clients through the house, whether or not they are qualified or interested in that particular house, thus creating the impression that the house is being shown. There is always the chance that one of them will like the house and make an offer.
Discussion. Occasionally a listing broker may not have any clients interested in a particular property that the broker has listed, and the broker can do nothing about it. However, it is unethical for a listing broker to fabricate showings solely for the purpose of deceiving the property owner. In this case, Fred is no longer competent to conduct the business for which he was hired. He should explain the situation to the homeowner and allow her to list with another broker.
Situation 8. Broker Barbara, a member of the local MLS, actively solicits listings for inclusion in the MLS pool. Unlike other brokers who spend a good deal of time showing their listings as well as those of other brokers, Barbara does little to market the properties she has listed. Barbara knows she will receive a commission split on every property she has listed that sells, regardless of who sells it.
Discussion. While Barbara is doing nothing illegal, she is operating unethically. By signing the listing contract Barbara is pledging to do everything within her power to protect and enhance the financial well being of her principal. Obtaining listings with the intention of letting other brokers market the properties is not in the principal's best interests. Furthermore, Barbara owes the same degree of effort and care to her fellow professionals as she demands of them.
Situation 9. Broker Billy frequently has cash flow problems and occasionally deposits down payments entrusted to him into his own account for brief periods. Billy always manages to produce the necessary funds prior to closing.
Discussion. Broker Billy's practice of depositing down payments into his own account, even for the briefest time, is both illegal and unethical. The law and regulations of the Real Estate Commissioner prohibit the practice of combining funds, called commingling.
Situation 10. Broker Jean is approached by a married couple, John and Mary, interested in purchasing a home. Mary, who is black, is a successful businesswoman and her husband John, who is white, is attending graduate school. Jean shows the couple only MLS listings in racially mixed neighborhoods.
Discussion. The real estate licensee should never categorize customers according to their race. Jean has an obligation to show any and all homes meeting the requirements of the prospective buyers, regardless of the race of the couple or individuals looking for a home. By only showing homes in certain neighborhoods, Jean essentially is practicing an overt form of steering. Besides being unethical, the practice is discriminatory, a violation of federal and state fair housing laws, and could lead to charges being filed against Jean and her firm.
Educational Objectives: Learn about Appointment and
qualifications, Requirements
for qualifying and time limit,
Notary public bonds, Geographic jurisdictions, Notaries may not refuse
services, Notary seal, Notarial records, JURAT, Notarization
of incomplete documents, Certified copies, Common questions and answers,
R. E.
TERMS GLOSSARY, INDEX.
MANDATORY NOTARY EDUCATION TAKES EFFECT JULY
1, 2005
Assembly Bill 1210, Chapter 513,
Statutes of 2003, sponsored by Secretary of State Kevin Shelley and authored by
Assembly Member George Nakano, introduces for the first time mandatory
education for all notary public applicants. The bill requires all notary public
applicants to complete approved courses of study prior to being appointed as
notaries public. (Government Code section 8201.)
Further, Assembly Bill 2062, Chapter 539,
Statutes of 2004, which takes effect in 2005, amends the date notary public
applicants are required to complete mandatory education.
To ensure all applicants receive the most
qualified training available, the Secretary of State, commencing
The responsibilities of a notary public are crucial to many facets of our personal and professional lives. These duties must not be taken lightly. Legal and financial liabilities may result from improper notary acts. Understand and perform your duties as required by law. It is your responsibility as a notary public commissioned to a public office to know the relevant law and perform your duties accordingly.
If you are unable to apply the law to specific circumstances, please seek competent counsel. You are reminded to be especially cautious when notarizing documents relating to immigration, insurance matters and mortgages on real property. There are specific limitations and resultant stiff penalties for improper notarizations of these types of documents.
Keep in mind that the notary's role is to serve the public. As a notary, you cannot refuse to notarize a document in response to an otherwise proper request unless you fall within the specific provisions of Government Code Section 8202. 8. This section provides for an exception to the rule which requires you to provide notary services to all persons who present a proper request and pay the required fees.
Your notary public commission belongs to you; you qualified for appointment and commissioning and no other person or organization has the right to your seal or journal. Regardless of who paid for the commission, seal and journal, they are yours and you are required by law to retain them except for those appointed for military or naval reservations under the provisions of Government Code Section 8203. 1. If you resign your commission or it expires and you do not obtain another within thirty days, you must submit all notarial records and papers to the clerk of the county where your last oath of office is filed.
Notaries public perform invaluable services to the legal,
business, financial, and real estate communities. Take the time to study this handbook so that
you are confident of your knowledge in the law.
Your role is an important public service for the people of
APPOINTMENT
Every person appointed a notary public shall:
1.
Be at the time of appointment a legal resident of the State of
2. Be not less than 18 years of age.
3. Have satisfactorily completed the written examination prescribed by the Secretary of State.
Persons who have not held a notary public commission, or who have had a break in their commission of more than three months, are required to submit a completed fingerprint card with their application.
REQUIREMENTS
FOR QUALIFYING
No person who has been granted a notary public commission may act there under unless within thirty calendar days from the beginning of the term prescribed in the commission, said person has filed an oath of office and $10,000 bond with the county clerk's office. The filing must take place in the county where the notary maintains his or her principal place of business as shown in the application submitted to the Secretary of State. Failure to comply with these requirements within the thirty calendar day period will render the commission void and the person commissioned may not act as a notary public until a new appointment is secured and the person has properly qualified within the thirty calendar day time limit.
In
order to provide some protection to the public,
GEOGRAPHIC JURISDICTION
A
notary public has jurisdiction to act as such throughout the State of
ACTS CONSTITUTING THE PRACTICE OF LAW
(Inserted at the request of The State Bar of California)
Among the acts which constitute the practice of law, and which therefore notaries public are prohibited from performing for others, are the preparation, drafting, or selection or determination of the kind of any legal document, or giving advice with relation to any legal documents or matters.
NOTARIES
California Government Code Section 8205 makes it the duty of a notary public to provide notary services to all persons who present a proper request and pay the required fees. Not providing services when required to do so could cause the notary to be liable if any damages resulted from the refusal.
Government Code Section 8202. 8 does provide an exception to the duty of a notary public to provide services if certain conditions are met. This section requires that there be an agreement between the notary and a private employer in which the employer pays the costs connected with the commission. If this agreement is in effect, then the private employer may limit, during the notary's ordinary course of employment, to providing notary services solely to transactions where the employer is either named or acting as an agent. The notary public may not notarize any other documents other than those of the employer. Private documents brought by a customer or employee of the company may not be notarized. This provision of law does not apply to notaries public who are appointed to act for public agencies such as counties, the state or school districts, even when the appointment was made to act for and on behalf of the public employer.
NOTARY SEAL
Each notary public is required to have and to use a seal. Because of the legal requirement that the seal be photographically reproducible, the rubber stamp seal has become all but universal. The legal requirements in Section 8207 of the Government Code for a rubber stamp seal are as follows:
1. It is photographically reproducible when it is affixed to a document.
2. It contains the State Seal and the words "Notary Public. "
3. It contains the name of the notary public.
4. It contains the name of the county where the oath of office and notary bond are on file.
5. It contains the expiration date of the notary public commission.
6.
It contains the
sequential identification number assigned to the notary as well as the
identification number assigned to the manufacturer or vendor for every seal or
stamp manufactured on or after
7. The seal has a serrated or milled edged border.
Many
documents which are acknowledged may be later recorded. A document may not be accepted by the recorder
if the notary seal is illegible.
Notaries are cautioned to take care that the notary stamp leaves a clear
impression. All the elements must be
easily discernible. The seal should not
be placed over signatures or any printed matter on the document. An illegible or improperly placed seal may
result in rejection of the document for recordation and result in
inconveniences and extra expenses for all those involved.
The
law allows only one condition under which a notary may authenticate an official
act without using an official notary seal.
Because subdivision maps are usually drawn on a material that will not
accept standard stamp pad ink and other acceptable inks are not as readily
available, acknowledgments for
A
NOTARY PUBLIC SHALL NOT USE THE OFFICIAL SEAL OR THE TITLE NOTARY PUBLIC FOR
ANY PURPOSE OTHER THAN THE RENDERING OF NOTARIAL SERVICE. (Section 8207, Government Code)
NOTARY
RECORDS
A
notary pubic is required to keep a sequential journal of all acts performed as
a notary public. (Section 8206,
Government Code)
The
record shall include:
1. Date, time and type of each official
act.
2.
Character of every
instrument acknowledged or proved before the notary.
3.
The signature of each
person whose signature is being notarized.
4.
A statement as to
whether the identity of a person making an acknowledgment was based on personal
knowledge or satisfactory evidence. If
identity was established by satisfactory evidence pursuant to Section 1185 of
the Civil Code, then the journal shall contain the signature of the credible
witness swearing or affirming to the identity of the individual or the type of
identifying document, the governmental agency issuing the document, the serial
or identifying number of the document, and the date of issue or expiration of
the document.
5.
If the identity of the
person making the acknowledgment was established by the oaths or affirmations
of two credible witnesses whose identities are proven upon the presentation of
satisfactory evidence, the type of identifying documents, the identifying
numbers of the documents and the dates of issuance or expiration of the
documents presented by the witnesses to establish their identity.
6. The fee charged for the notarial
service.
7.
If the document to be
notarized is a deed, quitclaim deed, or deed of trust affecting real property
within the
ACKNOWLEDGMENTS
The
form most frequently completed by the notary public is the acknowledgment. The acknowledgment form is set forth in
Section 1189 of the Civil Code. In the
acknowledgment, the notary public certifies:
1.
That the signer
personally appeared before the notary public on the date indicated in the
county indicated.
2. To the identity of the signer.
3. That the signer acknowledged executing the
document.
The
notary public sequential journal must contain a statement as to whether the
identity of a person making an acknowledgment was based on personal knowledge
or satisfactory evidence. If identity
was established based on satisfactory evidence then the journal shall contain
the signature of the credible witness swearing or affirming to the identity of
the individual or the type of identifying document used to establish the person's
identity, the governmental agency issuing the document, the serial or
identifying number of the document, and the date of issue or expiration of the
document.
The
certificate of acknowledgment must be completely filled out at the time the
notary's signature and seal are affixed.
The completion of an acknowledgment that contains statements that the
notary public knows to be false not only may cause the notary to be liable for
civil penalties and administrative action, but it also may constitute a criminal
offense.
The second form most frequently completed by a notary public is the jurat. The jurat is identified by the wording "Subscribed and sworn to" immediately above the place where the notary public signs his/her name. In the jurat, the notary public certifies:
1. That the signer personally appeared before the notary public on the date indicated and in the county indicated.
2. That the signer signed the document in the presence of the notary public.
3. That the notary public administered the oath.
There is no prescribed wording for the oath, but an acceptable oath would be "Do you swear or affirm that the statements in this document are true?' When administering the oath, the signer and notary traditionally raise their right hands but this is not a legal requirement.
In the jurat, the notary public is not certifying to the identity of the signer. A sample of an affidavit containing a jurat is as follows:
I certify that I am over the age of 18
years of age and have resided in the State of
State of
Subscribed and sworn to before me on
/s/ John Doe
/s/ Richard Roe
NOTARY SEAL
SUBSCRIBING WITNESS
When the signer of an instrument is unable to appear before a notary to acknowledge its execution, proof of execution may be made by a subscribing witness. (Civil Code Section 1195)
The requirements for proof of execution by a subscribing witness are as follows
1. The witness must be personally known to the notary or the witness' identity must be proved to the notary by the oath of a credible witness who is personally known to the notary. (Civil Code Section 1196)
2. The witness must sign the instrument.
3. The witness must prove by oath that the person whose name is subscribed to the instrument is the person who executed it.
Shown below is a suggested format for proof of execution by a subscribing witness. Other formats with similar wording may also be acceptable.
State of
County of) ss
On (date) , before me, the undersigned, a notary public for the state, personally appeared (subscribing witness' name) personally known to me (or proved to me on the oath of (credible witness' name) who is personally known to me) to be the person whose name is subscribed to the within instrument, as a witness thereto, who, being by me duly sworn, deposes and says that he/she was present and saw (name of principal) , the same person described in and whose name is subscribed to the within and annexed instrument as a party thereto, execute the same, and that said affiant subscribed his/her name to the within instrument as a witness at the request of (name of principal)
NOTARY SEALNOTARY SIGNATURE
NOTARIZATION OF INCOMPLETE DOCUMENTS
A notary public should not notarize a document which is incomplete. If presented with a document for notarization which the notary knows from his or her experience to be incomplete or is without doubt on its face incomplete, the notary should refuse to notarize the document. If there is any doubt as to the completeness of the document, the notary should ask the signer if it is incomplete and if any part will be filled in later. If the signer states it is incomplete, then the notary should refuse to notarize the document. If the signer states that the document is complete and nothing is to be filled in later, the notary should accept the signer's word and notarize the document.
CERTIFIED COPIES
WILLS
The California State Bar advises that when a notary public is asked to notarize a document which purports to be a will, the notary public should decline and advise the person requesting the notarization to consult a member of the California State Bar.
IMMIGRATION DOCUMENTS
Contrary to popular belief, there is no prohibition
against notarizing immigration documents.
However, several laws specifically outline what you can and cannot
do. Because of differing customs and
literal translations from other languages, you must know the limitations on
your authority.
In addition, a notary is legally barred from advertising in any manner whatsoever that he or she is a notary if the notary promotes himself or herself as an immigration specialist or consultant. A notary may not charge any individual more than $10 to complete all forms relating to the change of a person's immigration status, unless the notary is also an attorney who is rendering professional services as an attorney. This fee limitation applies even if the person is not performing notarial duties.
Q. Is a notary to keep his or her seal and journal under lock and key?
A. Although the law does not specifically deal with the question of the security of the notary seal or journal, notaries should exercise reasonable and customary care in providing security for these materials.
Q. Can a notary notarize a document for a relative?
A.
Q. May a notary notarize a document in a foreign language that he/she is not familiar with?
A. A notary public is not responsible for the contents of documents notarized and therefore the document does not need to be written in a language understood by the notary. You should scan the document to determine if it appears complete and be able to describe the character of the instrument, if it is to be acknowledged, in the journal. If the character cannot be easily determined, then it may be described as "a document in a foreign language. " Although the text of the document may be written in a language not understood by the notary, a certificate of acknowledgment or jurat which is completed by the notary must be understood by the notary.
Q. May a notary notarize a document when the signer cannot speak his/her language?
A. Notaries public must be able to communicate with constituents in order that the signer may either swear to or affirm the contents of an affidavit or acknowledge the execution of an instrument.
Q. Must a notary charge every person a fee or may the fee be waived in certain cases?
A. Government Code Section 8211 provides for the maximum fee that can be charged for notarial services but it does not require that you charge a fee. However, there is an exception. Government Code Section 6100 requires any notary public who is appointed to act for and on behalf of certain public agencies pursuant to Government Code Section 8202. 5, to charge for all non public agency work and remit the fees received to the employing agency. The fee charged must be entered in the journal.
Q. Must a notary see the person sign the document being notarized?
A. When preparing an acknowledgment, no. The document can be executed before the person brings it to you for notarization. In the acknowledgment, the signer is acknowledging that they executed the document, not that they executed the document in your presence. When preparing a jurat, yes. The person requesting the jurat must appear before you, take an oath, and sign the document in your presence.
Q. When you leave your place of employment where your employer has paid all the fees associated with your commission, what happens to your commission?
A. The commission belongs to you, the notary, regardless who paid the fees with the exception of those commissioned on behalf of a military reservation. Your employer cannot retain your stamp or journal. If you choose to resign your commission, you must deliver all your notarial records and papers to the county clerk's office, in which your current oath is on file, within 30 days.
Q. What are the procedures for a change of business address?
A. A notary public must notify the Secretary of State in writing, by certified mail, within 30 days as to any change in location, address, or name of principal place of business. To ensure proper processing of your notice, send a copy of your commission certificate or include the name exactly as it appears on your commission, the expiration date and commission number.
Government
Code
8206. Sequential journal; contents; deeds
affecting real property in
A
notary public shall keep a sequential journal of all official acts performed as
a notary public. The journal shall be
in addition to and apart from any copies of notarized documents which may be in
the possession of the notary public and shall include:
(a)
Date, time, and type of each official act.
(b) Character
of every instrument acknowledged or proved before the notary.
(c) The
signature of each person whose signature is being notarized.
(d) A
statement as to whether the identity of a person making an acknowledgment was
based on personal knowledge or satisfactory evidence. If identity was established by satisfactory
evidence pursuant to Section 1185 of the Civil Code then the journal shall
contain the signature of the credible witness swearing or affirming to the
identity of the individual or the type of identifying document, the
governmental agency issuing the document, the serial or identifying number of
the document, and the date of issue or expiration of the document.
(e) If
the identity of the person making the acknowledgment was established by the
oaths or affirmations of two credible witnesses whose identities are proven
upon the presentation of satisfactory evidence, the type of identifying
documents, the identifying numbers of the documents and the dates of issuance
or expiration of the documents presented by the witnesses to establish their
identity.
(f)
The fee charged for the notarial service.
(g) If
the document to be notarized is a deed, quitclaim deed, or deed of trust
affecting real property within the
Upon
written request of any member of the public, which request shall include the
name of the parties, the type of document, and the month and year in which
notarized, the notary shall supply a photostatic copy of the line item
representing the requested transaction at a cost of not more than thirty cents
($0. 30) per page.
This
section shall remain in effect only until
***
8208. Protest of bill or note for nonacceptance or
nonpayment
The
protest of a notary public, under his or her hand and official seal, of a bill
of exchange or promissory note for nonacceptance or nonpayment, specifying any
of the following is prima facie evidence of the facts recited therein:
(a) The time and place of
presentment.
(b)
The fact that presentment was made and the manner thereof.
(c)
The cause or reason for protesting the bill.
(d) The
demand made and the answer given, if any, or the fact that the drawee or
acceptor could not be found.
***
8211. Fees
Fees
charged by a notary public for the following services shall not exceed the fees
prescribed by this section.
(a) For
taking an acknowledgment or proof of a deed, or other instrument, to include
the seal and the writing of the certificate, the sum of ten dollars ($10) for
each signature taken.
(b) For
administering an oath or affirmation to one person and executing the jurat,
including the seal, the sum of ten dollars ($10).
(c) For
all services rendered in connection with the taking of any deposition the sum
of twenty dollars ($20), and in addition thereto, the sum of five dollars ($5)
for administering the oath to the witness and the sum of five dollars ($5) for
the certificate to such deposition.
(d) For
every protest for the nonpayment of a promissory note or for the nonpayment or
nonacceptance of a bill of exchange, draft, or check, the sum of ten dollars
($10).
(e) For serving
every notice of nonpayment of a promissory note or of nonpayment or
nonacceptance of a bill of exchange, order, draft, or check, the sum of five
dollars ($5).
(f)
For recording every protest, the sum of five dollars ($5).
(g) No
fee shall be charged to notarize signatures on absentee ballot identification
envelopes or other voting materials.
***
8214. 2.
Fraud relating to deed of trust; single-family residence; felony
A
notary public who knowingly and willfully with intent to defraud performs any
notarial act in relation to a deed of trust on real property consisting of a
single family residence containing not more than four dwelling units, with
knowledge that the deed of trust contains any false statements or is forged in
whole or in part, is guilty of a felony.
***
8224.
Conflict of interest; financial or
beneficial interest in transaction; exceptions
A
notary public who has a direct financial or beneficial interest in a
transaction shall not perform any notarial act in connection with such
transaction. For purposes of this
section, a notary public has a direct financial or beneficial interest in a
transaction if the notary public:
(a)
With respect to a financial transaction, is named, individually, as a principal
to the transaction.
(b) With
respect to real property, is named, individually, as a grantor, grantee,
mortgagor, mortgagee, trustor, trustee, beneficiary, vendor, vendee, lessor, or
lessee, to the transaction.
For
purposes of this section, a notary public has no direct financial or beneficial
interest in a transaction where the notary public acts in the capacity of an
agent employee, insurer, attorney, escrow, or lender for a person having a
direct financial or beneficial interest in the transaction.
8224. 1.
Writings, depositions or affidavits of notary public; prohibitions
against proof or taking by that notary public
A
notary public shall not take the acknowledgment or proof of instruments of
writing executed by the notary public nor shall depositions or affidavits of
the notary public be taken by the notary public.
SHORT INTRODUCTION TO
© 1994 by Home Study,
Inc. dba American Schools
Chapter XVII: Real Estate Salesmanship
Educational Objectives:
Learn about
Developing a professional career from real estate practice requires more than passing an examination and carrying a valid license. The skilled practitioner recognizes the diversity of the field and the personal commitment required to practice competently and ethically. The newcomer, therefore, soon learns that selling real estate differs from selling other products in very specific ways:
1. Real estate is a unique commodity; no two properties are exactly alike. The licensee must become very familiar with the property, its value, construction, features, and neighborhood. The licensee also must know the entire community, its history, characteristics, past, present and future goals and plans. Real estate is not sold in a vacuum.
2. The real estate sales period is indefinite, sometimes taking months before a sale occurs; or the sale may "fall through" for reasons not related to the broker's competence or diligence. Selling real estate takes patience and perseverance. Licensees, therefore, should resist the temptation to take short cuts that lead to unethical behavior.
3. A real estate purchase represents a large investment, often the largest purchase a buyer will make. The licensee who markets such property must carefully match the needs and capabilities of the buyer with the property to make an effective sale. Both buyer and seller have much at stake.
4. Real estate sales involves working closely with buyers and sellers, individuals with unique psychological needs, expectations, and goals, sometimes conflicting with each other. The licensee, therefore, must be able to work with people under what can be stressful circumstances, often for long periods.
5. Real estate practice requires close scrutiny of federal, state, and local laws. Real estate laws and those laws affecting its practice may change frequently, and the licensee must remain current on each.
6. Real estate practice is closely identified with the practitioner. The successful professional is well respected and firmly established in the community. In every transaction, the licensee should be more concerned with dealing honestly and ethically than with earning the commission. Thus as the licensee gains a reputation for fair dealing, his/her practice will grow accordingly.
The philosophy of the real estate market
Success can be boiled down to doing what you do well over and over again. Your analysis of the questions indicate where your successful market segment lies.
Does this mean you are locking yourself into a certain type of home or buyer? Absolutely not! It merely indicates where you are most comfortable as a sales person at this time and where you might concentrate your primary marketing efforts for even greater success.
Marketing pieces aimed at the "general
public" are aimed at no one and motivate no one to action. This shot-gun approach is expensive and
ineffective.
All have seen real estate materials aimed at buyers/sellers/
investors. These types of materials are
prime examples of the scatter approach.
"Let's shot-gun 'em.
Something's bound to fall out of the sky!"
Seldom does anything result from this approach for
the one sheet of paper attempts to address three different motivations and none
with a strong enough appeal to attain results.
All marketing efforts must be targeted to a specific audience with a
specific message to achieve a specific result.
For example:
HOMEOWNERS OF
Have you thought about selling your home lately?
Are you aware of the savings you can have with the
current low interest rates? Call me today for free information on how smart
sellers are winning potential buyers.
Call
A specific audience - homeowners of Ski Island.
A specific message - thinking of selling - savings
you can have - smart sellers - win potential buyers.
A specific result - call me today for more
information.
Now that the target market has been defined as a
group of people with a specific background and living within a certain area and
sharing some common characteristics, personal promotion will be addressed.
Personal Promotion
Personal promotion is the activity engaged in face to
face with the target market. The agent
participates and interacts with a chosen group of potential customers and
clients to further the name, business reputation and personal credibility of
the agent. Depending upon the needs and
interest of the target community, the activities can range from chairing a
local charity fundraiser to being involved in a Neighborhood Watch
Association.
Promotion is good public relations and the more
active one can be with the target population, the healthier the business
activity. All like to do business with
someone they know who understands and cares enough about a segment of the
community to participate in some activity.
This is known as the shelter syndrome of modern man, "shelter me
from the cruel world. " It is also
known as networking.
A weekly schedule should include some activity with a
group of people outside of real estate that will give enjoyment, better the
target group and enhance the public image of the agent. This is what personal promotion is all
about.
As activities are chosen, the interests of the agent
should be considered - not the desire to associate with a certain group of
people. The needs of the target
community should also be considered and matched with the needs and interests of
the agent. The degree of dedication and
sincerity is easily measured by the degree of involvement.
One agent has enjoyed coaching Little League teams
for the past ten years. Parents from
the first team still are calling to list their homes.
Such activities become a social farm and will be far
more important in the future as society continues to splinter into- special
interest groups. But paying attention
to personal interests for this type of farming is long range and requires
effort on the part of the agent.
Personal promotion is a subtle but extremely
effective form of marketing. It is
developing the small town approach in a complex city. One cannot possibly know everyone in a large
city but one can develop nodding acquaintance with 3500 people and a speaking
relationship with 350. If one
"knows" 350 people and each of them has ten to fifteen personal
friends, referrals are assured and a "market" source has been
developed.
This is not a form of using people. It is
the way good business people function - face to face, nose to nose and toes to
toes.
Accomplishments are a matter of focus and
dedication. It is not luck or random
activity. To accomplish one positive
deed, one must make a conscious move forward.
Life is a series of choices.
Personal promotion is not for monetary gain - it is intended to enhance
ones reputation as a worthwhile human being who gives time and energy to the
betterment of the community.
Many large corporations demand of their employees at
least three outside affiliations with community groups and personnel directors
sometime pay more attention to community activities of a potential employee
than to college transcripts. The reason
is simple-public relations or promotional abilities of the individual enhance
the ability of the corporation to get things done on the local level.
The Personal Marketing Plan
One-half of the marketing strategy - the personal
promotion half - has now been explored.
Both short term and long range goals as well as an analysis of
self-perceptions blend into a cohesive plan of action.
The life and activities of a professional should be
reflected in personal promotion and advertising. All promotion and advertising efforts need
to be in sync with each other and a reflection of personal and business
philosophy.
Philosophy is a study which seeks to systematize and
interpret knowledge through basic concepts of reality, validity and value. This is the great unexplored, ever-changing
territory within everyone.
Reality, validity and values are largely reflected in
how people want others to perceive them and although goal setting is not the
purpose of this unit, ones personal marketing efforts must arise and be
directed by personal and business philosophy.
In the corporate world, this is called the "mission statement. "
The purpose of a written mission statement is to
convey the value system and direction of the corporate entity to everyone
within the corporation. It becomes the
standard by which every memorandum, every advertisement and every action is
measured. It is the ultimate game
plan.
For instance, the mission statement of a teacher
might be to produce information, low in cost, of the highest quality and with
immediate value to the student. The
mission statement, done by a corporation, is a guide to the myriad of
employees, and acts as a directional arrow for all of the corporation's public
marketing activities
Also, though the company may have a mission
statement, it is vital to the efforts of independent contractors to develop
their own mission statements as directional arrows for their activities.
It has been forecast that the next decade will
witness a rise of cocooning, the stay at home syndrome. This cocooning may take place in high tech
caves, but people are searching for a haven at home where they can draw their
shades, plump their pillows and clutch their remote TV controls. Many have responded to the impulse to go
inside because the rat race has become too tough and scary outside.
Cocooning is evidenced by the skyrocketing sales of
VCRs, tape rentals, the production of comfort food for the couch, and a
mega-million dollar volume for microwave popcorn sales. The birth rate has risen and mail order
sales have increased by billions of dollars in the last decade.
To the real estate professionals, this means homes
are more important to consumers who want comfortable cocoons. They are seeking security, and this is
evidenced even in home decor. One of
the hottest current trends is the Victorian Look, shades of ancestors who lived
more calm and peaceful lives. Comfort
is sought in the frills and ruffles and yards of lace and old fashioned
reminders of another century.
The demand is now for less standardization and more
standards of excellence. In a consumer
culture, one that offers choice beyond survival basics, the motive has never
been need, but want. Pushing that motivation
beyond want to deserve is a recent and powerful, cultural transformer. People not only want a nice home for a
cocoon, but feel they deserve it because of having been subjected to the
uncertainties of the work place. image
is not where it's at any longer; they are seeking quality at the best
price.
Profit can be reaped by providing for the needs of
consumers for personalization, whether it be in product concept, product
design, or personal service. The
marketeer who enables each customer and client to feel unique will
succeed.
Homes are, and will be more so in the future,
important because at present millions of corporate employees work at home,
either part time or full time. Flex
time and work at home flexibility are becoming important corporate
"perks" for valued employees.
Confronted every day with shabby quality,
irresponsibility and false claims, consumers are taking up the banner of
protest against marketing immorality.
Consumers are screaming and smart markets are listening. What will make customers buy one product over
another is a feeling of partnership with the seller, and feeling that they are
buying for the future. Anonymous,
impersonal selling, where one did not get too involved with the customer, is
past.
So where does this leave the professional real estate
person? First of all, since America is cocooning, customers are more difficult
to reach. As they are rejecting the old
anonymous treatment, there is a need to be recognized as unique and the
consumer has a pent up demand for solving special problems. They want to know and feel comfortable with
the people from whom they purchase goods or service. The burden is on real estate professionals
to satisfy that need through the use of personal marketing and advertising.
Marketing could be divided into two basic segments,
showing and advertising, but this is just the tip of the iceberg.
People want to buy from people. They want to establish a comfort zone of
trust and recognition of them and their individual needs. Any broker who is scrupulously honest will
admit the old days of running page long ads of three liners full of trite
phrases is not, and has not been for several years, cost effective. Many recognize that those types of ads were
just glorified pacifiers. It satisfies
the seller that something is being done about promotion, and it eases the pain
of agents who want to see their listings in print.
It has been said over the years, "The name over
your door can be of some help in getting your foot inside a seller's home, but
if that seller does not like or trust you as an agent, you will not get the
listing. "
So the mission for real estate practitioners in these
times is to master the art of personal marketing and not only survive, but meet
the goal of prosperity.
Personal Marketing
Personal marketing and customer service are the
"hot buttons" of sales.
Success will depend on a willingness to practice both activities.
Society is growing more complex as people move deeper
into the isolation of cocooning. In
fact, futurists say we are moving into a burrowing state of socialization as
social contacts are turned to special interest groups. This accounts for the profusion of special
interest magazines, hobby and recreational groups. People are content to entertain small
groups, rent videos, buy books or computer games and "spend a quiet
week-end at home. " These and other
rapid changes in our work place and society make reaching the customer with any
advertising message more difficult.
Therefore, the challenges of personal marketing
become one of the most exciting and fun twists of doing business today.
Personal marketing is the equivalent of product,
service and image advertising in large corporations. The products being sold by the service and
image are agents themselves!
Defining Personal Marketing
Personal marketing may be defined as the activities
designed and engaged in by agents to promote themselves and their personal or
business reputations. Such activities
are usually divided into two categories: personal promotion and personal
advertising.
Personal promotion falls into the image building or
public relations approach to marketing.
It includes the nose to nose, toes to toes, face to face type of
marketing activity.
Personal promotion builds for the future while personal advertising is directed at the short term now.
Salespeople who feel that a box of business cards is going to break the ice and make them a roaring success are going to be disappointed. In today's competitive environment, success depends on the ability to reach and communicate with a public that is swamped with advertising messages.
Success means actively seeking new customers and clients on a daily basis. Real estate is a business of prospecting. The majority of time and energy must be directed to this activity. Prospecting is a numbers game and it takes a larger number of contacts in a real estate sale than nearly any other type of sales because not everyone is in the market to buy or sell property. A greater portion of the population needs a medical doctor in any given year more than a real estate agent. In marketing, the job is to find the people who need the service in a manner that is the most comfortable method for the practitioner.
The Purpose of Personal Marketing
The purpose of personal marketing is to help develop a marketing plan, both promotional and advertising that fits the agent. Each agent is a unique individual and each brings differing talent, skill and personality to the profession.
One of the goals within the marketing plan is to identify and promote the best of an agent and build upon a success ratio using a method that is comfortable to the agent. A best friend's marketing plan will not work for another because personal marketing, like shoes, must "fit" the individual.
In marketing, there is a statement called "the majority fallacy," which says "I can sell anything to anyone. " Wrong! Most customers cannot be sold a corporate jet because:
1. They can't afford it.
2. They have no use for it!
3. They dislike flying!
4. The majority of their business is local!
Now, some will say the choice of a corporate jet is too unique a product for this example, but unfortunately many real estate agents are approaching marketing with the same majority fallacy philosophy by not taking the time to analyze where their successes occur.
They might, in the dark of the night, recognize that they seem to have a greater success ratio with certain types of customers, prices or styles of houses but they never direct their energies toward more success. They continue to practice the majority fallacy by shot-gun marketing (a little for everyone in the population) which leads to frustration, failure and self-doubt.
Target marketing is a method of isolating the concentration on a segment of the market - a portion of the population with which the agent is known to be able to work successfully. It does not limit the seeking of new markets for one can always develop a secondary plan for those new areas of exploration, but it enables one to multiply current success. Agents tend to fall into two patterns - those few who understand the benefits of target marketing and those who plan on a 3. 5 million dollar listing and sale to come off the phones or otherwise drop in their laps.
One agent for example recognizes his market as homes in the below $40,000 range but his goal is to sell 100 units per month. He doesn't think dollar volume - only units. The result is a successful agent. He isn't going after or waiting for the once in a lifetime deal; he works what he does best.
Target marketing says that since one cannot work the entire market, an agent aims the guns at a small segment of the market where there is the best chance of success. Direct mail experts say at least seven mailings must be sent to each individual within fourteen months before golden results can be expected. If agents are attempting to market all of a major city or selected metro areas, they may be buying a bunch of stamps or mass media advertising with no real direction.
Target Market Exercise
The more focused your marketing effort is the greater your return will be. To recognize your market, complete the following exercise:
Clients:
Most of my clients are between the ages of and (Limit yourself to a twenty year age range. )
Most of my clients are selling a house between $ and $ (Limit yourself to a $30,000 difference in the range)
Most of my clients have completed years of schooling.
Most of my clients are professionals, white collar, blue collar, retirees. (Circle one. )
Most of my clients want to move up, move down, transfer out of town, buy a new home in the same price range. (Circle one. )
Customers:
Most of my customers are between the ages of and . (Limit yourself to the 20 year range and only those people who have bought homes from you. )
Most people who buy from me buy a home in the $ to $ price range. (Limit yourself to a $30,000 difference. )
Most of my successful buyers have completed years of schooling.
Most of my successful buyers are professional, white collar, blue collar, retirees. (Circle one. )
Most of my successful buyers are moving up, moving down, transferring in, or buying a new home. (Circle one. )
Most of my successful buyers are first timers, experienced buyers, or investors. (Circle one. )
Now you have defined your primary target market. Take a map of your community and circle the areas where these people live. This is where you should be concentrating your efforts for more success. If you are going bear hunting, go where the bears are!
Five Ways To Use Promotional Literature
1. Leave behind. Listing appointments are crucial to success. Does it make sense to leave a penny business card and a computer print out with a potential client? Or is it better to leave a personal brochure that pumps service? It is that extra touch of class!
2. Inquiry fulfillment. Promotional material is a great follow up to those customers requesting more information, especially out of town inquiries.
3. Direct mail. Direct mail is one of the primary methods of prospecting for new clients and customers. Remember the "rule of seven. " Seven contacts within fourteen months are needed to establish a relationship with a consumer base. Each contact requires a slightly different message. Also, mail-outs remind previous customers and clients that the agent is still in the real estate business and would appreciate referrals and repeat business.
4. Open houses. At open houses, personal marketing materials are equal to point of sale literature. When next visiting an insurance office or a bank, look around. All the brochures, cards and other types of printed literature are geared to informing the customer how that institution can meet their particular needs. It serves the secondary purpose of keeping the company name in front of the consumer. Develop a variety of materials that have your name on them, that gives valuable information or is some type of specialty item that a visitor will keep around the house.
A Guest Register is an important tool to be used in connection with the open house. Place it on a conspicuous table and make sure each and every visitor gets a chance to enter name, address and phone number. Many prospects may be obtained this way. Visitors who do not like this property may easily be talked into considering other properties the salesperson has to offer.
Some agents will offer light snacks and coffee or tea at least. Leaving the entrance door ajar or having a "Welcome, come right in!" sign at the door is advisable. The embarrassment of the visitors having to ring the door bell will be avoided.
Another creative idea is to hold an open house at unusual times to accommodate professional people such as doctors or dentists. Such professionals have sometimes Wednesdays or Thursdays afternoons off and are available for such special events.
5. Sales tool. Once materials are developed, many top sales people keep the booklet, brochure, etc. , directly in front of them as they lead the customer through a discussion. For instance, if you were presenting bond money rules to a first time buyer, it is real handy to have a booklet which outlines those rules and regulations.
This list of suggestions is not meant to limit ideas. Literature for real estate agents has been seen in libraries, in restaurants, the waiting rooms of a maternity ward, and the place where one waits to have the car's oil changed.
The point of having marketing literature developed and in "kit" form is to allow time to discover a greater variety of methods for spreading the name and services around town.
Nine Types of Promotional Literature and Their Uses
Booklets. The use of booklets work well by providing useful information to clients and customers. A booklet may be written to answer frequently asked questions or to teach clients and customers to be informed consumers. Also, there is the opportunity of generating more sales and listings by offering the booklet in ads and via direct mail. The booklet is a lead generation piece of literature.
Case Histories. This technique is often overlooked by real estate licensees. It is simply a compilation of success stories. Agents usually have stories that are unique and demonstrates their abilities. Get permission of the participants or change the name to John and Mary Doe. Success stories overcome skepticism and demonstrate problem solving abilities.
Letters of Reference. Although they are not nearly as much fun to read as the success stories, they can be effective in developing trust.
Catalogs. Personal catalogs, in full or partial color, are beginning to appear on the state scene. Most of the current catalogs are pictures of homes and brief descriptions with perhaps one or two pages devoted to the individual agent.
Flyers. Flyers are one of the most economical methods of personal promotion. Most agents have a personal computer at their disposal and can quickly create some type of material. Flyers are mailed or hand carried to a target neighborhood.
Data Sheets. A data sheet may be written for a particular house to point out the benefits and features which are not apparent to the eye. For instance, neighborhood facts and association rules, design features or benefits, the school system and bus pick-up points, etc.
Newsletters. Newsletters can be extremely effective if the writer will avoid the mass produced materials available. Remember, the agents are seeking the personal touch in all of the literature and are aiming at a specific audience with a specific message. Chit chat concerning the care and maintenance of an automobile during an Arctic winter is not personalized marketing. The fact that ones name and picture appear on this wonderful literary attempt makes it neither effective nor personal.
Readers are interested in information which impacts them, their investment and well being. Even on a semi-annual schedule, such newsletters are far better received than the mass produced pieces of fluff which discuss the newest shade of mauve or present a recipe for caterpillar popcorn.
The purpose of a newsletter is to build the trust of consumers over a period of time. This goal is achieved by advising customers/ clients of new policies, new services and other matters that affect their lives. The return is to get more sales leads when their friends request copies of the newsletter.
Specialty Advertising. Specialty advertising is a catch-all phrase which includes anything a name and telephone number can be put on. Pencils, tee-shirts, cookbooks, billboards are only some of the possibilities. For most specialty items, the main question is, "Will this item remain part of the household and how much is each piece going to cost?"
All advertising must be measured by the basic cost per thousand (CPM). The goal is to be able to reach a thousand people at a low dollar cost and a high exposure index.
Specialty advertising should:
1. Lift the message out of the crowd.
2. Create excitement about the agent's service.
3. Get ones name in front of the consumer.
4. Increase business.
If all four objectives do not happen after a limited trial basis, the game plan should be changed because specialty items are usually the most expensive type of advertising.
Postcards. Due to increased postal rates, the simple postcard may still be the best buy for a low budget effort. If the card is designed with care and projects a clear but clever message, it will result in increased business.
Writing Good Ad Copy For a Promotional Kit
Approach the writing of all promotional literature by writing benefits of the service, not its features. Focus the copy on the prospect's natural curiosity, "What's in it for me?" Find the mission statement exercise. Review what was wanted of clients to think of you. Write those as benefits on the writing exercise sheet.
The "What's in it for me?" question should be reflected in every line of good copy.
Focus on the prospects and their problems.
Create believable client or customer centered benefits.
Pile benefit after benefit on the copy.
Avoid real estate jargon.
Touch the anxious nerves as well as exciting the deepest hopes and wants of the prospects.
Give the prospect a reason to act now!
Ask for the business of the prospects and make sure they know how to reach you.
People buy and sell houses to solve problems. Let them know the problems are understood and the solutions can be provided.
Use verbs and nouns. Adjectives and adverbs water down the message.
Write in the "you. " You need more bedrooms. You want a new house.
Collect testimonials from previous clients and customers. Select snappy quotes from the testimonials. Get permission to quote them. Become a testimonial fanatic. It is amazing how flattered people are that when asked for a recommendation.
THE
ACTUAL
Qualifying buyers
Real estate professionals have to assess the needs and the financial possibilities of the potential buyers. This process is called "qualifying the buyer" and the agent is well advised to proceed tactfully to obtain information about the client without getting nosy. Beyond obtaining financial information the real estate professional has to understand the background reasons why the visitor could become a buyer and be aware of some "symptoms" displayed in the interaction between the salesperson and the potential buyer.
The key to success in real estate among other factors is an ability to understand people and be able to communicate effectively after becoming aware of their needs. The successful real estate professional has a deep insight into the psychology of the customer.
Why buy a home?
1. A home provides shelter and offers basic protection from physical discomfort or harm. A roof over one's head provides protection from the elements and other threats to an individual's well being.
2. A home can also provide protection from unwanted social contact. Most people want to be able to control the extent of their exposure to the rest of society. Of course, those who have or who have had teenagers realize this is not always possible. Nevertheless, shelter for the family is desired, and also within that context, some form of privacy for each individual is sought.
3. Because homes are generally immobile, most people want them conveniently located in relation to other factors important to their place of employment, schools, shopping, recreation facilities and transportation.
4. The characteristics of the surrounding area, the neighborhood, are important considerations. These may include the appearance of other homes, the cost and quality of public services, the social environment, absence of noise and pollution and any prestige that may be attached to the area.
5. As housing is a form of wealth, the purchase of a home represents an important investment and an inheritable estate.
Greater understanding of people will increase ability to function as a problem solver. One of the most valuable skills in the real estate business is the ability to "read" people. Some agents posses a natural instinct and a higher degree of empathy, but it is a skill that can be magnified by learning what to look and listen for. If done consistently, the agent will find that each person will convey how services should be performed. Dozens of signals, both verbal and nonverbal, will tell when to speed up or slow down, when to zero in on details, or when to put extra effort into building the relationship.
Personality Types
this light, the four major categories of needs are:
results, recognition, relationships and regimentation.
Some measure success by results. To these, the finished product is the most
important thing and they will do whatever it takes, within reason, to get the
job done. Their dominant need is
accomplishment.
Another variation is the sensitive, supportive, warm
individual whose main need is relationships, and who is dominated by the need
for empathy and building trust. A
presentation that would work well with the results-oriented person, would more
than likely be ignored or not accepted by the person interested in
relationships.
A third type of individual places high value on
recognition. To this person, success is
measured by the amount of acknowledgment and praise received.
Then there are those who are more concerned with the
"content" rather than the "congratulations. " The dominating need for them is
orderliness, regimentation, or the "tying up in neat packages. " They want things presented in crystal
clear fashion, without superfluous adjectives.
It is obvious with the four major personality types,
four different methods of action are required.
Once having learned the needs of each behavior pattern, the agent will
know how to work more effectively with each type of person.
When people are in social situations, they act and
react in a manner that exhibits clues defining their behavioral styles. These can be identified by becoming a
dedicated "people watcher. "
The complexities in this exercise can lead to frustration and futility, but it
is possible by simplifying and identifying a person's behavior on two
dimensions: openness and directness. A
shoe salesman wants to make certain the shoe is both long enough and wide enough. By doing this, the rest of the foot should
fit someplace in between.
Openness is the readiness and willingness with which
a person outwardly shows emotions or feelings and develops relationships. This type of behavior pattern could be at
one end of a hypothetical scale of behavioral patterns. "Open people" commonly are
described by their peers as being, "laid back, warm, personable, informal
and responsive to others. " They
tend to be relationship oriented. In
conversations, they are not hesitant to share both their opinions and
feelings. They often are given to
joking and telling stories. They are
flexible as to time and tend to base decisions on "gut" feelings more
than on hard facts and data. It is no
secret what an "open" person is thinking. Their spoken and nonverbal feedback will
make it clear.
At the other end of the spectrum are the self
contained persons. They tend to be more
aloof and guarded in their relationships.
They are the types of individuals who follow the letter of the law and
would go into cardiac arrest in making a decision on anything other than the
cold, hard facts. These people are
usually task oriented and highly disciplined about time. Their personal feelings are hidden in the
presence of others.
A third personality type is the "direct"
individual. These tend to "come on
strong," take the social initiative and create emphatic impressions. They think, move and act fast. Not afraid of taking risks, they easily
become impatient with those who cannot keep up with their own fast pace. They are very active people who do a lot of
talking and appear confident and frequently are regarded as domineering. Direct people express their opinions readily
and make "no holds barred" statements.
The other side of the picture from the "direct"
person are indirect people who give the impression of being shy, reserved and
quiet in nature. They may seem to be
supportive and easy going, and tend to be security conscious, moving slowly,
meditating on their responses and decisions, and avoiding risks. Prone to ask questions and listen more than
talk, they reserve opinions and make tentative statements when taking a
stand.
The major point in outlining these four personality
types is that each of us possesses to some degree each of these traits, but are
dominated by one more than the others.
For simplification, these people are designated as
socializers, the director, the thinker and the relater. The name denotes a dominant characteristic
rather than a full and complete personality analysis.
Dealing with Personality Types
Most can identify their own personalities and think
of others who fit in other categories.
There is no "best" style.
Each possesses its own individual strengths and weaknesses, and in fact,
there can even be some variances in styles on a given day. However, there is a constant that can be
construed as the dominant in everyone.
The purpose of knowing that people are different is
quite obviously to meet and serve their needs.
Practitioners must be aware and flexible enough to present their
services in a manner making it comfortable and easy for people to receive. As discussed earlier, while working with
someone, all of a sudden it seems that every shred of rapport that had been
established was "gone with the wind.
" It could be that the real estate professionals are the
"open, socializer" type and were doing "their thing" relating
some story considered most amusing, but unfortunately the customers or clients
were "directors," who could have cared less about the anecdote and
wanted to "pick up the pace" and get the information in a straight
dose!
All of this information and that which follows,
leads to the necessity of the opening interview with both clients and
customers. By plunging directly into
loading people in a car and taking them on a "buy or die" tour, great
risk is run of having those people escape and at the earliest opportunity, never
to appear again. This is the scene
described earlier where the associate was staring blankly at the wall and could
be heard muttering, "Why me, Lord? Why do I always get the people who
don't give me a clue as to what they want?"
To prevent this sad scene, look at some behavior
patterns needed in order to serve effectively the different types of
personalities.
When dealing with "socializers," avoid
hurrying and discussing and attempt to build some mutually stimulating ideas
together. Make opinions, ideas, and
even dreams, the focal point in conversations.
Paint a picture of how they will feel in their new home. If at some point in the transaction there is
a bone of contention, avoid arguing. No
one can win an argument with a "socializer. " They deal in intuitions and opinions;
they explore alternative solutions.
Here are some quick points in how to handle a "socializer:"
* Show an interest in them. Allow them time to talk. Be stimulating.
* Do not be shy and non-verbal.
* Study and pay attention to their dreams and
goals, as these may be as important as their needs.
* Present a solution to their needs by means of
stories and illustrations that relate to them.
* Confirm the details in writing, be specific and
direct.
Customer/clients who are "directors" are
easy to deal with provided the agent is efficient, highly time organized,
specific, well-organized and precise.
That is the language "directors" speak. The relationship should be strictly
businesslike. They are more than likely
not seeking a personal relationship.
Make the directors' goals the topic of conversation. Remember that they are the most goal, task
and achievement oriented of all personality types. Should a point need to be made, share the
facts, not personal feelings. Make
certain that statements can be backed with hard facts and tangible proof. Provide the "directors" with
alternatives. They like to make their
own decisions. Don't go "all
around the barn" to make a point and above all, don't waste time. Keep these key behavior patterns in mind
when working with a "director.
"
* Be prepared, fast paced, to the point and
organized.
* Be professional and businesslike.
* Determine what they want to do and how.
* Make proposals clearly, succinctly defining
the results and rewards and how it would apply to them.
Be Professional and businesslike
Determine what they want to do and how.
Have more than one solution. .
. . then let them make the decision of which to
take.
With the "thinkers," systematic is the
magic word. Do everything possible to
support their organized, thoughtful approach to things. Any contribution made to the solution of
their situation should be done with actions, rather than words. They want to be provided with solid and
tangible proof that what is said is so.
Be scrupulously honest in presenting the "good and the bad" of
a property. Leaving out or trying to
minimize a disadvantage will make a "thinker" feel things are being
hidden and will probably terminate the transaction speedily. Don't rush them. They need time to think and to digest words
and actions, and to verify their veracity.
Don't even think of letting things be a "guesstimate. "
Thinkers expect and demand accuracy.
Be prepared to answer all their questions.
* Don't waste time in "small talk. "
* Approach their situation in a practical,
logical manner and ask lots of questions to determine and uncover their real
needs.
* Present the solutions to their needs in a logical
fashion and back it up with documentation.
* Don't rush them to a decision making
point. They need time to think.
The "relaters" of the world want to know
that others are interested in them as a person and that their feelings are
important. Move slowly and informally
and be attentive. Offer assurances of
support. Avoid rushing a "relater. "
* Get to know them.
Be professional, but friendly.
* Take the time to get them to divulge and
elaborate on their needs and what is important to them.
* Go at a moderate pace, build a relationship,
friendship, trust and credibility.
* Be regular and consistent in communication and
always be ready to nurture and reassure them.
Among other qualifications for being a successful
real estate agent are being adaptable and flexible. When one treats other people in a manner
that is inappropriate, they are uncomfortable and the tension already
experienced because of moving is increased.
This is obviously counter productive to any situation.
Not only will customers and clients benefit from
skills in "reading" personalities but agents will find themselves
less stressed, more productive, and better equipped to serve their needs.
Listening
Real estate professionals are constantly in search
of new and different "tools" to facilitate their jobs. They often overlook and fail to utilize one
of the most obvious tools in their possession listening. They hear but don't listen.
Hearing is the awareness or consciousness of sounds
in surroundings. All are bombarded by
sounds, ringing telephones, clattering typewriters and conversations
nearby. They hear these things, but
don't necessarily listen to them.
In contrast, listening is a conscious effort to hear
a particular sound and interpret its meaning.
To listen means to gather information.
Effective listening is a further effort to understand the message in
terms of the response it requires.
After taking the time and energy required to analyze
the type of individual one is working with, it would be the height of folly to
fail to listen to that person. Someone
has said, "There is a way of listening that surpasses all compliments. Golden words can put gold in your
pocket. "
A leftover from the age of the dinosaur is the fact
that too many real estate sales people confine their marketing approach to
listing the features of a property or their service. What does this mean? Look at an illustration. A feature is an objective characteristic of
a product or service. For instance, the
surface of a desk is flat, and the customer's reaction may be "so
what?" A similar reaction could result if a caller asked to see a listing
and all the agent did was agree to meet them there, open the front door and
say, "I'll see you later. "
The feature of the service is that the phone was answered and the agent agreed
to open the house for them. Not very
impressive.
If, however, the agent not only opens the house, but
points out the fact the living area is large and would a perfect place to
entertain, and the kitchen with its state of the art equipment is a delight for
gourmet cooking, a whole series of benefits appeal to the love for entertaining
guests by an owner with gourmet talents!
Agents need to recognize the distinction of a
feature and a benefit and be conscious of the fact a benefit satisfies a need
and that needs are highly personal in nature.
Case in point: The fact that doorways are at least nine feet tall is
merely a feature to a 5 feet, 2 inch homemaker. To a 7 foot, 2 inch professional basketball
player, it would be a decided benefit.
By adopting benefit selling as a part of their
repertoire, agents will find their jobs much easier, the satisfaction of
customers and clients greatly enhanced and pay checks healthier.
Poor communication and a lack of understanding
accounts for a large percentage of lost sales.
If an agent could increase production by 75% through better
communication, it would seem well worth the time and effort to acquire these
skills.
Agents should seek to increase the number of
comments prospects make. The type of
comments or remarks desired are those that would be likely to lead to an
agreement. The job of the agent is to
reinforce the remarks that are favorable and that would ultimately lead to the
sale being made, and avoid reinforcing negative comments.
Closing
The topic of closing is probably the least
understood and the one that produces the greatest fear in agents. It is not something that just should happen,
but it is the natural progression when following the techniques previously
discussed. Selling is a lot like
courting, to use a term that those older remember.
Virtually all have experienced meeting someone to
whom they were attracted, made an effort to find out more about them, tried to
find areas of mutual interest, asked questions that provided them with wanted
information, and also had ideas of the "romance just sitting there. " Most will admit to being hopeful of an
encounter that would result in a date and an opportunity, based on what
happened next, to go beyond dating!
The same is true in a sales situation. They have been courted, now why not expect
them to make an offer on something that has been shown to them.
But in romance and in selling it comes down to
"dosing" or gaining a commitment.
But also in both departments, signals the other party is giving must be
recognized before the next step can be taken.
Listen to a series of phrases and tell if they would
signal a buying sign if a customer said them:
1. "It
does look nice, but. . .
. "
2.
"What other homes do you have?"
3. "I
wonder how our furniture would fit in here?"
The first statement does indicate interest, but more
questions must be asked, first indirect, then direct, to find out what is
behind the "but. " The second
statement is one of rejection. They are
not interested in this property and the third statement is the one that can
send the agent into orbit. Wondering
how their furniture would fit here is a good sign.
Prospective buyers tend to give recognizable
signals. If they linger in the house
for a long period of time, or keep going back through the rooms, or if they sit
down and make themselves comfortable, they are trying to picture themselves at
home there. If they go off in a comer
somewhere and begin to talk quietly between themselves, watch the expression on
their faces. Husbands and wives, if
they have been married for any length of time will give one another
signals. Stay tuned into their
behavior, and of course, another good sign is if the wife is jumping up and
down and "ohhing" and "ahhing.
" This is a positive sign.
Of course, her husband may physically abuse her for showing too much
emotion. Even the statement, "I
believe the price is too high" is a buying signal. It could be translated to say, "I'm
interested in this home and with a little luck, I'll get it below the asking
price. "
The point is - be tuned in to the responses of
buyers and sellers. Agents cannot sit
and wait for buyers to hit them over the head and force them to write an offer
or fill out a listing agreement, else they may get real lean and mean! Agents
must learn to implement the tool known as "closing. "
When is it time to close? Just as soon as a sign
that could be construed as a buying sign is observed. The agent summarizes all the benefits that
are important to the prospect.
Summarization is an effective way of reinforcing important benefits at a
time when the prospect is more likely to be touching or focusing on the
drawbacks or objections they have in mind.
By enumerating all the positive points, or summarizing, the agent is
helping the prospects make up their minds and the agent is overriding the
negative things that normally occur to anyone faced with making a major
decision. Most of us can easily think
of a jillion reasons not to do something, but if someone is pointing out the
good things, it takes some of the "sting" out of making a
decision. Of course, being able to
review the appropriate benefits hinges on having carefully listened to all the
things that were especially important to the prospective buyer or seller.
Summarizing the procedure for handling objections:
first, clarify what the objection is.
If it is a lack of information or misunderstanding, it can be easily
remedied. The best method of clarifying
is to repeat the objection back to the prospect, "You are saying, Mr. Jones, you feel the price is too high?"
Make certain to be on the same wave length with the prospect and referring to
the same problem. Decide at this point
if it is an easy or hard objection.
Take care of it if possible and if not, try to offset with other
benefits.
Quality negotiations can be boiled down to four basic points which define a straight forward method of negotiation that can be used under most circumstances.
Separation of people from the problem.
Focusing on interests, not on positions.
Generation of a variety of possibilities before deciding what to do.
Insistence that the results be based on some objective standard.
Separation of People From The Problem
The first point responds to the fact that human beings are not computers. Humans are creatures of strong emotions who often have radically different perceptions and have difficulty communicating clearly. Emotions typically become entangled with the objective merits of the problem. Taking positions just makes this worse because people's egos become identified with their emotional positions which may not be the same as their rational position. Therefore, before working on the subject of the negotiation, disentangling the "people problem" may be necessary. Figuratively, the negotiators should see themselves as dealing with the problem, not attacking each other.
A Basic Rule of Negotiating: The negotiator who loses control of his/her emotions while the opposite negotiator retains his/hers, loses.
The loss of emotional control may "win" temporarily because of the overwhelming of the other party or appeal to his/her emotions. This may result in a short range win and a long range loss. Most people are helpless in the face of strong emotions. About all that can be accomplished is to try to restrain the other person, offer comfort, or give directions as to the location of the door. We might temporarily "give-in" for some small favor or need, but usually the professional negotiator will not respond favorably to emotion. Emotional encounters are great for making enemies or making love, but make lousy conditions for real negotiations, R. E. TERMS GLOSSARY.
Focus on Interests - Not Positions
The second point is designed to overcome the drawback of focusing on people's stated positions when the object of the negotiation is to satisfy their underlying interests. A negotiating position often obscures what one really wants. A position might even be stated differently from what one really wants. This is because most of us are not very good communicators. We do not always know the best way to say things or to present needs.
Another basic rule that relates to the second point is to listen THROUGH the other negotiator's position and get to what that person's actual interest is. Also, try to put into words what your own real interests are, not just some position you are taking. The second point is, therefore, a classic communications problem and should be treated as such. Another helpful thing to do is to restate or feedback to the other negotiator what you think his/her interests are or might be. Skilled negotiators even help the other party define what the other party's interests really are by going around or through the "positional" statements and getting to the nitty-gritty.
Compromising between positions is not likely to produce an agreement which will effectively take care of the human needs that led people to adopt those positions.
Generate a Variety of Possibilities
The third point responds to the difficulty of designing "best" solutions while under pressure. Trying to decide in the presence of an adversary narrows ones vision. Having a lot at stake inhibits creativity and increases emotional loading. So does frantic searching for the one right solution. You can offset these constraints by setting aside a designated time within which to think up a wide range of possible solutions that advance shared interests and creatively reconcile differing interests. This relates critically to the planning stage of negotiations.
Objective Criteria
The fourth element provides a means to deal with an opposite party who is stubborn, emotional, confused or threatened by the negotiations. Where interests are directly opposed, a negotiator may be able to obtain a favorable result simply by being stubborn. That method tends to give place intransigence and produce arbitrary results. There is usually very little commitment to implementation of results. More often this leads to sabotage. Such a negotiator may be countered by insisting that his/her single say-so is not enough and the agreement must reflect some fair standard independent of the naked will of either side. This does not mean insisting the terms be based only on the standards selected, but only that some fair standard. By discussing such criteria rather that what the parties are willing or unwilling to do, neither party need give in to the other. Both can defer to a fair standard.
Basics of Quality Negotiations
The four basic propositions of negotiation are relevant from the beginning to the conclusion of the negotiations process. The negotiations period can be divided into three stages: analysis, planning and discussion.
During the analysis stage, the negotiator is simply trying to diagnose the situation-gather information, organize it, and think about it. The negotiator will consider the people problems of partisan perceptions, emotional barriers, and unclear communication, as well as identify interests of both sides. Options already on the table will be noted and any criteria already suggested as a basis for agreement will be identified.
During the planning state, the negotiator will deal with the same four elements a second time, both generating ideas and deciding what to do. How will the people problems be handled? What are the real interests of both sides? What are some realistic objectives?
Again, during the discussion stage, when the parties communicate back and forth, looking toward agreement, the same four elements are the best subjects to discuss. Differences in perceptions, feelings of anger or pleasure, and difficulties in communication can be acknowledged and addressed.
Over and beyond all the legal, financial and technical knowledge possessed by the real estate professionals, it is their negotiating skills which will produce the closing of the sale, and thus enable them to earn a commission.
SHORT INTRODUCTION TO
CALIFORNIA
© 1994 by Home Study, Inc. dba American Schools
Educational
Objectives:
TRUST FUNDS - GENERAL INFORMATION; ADVANCE FEE TRUST FUNDS;
TRUST FUND BANK ACCOUNTS; ACCOUNTING RECORDS; RECONCILIATION
OF ACCOUNTING RECORDS; DOCUMENTATION REQUIREMENTS;
AUDITS
(The following is quoted
by permission from several publications of the California Bureau of Real
Estate as follows:
Real estate brokers and salespersons receive trust funds in the normal course of doing business. They receive these funds on behalf of others, thereby, creating a fiduciary responsibility to the funds' owners. Brokers and salespersons must control, and account for these trust funds according to established legal standards. While compliance with these standards may not necessarily have a direct bearing on the financial success of a real estate business, non-compliance can result in unfavorable business consequences. Improper handling of trust funds is cause for revocation or suspension of a real estate license, not to mention the possibility of being held financially liable for damages incurred by clients.
This textbook discusses the legal requirements for receiving and handling trust funds in real estate transactions as set forth in the Real Estate Law and the Regulations of the Real Estate Commissioner. It describes the requisites for maintaining a trust fund bank account and the precautions a licensee should take to ensure the integrity of the account. It explains the trust fund record keeping requirements under the Business and Professions Code and the Commissioner's Regulations.
The discussions and examples in this book involve real property sales and property management trust account transactions. Other types of real estate activities involving trust funds, although subject to the same laws and regulations, may also have to comply with additional legal and regulatory requirements. While these other types of transactions may require records significantly different, the record keeping fundamentals discussed still apply.
TRUST FUNDS- GENERAL INFORMATION
Trust Funds vs Non-Trust Funds
Since trust funds must be handled in a special manner, a licensee must be able to distinguish trust funds from non-trust funds. Trust funds are money or other things of value that are received by a broker or salesperson on behalf of a principal or any other person, and which are held for the benefit of others in the performance of any acts for which a real estate license is required. Trust funds may be cash or non-cash items. Some examples are: cash, a check used as a purchase deposit (whether made payable to the broker or to an escrow or title company), a personal note made payable to the seller, or even a pink slip to a car that is given as a deposit. The discussions in this book pertain to real estate trust funds received by licensees, and not to non-trust funds such as real estate commissions, general operating funds, and rents and deposits from broker-owned real estate. These other types of funds, which as long as they are not commingled with trust funds are not subject to the Real Estate Law and Commissioner's Regulations. It should be noted, however, that under certain circumstances the California Bureau of Real Estate does have the jurisdiction to look into transactions involving non- trust funds.
Commissioner's Regulation 2830. Trust Fund Account.
If a real estate broker who accepts funds in a trust from others in the course of carrying on activities for which a real estate license is required does not effect compliance with section 10145of the code by immediately placing such funds into a neutral escrow depository or into the hands of a principal on whose behalf the funds were received, the broker shall deposit the funds upon receipt into a trust fund account in the name of the broker as trustee at a bank or other financial institution.
Except as expressly provided by subdivision (d) of Section 10145of the Code or by a regulation in this article, the account into which the trust funds are deposited shall not be an interest-bearing account for which prior written notice can by law or regulation be required by the financial institution as a condition to the withdrawal of funds.
Commissioner's Regulation 2830. 1. Interest Bearing Trust Account. A real estate broker, when acting as agent for a financial institution as beneficiary of a loan, may deposit and maintain funds from or for the account of an obligor for the future payment of property taxes, assessments or insurance relating to real property containing only a one-to-four family residence, in an interest-bearing trust account in a bank or savings and loan association in order to pay interest to the obligor in accordance with Section 2954. 8 of the Civil Code if the following requirements are met:
(a) The account is in the name of the broker as trustee.
(b) All of the funds in the account are covered by insurance provided by an agency of the federal government.
(c) All of the funds in the account are funds held in trust by the broker for others.
(d) The broker discloses to the obligor how interest will be calculated and paid. (e) No interest earned on the funds shall inure directly or indirectly to the benefit of the broker nor to any person licensed to the broker.
Trust Fund Handling Requirements
Because trust funds belong to others and are entrusted to the care and handling of a real estate licensee, the licensee has a fiduciary responsibility to the owners of the funds. This duty requires that the licensee handle the funds according to the law and use them only for purposes authorized by the funds' owners. Additionally, the licensee must maintain accurate, complete, and up-to-date accounting of the funds. A typical trust fund transaction begins with the broker or salesperson receiving trust funds from a principal in connection with the purchase or lease of real property. According to Business and Professions Code Section 10145, trust funds received must be placed into the hands of the owner(s) of the funds, into a neutral escrow depository, or into a trust account maintained pursuant to Commissioner's Regulation 2830 not later than the next business day following receipt of the funds by the broker or by the broker's salesperson.
An exception to this rule is when a check is received from an offeror in connection with an offer to purchase or lease real property. As provided under Commissioner's regulation 2832, a deposit check may be held uncashed by the broker until acceptance of the offer if the following conditions are met:
1. The check by its terms is not negotiable by the broker, or if the offeror has given written instructions that the check shall not be deposited or cashed until acceptance of the offer; and
2. The offeree is informed, before or at the time the offer is presented for acceptance that the check is being so held. If the offer is later accepted, the broker may continue to hold the check undeposited only if the broker receives written authorization from the offeree to do so. Otherwise, the check must be placed, not later than the next business day after acceptance, into a neutral escrow depository or into the trust fund bank account or into the hands of the offeree if both the offeror and offeree expressly so provide in writing.
According to Business and Professions Code Section 10145, a real estate salesperson who accepts trust funds on behalf of the broker under whom he or she is licensed must immediately deliver the funds to the broker or if directed by the broker, place the funds into the hands of the broker’s principal or into a neutral escrow depository or deposit the funds into the broker's trust fund bank account. A neutral escrow depository, as used in Business and Professions Code Section 10145, means an escrow business conducted by a person licensed under Division 6 (commencing with Section 17000) of the Financial Code or by any person described in subdivisions (a) and (c) of Section 17006 of the Code.
Identifying the Owner(s) of the Trust Funds
A broker must be able to identify which of the parties in a transaction owns the trust funds and is entitled to receive them, since these funds can be disposed of only upon the authorization of that person. The person entitled to the funds may or may not be the person who originally gave the funds to the broker or the salesperson. In some instances the party entitled to the funds will change upon the occurrence of certain events in the transaction. For example, in a transaction involving an offer to buy or lease real property or a business opportunity, the party entitled to the funds received from the offeror (prospective buyer or lessor) will depend upon whether or not the offer has been accepted by the offeree (seller or landlord) .
Prior to the acceptance of the offer, the funds received from the offeror belong to that person and must be handled according to his/her instructions. If the funds are deposited in a trust fund bank account, they must be maintained there for the benefit of the offeror until acceptance of the offer. Or, as discussed in the previous section, if the offeror wishes, his/her check may be held uncashed by the broker as long as he/she gives written instructions to the broker to do so and the offeree is informed before or at the time the offer is presented for acceptance that the check is being so held.
After acceptance of the offer, however, the funds shall be handled according to instructions from the offeror and the offeree as follows:
. An offeror's check held uncashed by the broker before acceptance of the offer may continue to be held uncashed after the acceptance of the offer, only upon written authorization from the offeree. (Commissioner’s Regulation 2832(d)).
. The offeror's check may be given to the offeree only if the offeror and offeree expressly so provide in writing. (Commissioner's Regulation 2832(d)).
. All or part of an offeror's purchase money deposit in a real estate sales transaction shall not be refunded by an agent or subagent of the seller without the express written permission of the offeree to make the refund. (Commissioner's Regulation 2785(a)(10)).
BUSINESS
10026. Definition of Advance Fee
The term "advance fee" as used in this part is a fee claimed, demanded, charged, received, collected or contracted for a listing, advertisement or offer to sell or lease property, other than in a newspaper of general circulation, issued primarily for the purpose of promoting the sale or lease of business opportunities or real estate or for referral to real estate brokers or salesmen, or soliciting borrowers or lenders for, or to negotiate loans on, business opportunities or real estate.
10131. 2 Broker License Needed
A real estate broker within the meaning of this part is also a person who engages in the business of claiming, demanding, charging, receiving, collecting or contracting for the collection of an advance fee in connection with any employment undertaken to promote the sale or lease of real property or of a business opportunity by advance fee listing, advertisement or other offering to sell, lease exchange or rent property or a business opportunity, or to obtain a loan or loans thereon.
10146. Advance Fees to Be Deposited in Trust Account
Any real estate broker who contracts for or collects an advance fee from any other person, hereinafter referred to as the "principal," shall deposit any such amount or amounts, when collected in a trust account with a bank or other recognized depository. Such funds are trust funds and not the funds of the agent. Amounts may be withdrawn there from for the benefit of the agent only when actually expended for the benefit of the principal or five days after the verified accounts mentioned hereinafter have been mailed to the principal. Upon request of the commissioner, a broker shall furnish to the commissioner an authorization for examination of financial records of the trust account in accordance with the procedures set forth in Section7473 of the Government Code.
The commissioner may issue such rules and regulations as he deems necessary to regulate the method of accounting, and to accomplish the purpose of the provisions of this code relating to advance fees including, but not limited to, establishing forms for and determining information to be included in such accountings. Each principal shall be furnished a verified copy of such accountings at the end of each calendar quarter and when the contract has been completely performed by the licensee. The Real Estate Commissioner shall be furnished a verified copy of any account or all accounts on his demand therefore.
Where advance fees actually paid by or on behalf of any principal are not handled in accordance with the preceding paragraph, it shall be presumed that the agent has violated Sections 506 and506a of the Penal Code. The principal may recover treble damages for amounts so misapplied and shall be entitled to reasonable attorney’s fees in any action brought to recover the same.
Rental Advance Fees
10167. 10 Refund of Advance Fee Paid
(a) (1) A licensee, other than a real estate broker, shall refund in full the advance fee paid by a prospective tenant the licensee does not, within five days after execution of the contract, supply at least three rental properties then available to prospective tenant and meeting the specifications of the contract.
(2) A licensee will be deemed to have supplied information meeting the specifications of the prospective tenant if the information supplied meets the contract specifications with reference to: (i) type of structure; (ii) designated area;(iii) furnished or unfurnished; (iv) number of bedrooms;(v) maximum rental; and (vi) any other specification expressly set forth in the contract. A demand for the return of the fee shall be made by or on behalf of the prospective tenant within 10 days following the expiration of the five-day period referred to above by delivery or by mailing by registered or certified mail to the address of a location, or branch of a real estate broker, set forth in the contract.
(b) A licensee shall refund any amount over and above the sum of a twenty-five dollar ($25) service charge to the prospective tenant if the prospective tenant obtains a rental other than through the services of the licensee during the term of the contract or does not obtain a rental, provided that the prospective tenant demands a return of that part of the fee within 10 days after the expiration of the contract. Within10 days of receipt of such a demand by the respective tenant, the licensee shall refund any amount over and above the sum of a twenty-five dollar ($25) service charge to the prospective tenant.
(c) Each contract, other than a contract employed by a licensee who is a real estate broker, shall contain provisions which shall contain provisions which shall read as follows unless different language shall have been approved in writing by the department prior to use:
RIGHT TO REFUND
(Full caps, bold face or italicize)
"If, within five days after payment of an advance fee, the licensee has not supplied the prospective tenant with at least three rental properties meeting the specifications of the contracts to (i) type of structure; (ii) designated area; (iii) furnished or unfurnished; (iv) number of bedrooms; (v) maximum rental; and(vi) any other specification expressly set forth in the contract, the amount of the fee paid shall be refunded to the prospective tenant upon presentation of evidence of such failure within 10days of the expiration of the five-day period.
"If the prospective tenant obtains a rental other than through the services of the licensee during the term of this contract or if the prospective tenant does not obtain a rental through the services of the licensee during the term of the contract, the licensee shall refund the fee received in excess of a twenty-five dollar ($25) service charge to the prospective tenant within 10days after receipt by the licensee of the demand for refund.
To be entitled to a refund in excess of the service charge, the prospective tenant must mail or deliver the demand for refund not later than 10 days after expiration of this contract. "
(d) Each contract employed by a real estate broker shall contain provisions which shall read as follows, unless different language shall have been approved in writing by the department prior to its use:
RIGHT TO REFUND
(Full caps, bold face or italicize)
"If the prospective tenant obtains a rental other than through the services of the licensee during the term of this contract or if the prospective tenant does not obtain a rental through the services of the licensee during the term of the contract, the licensee shall refund the fee received in excess of a twenty-five dollar ($25) service charge to the prospective tenant within 10days after receipt by the licensee of the demand for refund.
To be entitled to a refund in excess of the service charge, the prospective tenant must mail or deliver the demand for refund not later than 10 days after expiration of this contract. "
(e) This section shall not apply to a person purchasing rental information for a purpose other than that of locating a rental unit for personal use or the use of a designated person. The contract shall so provide and shall be initialed by the customer.
(f) If the licensee fails to make a refund as provided in this section and if the denial or delay in making the refund is found to have been done in bad faith, a court of appropriate jurisdiction, including a small claims court, shall be empowered to award damages to the plaintiff in an amount not to exceed five hundred dollars ($500) in addition to actual damages sustained by the plaintiff. If the licensee refuses or is unable to pay the damages awarded by the court, the award may be satisfied out of the security required under Section10167. 7.
(Paragraph 10167. 7
provides for licensees to maintain a $2,500bond with the
Disbursement Disclosure Requirements
2972. Accounting Content.
Each verified accounting to a principal or to the commissioner as required by Section 10146 of the Code shall include at least the following information:
(a) The name of the agent.
(b) The name of the principal.
(c) Description of the services rendered or to be rendered.
(d) Identification of the trust fund account into which the advance fee has been deposited. (e) The amount of the advance fee collected.
(f) The amount allocated or disbursed from the advance fee for each of the following:
(1) In providing each of the services enumerated under (c)above.
(2) Commissions paid to field agents and representatives.
(3) Overhead costs and profit.
(g) In cases in which disbursements have been made for advertising, a copy of the advertisement, the name of the publication, the number of the advertisements actually published and the dates that they were carried.
(h) In the case of an advance fee for the arrangement of a loan secured by a real property or a business opportunity, a list of the names and addresses of the persons to whom information pertaining to the principal's loan requirements were submitted and the dates of the submittal.
Agents' Responsibility as to Advance Fees
Authority to Receive Deposits
The general rule is that when the scope of authority of a real estate broker has been limited to producing a buyer able and willing to purchase the property upon terms prescribed by the broker's principal, the broker has no authority to accept a deposit from the buyer. Even when an agent has express authority to negotiate a sale of real property, this does not give him or her implied or ostensible authority to collect the purchase price. When an agent does so the agent is acting as agent for the buyer and not the seller. Consequently any misappropriation of these funds by the broker would result in loss to the buyer and not the seller. This general rule of law does not apply, however, where the broker actually had authority to receive a deposit on behalf of the seller. Virtually all listing agreement forms in use today give express authority to the broker to accept an earnest money deposit on behalf of the owner. The authority granted a listing broker also applies to any subagents of the seller. The authority, however, would not apply to a broker who is acting only as an agent of the buyer.
In those cases where a down payment has been paid to the broker and not deposited in escrow, title to such payment vests in the seller when the seller accepts the contract. Further, where an agreement for sale of realty provides that a deposit with the broker is to become a part of the down payment when the seller puts in escrow a deed evidencing good title, the deposit becomes the seller's property when the deed is put in escrow and the broker cannot, except at broker's own risk, return it to the buyer. Similarly money received by seller's agent under a deposit receipt with a valid liquidated damages clause is not recoverable by the buyer in the case of the buyer's breach.
The rationale behind this rule is that money received by a broker as agent or subagent for the seller belongs to the seller when the offer has been accepted. The broker may not return the funds to the buyer without the consent of the seller.
Checks
In those cases where an earnest money deposit has been paid to the broker with written instructions to hold and not negotiate the check until acceptance of the offer, the buyer's instructions should be followed. But the seller must be informed in writing, that the buyer's check is being held and not negotiated. This disclosure should be given to the seller not later than the actual presentation of the offer to the seller and must be acknowledged by the seller prior to or concurrent with the seller's acceptance of the offer. It is acceptable practice to include the disclosure as a term and condition of the offer. During the time between the receipt of the check by the broker and the acceptance of the purchase offer by the seller, the broker should enter the fact of receipt of the check into the broker's trust fund records and hold the check in a safe place. (See Commissioner's Regulations 2831 and 2832. ) Although there may be a custom in real estate transactions for a broker to accept a check instead of cash as an earnest money deposit, the existence of such a custom does not justify the acceptance of either a check or a promissory note in lieu of cash unless there is full disclosure to the seller. While checks are universally accepted as the equivalent of money in business transactions, promissory notes are not. The maker of a check represents that the maker has money in the bank to cover it and the failure to have such money may be a crime. The maker of a note makes no such representation and the maker's failure to pay is generally not a crime. California law has held that a post- dated check is the equivalent of a promissory note. Therefore, a broker should not accept a post-dated check from a buyer since this may result in mischaracterization of the form of earnest money deposit without adequate disclosure to the seller.
Promissory Note
A real estate broker, like a trustee, has an affirmative duty to disclose all material facts which might influence a principal's decision. Thus the broker who impliedly represents to a principal that the broker has received cash from a purchaser as an earnest money deposit when in fact the broker has accepted a non- negotiable promissory note has violated the Real Estate Law.
Escrow Depository
In those cases where an earnest money deposit has been paid by the buyer directly into escrow under the standard form of escrow instructions which provide for the exchange of money and a deed on stipulated conditions, the buyer is said to have conditionally delivered the money to the escrow holder, while it may be argued that the buyer retains title to the money until the conditions imposed by the buyer have been performed. When the buyer and seller have each fully performed under an escrow agreement (all conditions of escrow have been satisfied or waived), the escrow holder becomes the agent of the seller as to the purchase money and the agent of the buyer as to the deed. The escrow holder thereupon delivers the money to the seller and the deed to the buyer.
Commingling
The agent who places a client's money in agent's personal bank account is guilty of commingling and creates a risk of having it attached for personal claims against the agent. (See Section 10176(e) B. & P. Code. ) Hence real estate licensees are required by law to immediately place all funds received on behalf of principals in a special trust account, unless they place them in a neutral escrow depository or in the hands of the principal who is entitled to them. Checks must be deposited for collection by the next business day following receipt by the broker. If the broker fails to do so, the broker is liable to disciplinary action by the commissioner. A salesperson should immediately deliver all deposits into the hands or into the control of salesperson's broker, or as instructed by the broker.
Approval of Advance Fee Agreement
BUSINESS
10085. Materials used in obtaining advance fee agreements; submission to commissioner; order; violations
The commissioner may require that any or all materials used in obtaining advance fee agreements, including but not limited to the contract forms, letters or cards used to solicit prospective sellers, and radio and television advertising be submitted to him or her at least 10 calendar days before they are used.
Should the commissioner determine that any such matter, when used alone or with any other matter, would tend to mislead he or she may, within 10 calendar days of the date he or she receives same, order that it not be used, disseminated, nor published. Any person using, disseminating, or publishing any matter which the commissioner has ordered, pursuant to this section, not to be used, published, or disseminated shall be guilty of a misdemeanor punishable by a fine not exceeding one thousand dollars ($1,000)or by imprisonment in the county jail not exceeding six months, or both, for each such use, dissemination, or publication.
Any violation of any of the provisions of this part or of the rules, regulations, orders or requirements of the commissioner there under shall constitute grounds for disciplinary action against a licensee, or for proceedings under Section 10081 of this code, or both. These sanctions are in addition to the criminal proceedings hereinbefore provided.
The commissioner may determine the form of the advance fee agreements, and all material used in soliciting prospective owners and sellers shall be used in the form and manner which he or she determines it necessary to carry out the purposes and intent of this part.
Any violation of any of the provisions of this part or of the rules, regulations, orders or requirements of the commissioner there under shall constitute grounds for disciplinary action against a licensee, or for proceedings under Section 10081 of this code, or both. These sanctions are in addition to the criminal proceedings hereinbefore provided.
10085. 5 Payment of advance fees; loans secured by lien on real property
(a) It shall be unlawful for any person to claim, demand, charge, receive, collect, or contract for an advance fee (1) for soliciting lenders on behalf of borrowers or performing services for borrowers in connection with loans to be secured directly or collaterally by a lien on real property, before the borrower becomes obligated to complete the loan or, (2)for performing any other activities for which a license is required, unless the person is a licensed real estate broker and has complied with the provisions of this part.
(b) This section shall not prohibit the acceptance or receipt of an advance fee by any bank, savings association, credit union, industrial loan company, or person acting within the scope of a license issued to that person pursuant to Division 9(commencing with Section 22000) Division 10 (commencing with Section 24000) or Division 11 (commencing with Section 26000)of the Financial Code, in connection with loans to be secured directly or collaterally by a lien on real property. This section shall not apply to charges made by title insurers and controlled escrow companies pursuant to Chapter 1 (commencing with Section 12340) of Part 6 of Division 2 of the Insurance Code.
(c) A violation of this section is a public offense punishable by a fine not exceeding ten thousand dollars ($10,000), or by imprisonment in the county jail for a term not to exceed six months, or by both fine and imprisonment, or if by a corporation, punishable by a fine not exceeding fifty thousand dollars ($50,000).
Article 21. Advance Fee Agreements
2970. Advance Fee Materials.
A person who proposes to collect an advance fee as defined in Section 10026 in the Code shall submit to the Commissioner not less than five days before publication or other use, all materials to be used in advertising, promoting, soliciting and negotiating an agreement calling for the payment of an advance fee including the form of advance fee agreement proposed for use.
(b) Material used in advertising, promoting, soliciting and negotiating an advance fee agreement shall not be approved if it:
(1) Includes any representation which is false, misleading or deceptive.
(2) Does not set forth a specific, complete description of the services to be rendered for the advance fee.
(3) Does not set forth the total amount of the advance fee along with the date on which the fee shall become due and payable.
(4) Contains any provision which purports to relieve or exempt the person collecting the advance fee from an obligation to fulfill verbal commitments and representations made by employees and agents of the person contracting for the advance fee.
(5) Contains any provision which purports to give a guarantee that the real property or business opportunity in question will be purchased, leased or exchanged or that a loan secured by real property will be obtained as a result of the services rendered by the person collecting the advance fee.
(6) Does not set forth a definite date for full performance of the services promised under the advance fee agreement.
(c) Not less than 10-point type shall be used in advance fee agreements.
General Requirements
Trust funds received by a licensee that are not forwarded directly to the broker's principal or to a neutral escrow depository or for which the broker does not have authorization to hold uncashed must be deposited to the broker's trust fund bank account. (Business and Professions Code Section 10145. )
Business and Professions Code Section 10145 and Commissioner's Regulation 2830 require that a trust account meet the following criteria:
1. Designated as a trust account in the name of the broker as trustee;
2. Maintained with a bank or recognized depository located in California; and
3. Not an interest-bearing account for which prior written notice can by law or regulation be required by the financial institution as a condition to withdraw the funds, except as noted in the following discussion of "Interest Bearing Accounts".
Trust Account Withdrawals
Commissioner's Regulation 2834.
(a) Trust Account Withdrawals. Withdrawals may made from a trust fund account of an individual broker only upon the signature of the broker or one or more of the following persons if specifically authorized in writing by the broker:
(1) a salesperson licensed to the broker.
(2) an unlicensed employee of the broker with fidelity bond coverage at least equal to the maximum amount of the trust fund to which the employee has access at any time.
(b) Withdrawals may be made from the trust fund account of corporate broker only upon the signature of an officer through whom the corporation is licensed pursuant to Section 10158 or10211 of the Code or one of the persons enumerated in paragraph (1) or (2) of subdivision (a) above.
(c) An arrangement under which a person enumerated in paragraph(1) or (2) of subdivision (a) above is authorized to make withdrawals from a trust fund account of a broker shall not relieve an individual broker, nor the broker-officer of a corporate broker licensee from responsibility or liability as provided by law in handling trust funds in the broker’s custody.
According to Commissioner's Regulation 2834, withdrawals from the trust account may be made only upon the signature of one or more of the following:
1. The broker in whose name the account is maintained; or
2. The designated broker-officer if the account is in the name of a corporate broker; or
3. If specifically authorized in writing by the broker, a salesperson licensed to the broker; or
4. If specifically authorized in writing by the broker, an unlicensed employee of the broker covered by a fidelity bond at least equal to the maximum amount of the trust fund to which the employee has access at any time.
Any arrangement under which a person named in items 3 or 4 is authorized to make withdrawals from a broker's trust fund account does not relieve an individual broker or the broker-officer of a corporate broker licensee from responsibility or liability as provided by law in handling trust funds in the broker's custody. The fact of an employee's irresponsibility or negligence also does not relieve the broker of compliance with the law.
Why a trust Account?
A trust account is set up as a means to separate trust funds from no trust funds. Although it can certainly be argued that keeping trust funds in a trust account will not prevent a dishonest broker from misusing the funds, separating client's funds from the broker's own funds provides a better physical and accounting control over the trust funds. An important reason for designating a trust fund depository as a trust account is the protection afforded principals' trust funds in situations where legal action is taken against the broker or if the broker becomes incapacitated or dies. Trust funds held in a true trust account cannot be "frozen" pending litigation against the broker or during probate. Trust funds also have better insurance protection if deposited into a trust account. The general counsel of the Federal Deposit Insurance Corporation (FDIC), in an opinion in 1965, held that funds of various owners which are placed in a custodial deposit (trust account) in an insured bank will be recognized for insurance purposes to the same extent as if the owners' names and interests in the account are individually disclosed on the records of the bank, provided the trust account is specifically designated as custodial and the name and interest of each owner of funds in the account are disclosed on the depositor's records. Each client with funds deposited in a trust account maintained with a federally insured bank is insured by the FDIC up to $100,000, as opposed to just $100,000 for the entire account, as long as the regulatory requirements are met.
Interest Bearing Accounts
A trust fund bank account normally may not be interest bearing. A broker may, however, at the request of the owner of trust funds, or of the principals to a transaction or series of transactions from whom the broker has received trust funds, deposit the funds into an interest-bearing account in a bank or savings and loan association if all of the following requirements pursuant to Business and Professions Code Section 10145 are met:
1. The account is in the name of the broker as trustee for a specified beneficiary or specified principal of a transaction or series of transactions;
2. All of the funds in the account are covered by insurance provided by an agency of the federal government;
3. The funds in the account are kept separate, distinct, and apart from funds belonging to the broker or to any other person for whom the broker holds funds in trust; and
4. The broker discloses the following information to the person from whom the trust funds are received and to any beneficiary whose identity is known to the broker at the time of establishing the account:
. The nature of the account;
. How the interest will be calculated and paid under various circumstances;
. Whether service charges will be paid to the depository and by whom; and
. Possible notice requirements or penalties for withdrawal of funds from the account.
5. No interest earned on funds in the account shall inure directly or indirectly to the benefit of the broker or to any person licensed to the broker. Even authorization by the funds' owners shall not legally permit the broker to collect the earned interest on trust funds.
6. In an executory sale, lease, or loan transaction in which the broker accepts funds in trust to be applied to the purchase, lease, or loan, the parties to the contract shall have specified in the contract or by collateral written agreement the person to whom interest earned on the funds is to be paid or credited.
The only other situation where a real estate broker is allowed to deposit trust funds into an interest bearing account is when the broker is acting as an agent for a financial institution which is the beneficiary of a loan. In this case the broker may, pursuant to Commissioner's Regulation 2830. 1, deposit and maintain funds received from or for the account of an obligor (or borrower) into an interest bearing trust account in a bank or savings and loan association in order to pay interest on an impound account to the obligor in accordance with Section 2954. 8 of the Civil Code, as long as the following requirements are met:
1. The funds received from or for the account of the obligor are for the future payment of property taxes, assessments or insurance relating only to a property containing a one-to four- family residence;
2. The account is in the name of the broker as trustee;
3. All of the funds in the account are covered by insurance provided by an agency of the federal government;
4. All of the funds in the account are funds held in trust by the broker for others
5. The broker discloses to the obligor how interest will be calculated and paid; and
6. No interest earned on the trust funds shall inure directly or indirectly to the benefit of the broker or to any person licensed to the broker.
Commingling Prohibited
Funds belonging to the licensee may not be commingled with trust funds. Commingling is strictly prohibited by the Real Estate Law. It is grounds for the revocation or suspension of a real estate license pursuant to Business and Professions Code Section 10176(e).
Commingling occurs when:
1. Personal or company funds are deposited into the trust fund bank account. This is a violation of the law even if separate records are kept.
2. Trust funds are deposited into the licensee's general or personal bank account rather than into the trust fund account. In this case the violation is not only commingling, but also handling trust funds contrary to Business and Professions Code Section 10145. It is also grounds for suspension or revocation of a license under Business and Professions Code Section 10177 (d) .
3. Commissions, fees, or other income earned by the broker and collectible from the trust account are left in the trust account for more than 30 days from the date they were earned. A common example of commingling is depositing rents and security deposits on broker-owned properties into the trust account. As these funds relate to the broker's properties, they are not trust funds and, therefore, may not be deposited into the trust fund bank account. Likewise, mortgage payments and other payments on broker-owned properties may not be made from the trust account even if the broker reimburses the account for such payments. Conducting personal business through the trust account is strictly prohibited and is a violation of the Real Estate Law.
For practical reasons, a real estate broker's personal funds may be commingled in the trust account in the following two specific instances:
1. A broker is allowed to maintain up to $100 of personal funds in a trust account to cover checking account service fees and other bank charges such as check printing charges and service fees on returned checks. Trust funds may not be used to pay for these expenses. The preferred practice however, is for the broker to have the bank debit his/her own personal account for any trust account fees and charges.
2. Commissions, fees, and other incomes earned by a broker, collectible from trust funds deposited into the broker's trust account may remain there for a period not to exceed 30 days. While leaving this income in the trust account is technically commingling of funds, sometimes it may just not be practical to disburse the earned income immediately upon receipt. For instance, a property management company may find it too burdensome to collect its management fee every time a rent check is received and deposited to the trust account. Therefore, as long as the broker disburses the fee from the trust account within 30 days after it is earned there is no commingling violation.
Note, however, that income earned shall not be taken from trust funds received before depositing such funds into the trust bank account. Also, under no circumstances may the broker pay personal obligations from the trust fund bank account even if such payments are a draw against commissions or other income. The broker must issue a trust account check to himself/herself for the total amount of the income earned, adequately documenting such payment, and then pay personal obligations from the proceeds of that check.
Trust Fund Liability
2831. Trust and Records to Be Maintained
(a) Every broker shall keep a record of all trust funds received, including uncashed checks held pursuant to instructions of his or her Principal. This record, including records maintained under an automated data processing system, shall set forth in Chronological Sequence the following information in columnar form:
(1) Date trust funds received.
(2) From whom trust funds received.
(3) Amount received.
(4) With respect to funds deposited in an account, date of said deposit.
(5) With respect to trust funds previously deposited to an account, check number and date of related disbursement.
(6) With respect to trust funds not deposited in an account, identity of other depository and date funds were forwarded.
(7) Daily balance of said account.
(b) For each bank account which contains trust funds, a record of all trust funds received and disbursed shall be maintained in accordance with subdivision (a) or (c).
(c) Maintenance of journals of account cash receipts and disbursements, or similar records, or automated data processing systems, including computer systems and electronic storage and manipulation of information and documents, in accordance with generally accepted accounting principles, shall constitute compliance with subdivision (a) Provided that such journals. records. or systems contain the elements required by subdivision (a) and that such elements are maintained in a format that will readily enable tracing and reconciliation in accordance with Section 2831. 2.
(d) Nothing in this section shall be construed to permit a violation of Section 10145 of the Code.
(e) A broker is not required to keep records pursuant to this section of checks which are written by a Principal, given to the broker and made payable to third parties for the provision of services providers, including but not limited to escrow, credit and appraisal services, when the total amount of such checks for any transaction from that principal does not exceed51,000. Upon request of the Deportment or the maker of such checks, a broker shall account for the receipt and distribution of such checks. A broker shall retain for three years copies of receipts issued or obtained in connection with the receipt and distribution of such checks.
NOTE: Authority cited: Section 10080, Business and Professions Code. Reference: Sections 10145 and 10148, Business and Professions Code.
2831. 1. Separate Record for Each Beneficiary or Transaction.
(a) A broker shall keep a separate record for each beneficiary or transaction, accounting for all funds which have been deposited to the broker's trust bank account and interest, if any, earned on the funds on deposit. This record shall include information sufficient to identify the transaction and the parties to the transaction. Each record shall set forth in chronological sequence the following information in columnar form:
(1) Date of deposit.
(2) Amount of deposit.
(3) Date of each related disbursement.
(4) Check number of each related disbursement.
(5) Amount of each related disbursement.
(6) If applicable, dates and amounts of interest earned and credited to the account.
(7) Balance after posting transactions on any date.
(b) Maintenance of trust ledgers of separate beneficiaries or transactions, or similar records, or automated data processing systems, including computer systems and electronic storage and manipulation of information and documents, in accordance with generally accepted accounting principles will constitute compliance with subdivision (a) provided that such ledgers, records, or systems contain the elements required by subdivision (a) and that such elements are maintained in a format that will readily enable tracing and reconciliation in accordance with Section 2831. 2.
NOTE: Authority cited: Section 10080 Business and Professions Code. Reference: Sections 10145 and 10148, Business and Professions Code.
2832 Trust Fund Handling
(a) Compliance with Section 10145 of the Code requires that the broker place funds accepted on behalf of another into the hands of the owner of the funds, into a neutral escrow depository or into a trust fund account in the name of the broker as trustee at a bank or other financial institution not later than three business s days following receipt of the funds by the broker or by the brokers salesperson.
(b) Except as expressly provided by subdivision (d) of Section10145 of the Code or by a regulation in this article, the account into which the trust funds are deposited shall not bean interest-bearing account for which prior written notice can by law or regulation be required by the financial institution as a condition to the withdrawal of funds.
(c) A check received from the offeror may be held uncashed by the broker until acceptance of the offer if
(1) the check by its terms is not negotiable by the broker or if the offeror has given written instructions that the check shall not be deposited nor cashed until acceptance of the offer and
(2) the offeree is informed that the check is being so held before or at the time the offer is presented for acceptance.
(d) In these circumstances if the offeror's check was held by the broker in accordance with subdivision (c) until acceptance of the offer, the check shall be placed into a neutral escrow depository or the trust fund account, or into the hands of the oferee if offeror and offeree expressly so provide in writing, not later than three business days following acceptance of the offer unless the broker receives written authorization from the offeree to continue to hold the check.
(e) Notwithstanding the Provisions of subdivisions (a) and (d), a real estate broker who is not licensed under the Escrow Law(Section 17000. et seq. of the Financial Code) when acting in the capacity of an escrow holder in a real estate purchase and sale. exchange or loan transaction in which the broker is Performing acts for which a real estate license is required shall place all funds accented on behalf of another into the hands of the owner of the funds. into a neutral escrow depository or into a trust fund account in the name of the broker as trustee at a bank or other financial institution not later than the next business day following receipt of the funds by the broker or by the broker's salesperson.
NOTE: Authority cited: Section 10080, Business and Professions Code. Reference: Section 10145, Business and Professions Code.
Commissioner's Regulation 2832. Trust Fund Handling.
(a) Compliance with Section 10145 of the Code requires that the broker place funds accepted on behalf of another into the hands of the owner of the funds, into a neutral escrow depository or into a trust fund account maintained pursuant to Section 2830 of these regulations not later than the next business day following receipt of the funds by the broker or by the broker's salesperson.
(b) Except as provided in subdivision (c), if the funds are received by the broker prior to acceptance of an offer to purchase or lease in connection with which the funds have been tendered, the funds shall be maintained in the trust fund account for the benefit of the offeror until acceptance of the offer.
(c) A check received from the offeror may be held uncashed by the broker until acceptance of the offer if (1) the check by its terms is not negotiable by the broker or if the offeror has given written instructions that the check shall not be deposited nor cashed until acceptance of the offer and (2) the offeree is informed that the check is being so held before or at the time the offer is presented for acceptance.
(d) In these circumstances if the offeror's check was held by the broker in accordance with subdivision (c) until acceptance of the offer, the check shall be placed into a neutral escrow depository or the trust fund account or into the hands of the offeree if offeror and offeree expressly so provide in writing not later than the next business day following acceptance of the offer unless the broker receives written authorization from the offeree to continue to hold the check.
Commissioner's Regulation 2832. 1. Trust Fund Handling for Multiple Beneficiaries. Compliance with Section 10145 of the Code requires that a real estate broker not disburse, nor cause or permit the disbursement of trust funds from a trust fund account without the prior written consent of every principal who is an owner of the funds in the account if the disbursement will reduce the balance of funds in the account to an amount less than the existing aggregate trust fund liability of the broker to all owners of said funds.
Trust fund liability arises when funds are received from or for the benefit of a principal, and decreases when funds are disbursed according to instructions from that principal. The aggregate trust fund liability at any one time for a trust account with multiple beneficiaries is equal to the total positive balances due to all beneficiaries of the account at the time. Note that beneficiary accounts with negative balances are not deducted from other accounts when calculating the aggregate trust fund liability. Funds on deposit in the trust account must always equal the broker's aggregate trust fund liability. If the trust account balance is less than the total liability a trust fund shortage results. Such a shortage is in violation of Commissioner's Regulation 2832. 1, which states that a broker may not disburse or cause or permit the disbursement of funds from a trust fund account without the prior written consent of every owner of the funds if the disbursement will reduce the balance of the account below the trust fund liability. Conversely, if the trust account balance is greater than the total liability there is a trust fund overage. An overage is also a violation of the Real Estate Law since non-trust funds may not be commingled in the trust account.
A trust fund discrepancy of any kind is a serious violation of the
Real Estate Law. Many broker and
salesperson licenses have been revoked after a
To ensure that the balance of the trust account at all times equals the trust fund liabilities, a broker should take the following precautionary measures:
1. Deposit intact and in a timely manner to the trust account all funds that are not forwarded to escrow or to the funds' owner(s) or which are not held uncashed as authorized. This practice, required under Commissioner's Regulation 2832, lessens the risk of the funds being lost, misplaced, or otherwise not deposited to the trust account. A licensee is accountable for all trust funds received whether or not they are deposited. Department auditors have seen numerous cases where trust funds received were properly recorded on the books, but were never deposited to the bank.
2. Maintain adequate supporting papers for any disbursement from the trust account, and accurately record the disbursement both in the Bank Account Record and in the Separate Beneficiary Record. The Broker must be able to account for all disbursements of trust funds. Any unidentified disbursement will cause a shortage.
3. Disburse funds against a beneficiary's account only when the disbursement will not result in a negative or deficit balance (negative accountability) to the account. Many trust fund shortages are caused by the broker's making disbursements for a beneficiary in excess of funds received from or for account of that beneficiary. The over-disbursements are, in effect, paid out of funds belonging to other beneficiaries with positive balances. A shortage occurs because the balance of the trust fund bank account, even if it is a positive balance, is less than the broker's liability to those other beneficiaries.
4. Ensure that a check deposited to the trust fund account has cleared before disbursing funds against that check. This applies, for example, when a broker after depositing an earnest money deposit check for a purchase transaction has to return the funds to the buyer because the offer is rejected by the seller. A trust fund shortage will result if the broker issues the buyer a trust account check and the buyer's deposit check bounces or for some reason fails to clear the bank.
5. Keep accurate, current and complete records of the trust account and the corresponding beneficiary accounts. They are essential to ensure disbursements are correct.
6. On a monthly basis, reconcile the cash record with the bank statement and with the separate record for each beneficiary or transaction.
Summary--Maintaining Trust Account integrity
In summary, to maintain the integrity of the trust fund bank account, a broker must ensure that:
1. His/her personal or general operating funds are not commingled with trust funds;
2. The balance of the trust fund account is equal to the broker's trust fund liability to all owners of the funds; and
3. The trust fund records are in an acceptable form and are current, complete, and accurate.
ACCOUNTING RECORDS
General Requirements
An important aspect of the broker's fiduciary responsibility to the client is the maintenance of adequate records to account for trust funds received and disbursed. This is true whether the funds are deposited to the trust fund bank account, sent to escrow, held uncashed as authorized under Commissioner's Regulation 2832, or released to the owner (s) of the funds. A broker should recognize the necessity of maintaining good and accurate accounting records. They are a requisite to the proper handling of trust funds, in that they:
1. Provide a basis upon which the broker can prepare an accurate accounting for his/her clients, especially in the case of property management accounts;
2. State the amount of money the broker owes the account beneficiaries at any one time, this is especially important when there are a large number of transactions;
3. Prove whether or not there is an imbalance in the trust account. (Some brokers audited by the Department in the past disagreed that their trust account had a shortage or an overage in the amount disclosed by the audit, but at the same time could not provide documentation to support their position)
4. Evidence the fact that funds deposited in the trust account belong to beneficiaries only and not to the broker; and
5. Guarantee that beneficiary funds deposited in the trust account will be insured up to the maximum FDIC insurance coverage.
Accounting Systems
There are two types of accounting records that may be used for trust funds:
columnar records in the formats prescribed by Commissioner's Regulations 2831 and 2831. 1; and records other than columnar records that are in accordance with generally accepted accounting practices. Certain basic characteristics must be present in an accounting system to be acceptable under Commissioner's Regulation 2831 and 2831. 1, regardless of the type of system used. To be an acceptable system, the records must show the following:
1. All trust fund receipts and disbursements with pertinent details presented in chronological sequence;
2. The balance of each trust fund account calculated based on recorded transactions;
3. All receipts and disbursements exclusively affecting each beneficiary's account presented in chronological sequence; and
4. The balance owing to each beneficiary or for each transaction, such balance calculated based on recorded transactions.
Either manually produced or computerized accounting records are acceptable. The type and form of records appropriate to a particular real estate operation as well as the means of processing transactions will depend on factors such as the nature of the business, the number of clients, the volume of transactions, and the types of reports needed. For example, manual recording on columnar records might be satisfactory for a broker handling a small number of transactions, while a computerized system might be more appropriate and practical for a large property management operation.
Columnar Records: A broker may decide to use the columnar records prescribed by Commissioner's Regulations 2831 and 2831. 1. The records required will depend on whether the trust funds received are deposited to the trust account, forwarded to an escrow depository or to the owner of the funds. These records are:
1. Columnar Record of All Trust Funds Received and Paid-Out-Trust
Fund Bank Account (
3. Record of Trust Funds Received but not Deposited to the Trust
Fund Bank Account (
The first two records are required when trust funds are received and deposited or supposed to be deposited to the trust fund bank account. The third record is required when trust funds received are not deposited to the bank account, but are forwarded to escrow or to the owner of the funds.
If the trust fund account involves clients' funds from rental
properties managed by the broker, the Separate Record for Each Property
Managed, (
Record of All Trust Funds Received and Disbursed--Trust Fund Bank Account
This record is used to journalize all trust funds deposited to and disbursed from the trust fund bank account. At a minimum, it must show the following information in columnar form: date funds were received, name of payee or pay or, amount received, date of deposit, amount paid out, check number and date, and the daily balance of the bank account. All transactions affecting the bank account are entered in chronological sequence on this record regardless of payee, pay or beneficiary. If there is more than one trust fund bank account, a separate record must be maintained for each account, pursuant to Commissioner's Regulation 2831.
Separate Record for Each Beneficiary or Transaction
This record is maintained to account for the funds received from or for the account of each beneficiary or for each transaction and deposited to the bank account. With this record, the broker can ascertain the funds owed to each beneficiary or for each transaction. The record must show in chronological sequence the following information in columnar form: date of deposit, amount of deposit, name of payee or payor, check number date and amount, and balance of the individual account after posting transactions on any date.
A separate record must be maintained for each beneficiary or transaction from whom the broker received funds that were deposited to the trust fund bank account. If the broker has more than one trust fund account, each account must have its own set of separate beneficiary records so that they can be reconciled with the individual trust fund bank account record required under Commissioner's Regulation 2831.
Record of Trust Funds Received But Not Deposited to the Trust Fund Bank Account
This record is used to keep track of funds received and not deposited to a trust fund bank account. It must show the date funds were received, the form of payment (check, note, etc. ), amount received, description of property, identity of the person to whom funds were forwarded, and date of disposition. Trust fund receipts are recorded in chronological sequence, while their disposition is recorded in the same line where the corresponding receipt is recorded. Transaction folders usually maintained by a broker for each real estate sales transaction showing the receipt and disposition of undeposited checks are not acceptable alternatives to the Record of Trust Funds Received But Not Deposited to the Trust Fund Bank Account.
Separate Record for Each Property Managed
This record is similar to and serves the same purpose as the Separate Record for Each Beneficiary or Transaction. It does not have to be maintained if the Separate Record is already used for a property owner's account. The Separate Record for Each Property Managed is useful when the broker wants to show some detailed information about a specific property being managed.
Non-Columnar Records. A broker may use trust fund records not in the columnar form as prescribed by Commissioner's Regulations 2831 and 2831. 1. Such records, however, must be in accordance with generally accepted accounting practices. Whether the records are prepared manually or by computer, they must include at least the following records:
1. Journals to record in chronological sequence the details of all trust fund transactions.
2. Cash ledger to show the bank balance as affected by the transactions recorded on the journals. The ledger is posted in the form of debits and credits. (In some cases the cash ledger may be combined with the journals. )
3. Beneficiary ledger for each of the beneficiary accounts to show in chronological sequence the transaction affecting each beneficiary's account, as well as the balance of the account. To comply with generally accepted accounting practices, there must be one set of journals, cash ledger, and beneficiary records for each trust fund bank account.
Journals
The journals are a daily chronological record of trust fund receipts and disbursements. A single journal may be used to record both the receipts and the disbursements, or a separate journal may be used for each.
To meet minimum record keeping requirements a journal must:
1. Record all trust fund transactions in chronological sequence;
2. Contain sufficient information to identify the transaction such as the date, amount received or disbursed, name of or reference to payee or payor, check number or reference to another source document of the transaction, and identification of the beneficiary account affected by the transaction;
3. Correlate with the ledgers, for example, it should show the same figures that are posted, individually or in total, in the cash ledger and in the beneficiary ledgers. The details in the journals must be the basis for posting transactions on the ledgers and arriving at the account balances; and
4. Show the total receipts and total disbursements regularly, at least once a month.
Cash ledger
The cash ledger shows, usually in summary form, the periodic increases and decreases (debits and credits) in the trust fund bank account and the resulting account balance. It can be incorporated in the journals or it can be a separate record, for example, a general ledger account. If a separate record is used, the postings must be based on the transactions recorded in the journals. The amounts posted on the ledger must be those shown in the journals.
Beneficiary Ledger
A separate beneficiary ledger must be maintained for each separate beneficiary or transaction or series of transactions. This ledger shows in chronological sequence the details of all receipts and disbursements related to the beneficiary's account, and the resulting account balance. It reflects the broker's liability to a particular beneficiary. Entries in all these ledgers must be based on entries recorded in the journals.
Recording Process
Keeping complete and accurate trust fund records is easier when specific procedures are regularly followed. The following procedures may be useful in developing a record keeping routine:
1. Record transactions daily in the trust fund bank account and in the separate beneficiary records.
2. Use the same specific source documents consistently as a basis for recording trust fund receipts and disbursements. (For example, receipts will always be recorded based on the Real Estate Contract and Receipt for Deposit form, and disbursements will always be recorded based on the checks issued from the trust account. )
3. Calculate the account balances on all applicable records at the time entries are made.
4. Reconcile the records monthly to ascertain that transactions are properly recorded on both the bank account record and the applicable subsidiary records.
5. If more than one trust fund bank account is maintained, keep a separate set of properly labeled columnar records (cash record and beneficiary record) for each account.
RECONCILIATION OF ACCOUNTING RECORDS
Purpose
The trust fund bank account record, the separate beneficiary or transaction record, and the bank statement are all interrelated. Any entry made on the bank account record must have a corresponding entry on a separate beneficiary record. By the same token, any entry or transaction shown on the bank statement must be reflected on the bank account record. This applies to columnar as well as to other types of records. The accuracy of the records can be verified by reconciling them at least once a month. Reconciliation is the process of comparing two or more sets of records to determine whether their balances agree. It will disclose whether the records are completed accurately.
For trust fund record keeping purposes, two reconciliations must be made at the end of each month:
1. Reconciliation of the bank account record with the separate beneficiary or transaction
2.
records; and
2. A reconciliation of the bank account record with the bank statement.
Reconciling the Bank Account Record with the Separate Beneficiary or Transaction Records
This reconciliation, which is required by Commissioner's Regulation 2831. 2, will substantiate that all transactions entered on the bank account record were posted on the separate beneficiary or transaction records. The balance on the bank account record should equal the total of all beneficiary record balances. Any difference should be located and the records corrected to reflect the correct bank and liabilities balances.
Commissioner's Regulation 2831. 2 requires that this reconciliation process be performed monthly except in those months when there is no activity in the trust fund bank account, and that a record of each reconciliation be maintained. This record should identify the bank account name and number, the date of the reconciliation, the account number or name of the principals or beneficiaries or transactions, and the trust fund liabilities of the broker to each of the principals, beneficiaries or transactions.
Reconciling the Bank Account Record with the Bank Statement
The reconciliation of the bank account record with the bank statement will disclose any recording errors by the broker or by the bank. If the balance on the bank account record agrees with the bank statement balance as adjusted for outstanding checks, deposits in transit, and other transactions not yet included in the bank statement, there is more assurance that the balance on the bank account record is correct. Although this reconciliation is not required by the Real Estate Law or the Commissioner's Regulations, it is an essential part of any good accounting system.
Suggestions for Reconciling Record. The detailed procedures on how to perform the reconciliations will not be discussed here. Following, however, are a few general pointers:
1. Before performing the reconciliations, record all transactions up to the cut-off date in both the bank account record and the separate beneficiary or transaction records.
2. Use balances as of the same cut-off date for the two records and the bank statement.
3. For the bank account reconciliation, calculate the adjusted bank balance both from the bank statement and from the bank account record. (Trust account audits made by the Department of Real Estate have revealed that licensees commonly err by calculating the adjusted bank balance based solely on the bank statement but not on the bank account record. While they may know the correct account balances, they may not realize their records are incomplete or erroneous. )
4. Keep a record of the two reconciliations performed at the end of each month along with the supporting schedules.
5. Locate any difference between the three sets of accounting records in a timely manner. A difference can be caused by any of the following: not recording a transaction, recording an incorrect figure, erroneous calculations of entries used to arrive at account balances, missing beneficiary records, and bank errors.
Transactions and Related Documents
In addition to accounting records, the California Bureau of Real Estate also requires that the broker maintain all documents prepared or obtained in connection with any real estate transaction handled. The following table, which is not intended to be all-inclusive, lists the various types of transactions normally handled by a licensee and the corresponding documents necessary to evidence that type of transaction:
1. Receiving trust funds in the form of:
ANSWER: Purchase deposits from buyer
b. Rents and security deposits from tenants
c. Other receipts
Documents needed:
. Real estate purchase contract and receipt for deposit, signed by the buyers
. Collection receipts
2. Depositing trust funds
Documents needed:
. Bank deposit slips
3. Forwarding buyers' checks to escrow
Documents needed:
. Receipt from title company and copy of check
4. Returning buyers' checks
Documents needed:
. Copy of buyer's check signed and dated by buyer signifying he received his check back
5. Disbursing trust funds
Documents needed:
. Checks issued
. Supporting papers for the checks, such as invoices, escrow statements, billings, receipts, etc.
6. Receiving offers and counter-offers from buyers and sellers
Documents needed:
. Real estate purchase contract and receipt for deposit, signed by the respective parties
. Agency disclosures statement
. Transfer disclosure statement
7. Collecting management fees from the trust fund bank
Documents needed:
. Property management agreement between broker and property account owners. (Note: If only one trust fund check is issued for management fees charged to various property owners, there should be a schedule or listing on file showing each property and amount charged, and the total amount, which should agree with the check amount. )
. Cancelled checks
8. Reconciling bank account record with separate beneficiary records
Documents needed:
. Record of reconciliation
Following are some additional requirements of the Real Estate Law and the Commissioner's Regulations relating to the preparation and management of real estate transaction documents.
Person Signing Contract to be Given Copy. Under Business and Professions Code Section 10142, any time a licensee prepares or has prepared an agreement authorizing or employing that licensee to perform any acts for which a real estate license is required or when the licensee obtains the signature of any person to any contract pertaining to such services or transaction, the licensee must deliver a copy of the agreement to the person signing it at the time the signature is obtained. Examples of such documents are listing agreements, real estate purchase contract and receipt for deposit forms, addendums to contracts, and property management agreements.
Broker Required to Initial and Review Instruments, and Delegation of Authority
Commissioner's Regulation 2725 requires that every instrument prepared or signed by a real estate salesperson in connection with any transaction for which a real estate license is required that may have a material effect upon the right or obligations of a party to the transaction shall be reviewed, initialed, and dated by the salesperson's broker within five working days after preparation or signing by the salesperson or before the close of escrow, whichever occurs first. As long as the broker does not relinquish his overall responsibility for supervision of the acts of salespersons licensed to him, the broker may delegate this responsibility or authority as follows:
1. To any licensed real estate broker who has entered into a written agreement with the broker relating to the delegation;
2. To a real estate salesperson licensed to the broker if the salesperson has accumulated at least two years full-time experience as a salesperson licensee during the immediately preceding five year period and has entered into a written agreement with the broker with respect to the delegation of responsibility. In the case of any real property or business opportunity transaction where an escrow is conducted by a real estate broker under the exemption of Section 17006 of the Financial Code, the broker's responsibility to review and initial instruments extends to escrow instructions and closing statements if rendered to the parties to a transaction prior to close of escrow, and which were prepared or signed by a salesperson licensed to the broker or by an associate or employee of the broker.
AUDITS
Commissioner's Regulation 2846. 5. Report of Annual Trust Fund Accounts Review.
(a) The annual report of a review of trust fund financial statements required under subdivision (a) of Section 10232. 2of the Code shall include confirmation by an independent public accountant that:
(1) The broker maintains those records specified in Section2831 and 2831. 1 of these regulations, and reconciles such records in accordance with Section 2831. 2 of these regulations.
(2) Each trust fund bank account is maintained by the broker in compliance with Sections 2830 and 2834 of these regulations.
(3) The accountant has reviewed the accompanying balance sheet of trust funds held by the broker as of the last day of the year, and the accompanying statement of receipts and disbursements of trust funds and changes in cash for the fiscal year, in accordance with standards established by the American Institute Certified Public Accountants.
(4) The accountant is not aware of any material modification that should be made to the trust fund financial statements in order for them to be in conformity with generally accepted accounting principles.
(5) The adjusted balance(s) of the bank trust account(s)maintained by the broker as shown in the accompanying financial statements were on deposit as of the financial statements date.
(6) The trust fund bank account balance(s) and receipts and disbursements shown on the financial statements agreed with the amounts reflected on the cash records specified in Section 2831 of these regulations.
(7) The trust fund liability balance for each open account as itemized in the financial statements agreed with the amount reflected on the separate beneficiary records specified in Section 2831. 1 of these regulations.
(b) In preparing the report referred to in subdivision (a), the accountant may incorporate qualifying representations or disclaimers substantially as follows:
(1) All information included in the financial statements examined by the accountant are representations of the broker or of responsible officers of the broker.
(2) The review by the accountant consisted principally of inquiries of company personnel and analytical procedures applied to financial data. ANSWER: It was substantially less in scope than an examination in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. The report therefore includes no such opinion.
(c) In lieu of complying with subdivision (a) above, a broker may satisfy subdivision (a) of Section 10232. 2 of the Code by submitting the report by a California independent public accountant of an audit of the trust fund financial statements of the broker in which the accountant expresses an unqualified opinion that the financial statements fairly present, inconformity with generally accepted accounting principles, (1)the trust fund position of the broker at the end of the fiscal year and (2) a compilation of receipts and disbursements of trust funds for the fiscal year.
(d) The annual report of a review of trust fund financial statements shall include the following financial statements:
(1) Balance sheet of trust funds held by the broker as of the last day of the fiscal year. Each of the trust fund bank accounts shall be identified, either in the balance sheet or in the notes thereto, by name of bank and account number.
(2) Statement of receipts and disbursements of trust funds and changes in cash for the fiscal year.
(3) Schedule of trust fund liability balances showing each open beneficiary account in connection with trust funds received in carrying on the activities described in subdivisions (d) and (e) of Section 10131 of the Code.
2846. 7. Delayed Filing of Trust Account Report.
(a) A real estate broker whose fiscal year ends between the last day of November and the last day of February inclusive shall regularly have until the following May 31 in which to file the report required by subdivision (a) of Section 10232. 2 of the Code.
(b) A real estate broker whose fiscal year ends between March 1and November 29 inclusive shall file the report required by subdivision (a) of Section 10232. 2 of the Code not later than90 days after the end of the fiscal year unless the broker shall have previously obtained written authorization from the Department to file the report more than 90 days after the end of the fiscal year.
2846. 8. Quarterly Trust Fund Status Report.
(a) The Commissioner shall publish and make available to interested persons as an official form of the Department, an approved format and content for the Trust Fund Status Report described in Section 10232. 25 of the Code.
(b) The publication of a form pursuant to subdivision (a) is for the purpose of aiding real estate licensees in complying with Section 10232. 25 of the Code. The form prescribed by the Commissioner shall not constitute the only format or content that will satisfy the requirements of Section 10232. 25.
(c) Real estate brokers
who meet the criteria of Section 10232 of the Code need not file a Trust Fund
Status Report for a fiscal quarter ending in 1982, but shall file a report for
each fiscal quarter ending after
CONSEQUENCES OF TRUST FUNDS CONVERSION
Ongoing Auditing by the
Because of the importance of trust fund handling, the Commissioner has an ongoing state-wide program of examining brokers' records. Licensees audited will be made aware of trust fund handling and record keeping requirements where necessary. If during the course of an audit or examination actual trust fund imbalances are uncovered or money handling procedures pose a potential monetary loss situation, even if a loss has not yet occurred, appropriate disciplinary proceedings will be initiated. Section 10148 of the Business and Professions Code provides that a licensed real estate broker shall retain for three years, copies of all listings, deposit receipts, canceled checks, trust records, and other documents executed by or obtained by the broker in connection with any transaction for which a real estate broker license is required. The retention period shall run from the date of the closing of the transaction or from the date of the listing if the transaction is not consummated. After giving notice, such books, accounts and records shall be made available for examination and inspection by the commissioner or his designated representative during regular business hours, and shall, upon the appearance of sufficient cause, be subject to audit without further notice, except that such audit shall not be harassing in nature.
Conversion
Conversion is a much more serious offense than commingling. Conversion is spending or using the principal's property for purposes unauthorized by the principal. A broker appropriating or secreting trust funds commits the crime of embezzlement (Penal Code Section 506).
Criminal Sanctions
Penal Code 506
Person controlling or entrusted with property of another; misappropriations; payment of laborers and material men as use of contract price
Every trustee, banker, merchant, broker, attorney, agent, assignee in trust, executor, administrator, or collector, or person otherwise entrusted with or having in his control property for these of any other person, who fraudulently appropriates it to any use or purpose not in the due and lawful execution of his trust, or secretes it with a fraudulent intent to appropriate it use or purpose, and any contractor who appropriates money paid to such use or purpose, and any contractor who appropriates money paid to him for any use or purpose, other than for that which he received it, is guilty of embezzlement, and the payment of laborers and materialmen for work performed or material furnished in the performance of any contract is hereby declared to be the use and purpose to which the contract price of such contract or any part thereof, received by the contractor shall be applied.
Penal Code 506a
Collector of accounts or debts; prosecution and punishment
Any person who, acting as collector, or acting in any capacity in or about a business conducted for the collection of accounts or debts owing by another person, and who violates Section 506 of the Penal Code, shall be deemed to be an agent or person as defined inspection 506, and subject for a violation of Section 506, to be prosecuted, tried, and punished in accordance therewith and with law; and "collector" means every such person who collects, or who has in his or her possession or under his or her control property or money for the use of any other person, whether in his or her own name and mixed with his or her own property or money, or otherwise, or whether he or she has any interest, direct or indirect, in or to such property or money, or any portion thereof, and who fraudulently appropriates to his or her own use, or the use of any person other than the true owner, or person entitled thereto, or secretes that property or money, or any portion thereof, or interest therein not his or her own, with a purpose not in the due and lawful execution of his or her trust.
Even where the licensee has not taken funds from an established trust account, provisions in the law make one who holds property on behalf of another a constructive, involuntary trustee,
Civil Code 2224
Involuntary trustee; thing gained by fraud, wrongful act, etc.
INVOLUNTARY TRUST RESULTING FROM NEGLIGENCE,
License Suspension
The Commissioner shall upon a verified written complaint, or may,
upon the Commissioner's own motion investigate the actions of any person
engaged in the business or acting in the capacity of a licensee within this
state, and has the power to suspend or revoke the real estate license
permanently. The Commissioner also has
the authority to deny a license to an applicant if the applicant does not meet
the full requirements of the law.
Through a screening process (including the fingerprint record) of an
applicant for a license, if it is ascertained that applicant has a criminal
record or some other record that may reflect on the applicant's character, an
investigation is made by the Commissioner's staff. A formal hearing may be ordered to determine
whether or not the applicant meets the requirements of honesty and
truthfulness. Effective
When a real estate broker license is revoked or suspended, the licenses of every real estate salesperson in the broker's employ are automatically cancelled. Such salespersons may transfer their licenses to a new employing broker.
Generally speaking, an investigation of a licensee is based upon a written statement from one who believes he or she has been wronged by a licensee who was acting in the capacity of an agent. The usual investigative practices are followed by the Commissioner's staff: statements are received from witnesses, if any; a statement may be obtained from the licensee involved; bank records, title company records and public records are checked. As part of the investigation an informal conference may be called, and all parties concerned may be requested to attend for the purpose of determining the seriousness of the complaint, and to evaluate the validity of the complaint. If it appears that the complaint is of a serious nature and that a violation of law has occurred, an accusation is filed and there may be a formal hearing which results in the suspension or revocation of the agent's license.
Formal Hearings
The formal hearing procedure is conducted in accordance with procedures set forth in the Administrative Procedure Act. The accusation or statement of issues is served upon the affected licensee who is informed of the rights of an accused. In the hearing, the Commissioner becomes the complainant in the matter, and brings the charges against the licensee. The original complainant who brought the matter to the Commissioner's attention usually becomes a witness. The licensee, known as the respondent in the hearing procedures, may appear with or without counsel. A record is made of the proceedings, and the hearing is conducted very largely according to rules of evidence in civil matters. Testimony is taken under oath. An administrative law judge from the Office of Administrative Hearings hears the case. The Commissioner's case is presented by the Commissioner's counsel. The hearing officer makes a proposed decision based upon the findings. The Commissioner may reject or accept the proposed decision, or reduce the proposed penalty and make an official decision. The respondent may petition for reconsideration, and has the right of appeal to the courts.
If the charges are not sustained at the hearing, they are dismissed. On the other hand, if the testimony substantiates the charges and they appear to be sufficiently serious, the license of the respondent is suspended or revoked. After a license is revoked, the person affected may not apply for reinstatement of the license until one year has passed.
Representatives of the Commissioner also investigate persons or firms who appear to be operating improperly or without benefit of a license or who subdivide land without complying with the subdivision laws enforced by the commissioner. If sufficient evidence of violation is obtained, an Order to Desist and Refrain is issued, or a complaint is brought and the parties are prosecuted in a court of competent jurisdiction.
BUSINESS
Grounds for Revocation or Suspension 10176
The commissioner may, upon his own motion, and shall, upon the verified complaint in writing of any person, investigate the actions of any person engaged in the business or acting in the capacity of a real estate licensee within this state, and he may temporarily suspend or permanently revoke a real estate license at any time where the licensee, while a real estate licensee, in performing or attempting to perform any of the acts within the scope of this chapter has been guilty of any of the following:
(a) Making any substantial misrepresentation.
(b) Making any false promises of a character likely to influence, persuade or induce.
(c) A continued and flagrant course of misrepresentation or making of false promises through real estate agents or salesmen.
(d) Acting for more than one party in a transaction without the knowledge or consent of all parties thereto.
(e) Commingling with his own money or property the money or other property of others which is received and held by him.
(f) Claiming, demanding, or receiving a fee, compensation or commission under any exclusive agreement authorizing or employing a licensee to perform any acts set forth in Section10131 for compensation or commission where such agreement does not contain a definite, specified date of final and complete termination.
(g) The claiming or taking by a licensee of any secret or undisclosed amount of compensation, commission or profit or the failure of a licensee to reveal to the employer of such licensee the full amount of such licensee's compensation, commission or profit under any agreement authorizing or employing such licensee to do any acts for which a license is required under this chapter for compensation or commission prior to or coincident with the signing of an agreement evidencing the meeting of the minds of the contracting parties, regardless of the form of such agreement, whether evidenced by documents in an escrow or by any other or different procedure.
(h) The use by a licensee of any provision allowing the licensee an option to purchase in an agreement authorizing or employing such licensee to sell, buy, or exchange real estate or a business opportunity for compensation or commission, except when such licensee prior to or coincident with election to exercise such option to purchase reveals in writing to the employer the full amount of licensee's profit and obtains the written consent of the employer approving the amount of such profit.
(i) Any other conduct, whether of the same or a different character than specified in this section which constitutes fraud or dishonest dealing.
(j) Obtaining the signature of a prospective purchaser to an agreement which provides that such prospective purchaser shall either transact the purchasing, leasing, renting or exchanging of a business opportunity property through the broker obtaining such signature, or pay a compensation to such broker if such property is purchased, leased, rented or exchanged without the broker first having obtained the written authorization of the owner of the property concerned to offer such property for sale, lease, exchange or rent.
Fraud in a Civil Action 10177. 5
When a final judgment is obtained in a civil action against any real estate licensee upon grounds of fraud, misrepresentation, or deceit with reference to any transaction for which a license is required under this division, the commissioner may, after hearing in accordance with the provisions of this part relating to hearings, suspend or revoke the license of such real estate licensee.
Report of Discharge of Salesperson for Violations Required of
Broker 10178
When any real estate salesman is discharged by his employer for a violation of any of the provisions of this article prescribing aground for disciplinary action, a certified written statement of the facts with reference thereto shall be filed forthwith with the commissioner by the employer and if the employer fails to notify the commissioner as required by this section, the commissioner may temporarily suspend or permanently revoke the real estate license of the employer, in accordance with the provisions of this part relating to hearings.
Effect of Violation by Salesperson on Broker 10179
No violation of any of the provisions of this part relating to real estate or of Chapter 1 of Part 2 by any real estate salesman or employee of any licensed real estate broker shall cause the revocation or suspension of the license of the employer of the salesman or employee unless it appears upon a hearing by the commissioner that the employer had guilty knowledge of such violation.
Corporate office or Agent Revocations 10180
The commissioner may deny, suspend or revoke the real estate license of a corporation as to any officer or agent acting under its license without revoking the license of the corporation.
License Suspension 10475
Should the Commissioner pay from the Recovery Account any amount in settlement of claim of toward satisfaction of a judgment against a licensed broker or salesperson, the license of the broker or salesperson shall be automatically suspended upon the date of payment from the Recovery Account. No broker or salesperson shall be granted reinstatement until he or she has repaid in full, plus interest at the prevailing legal rate applicable to a judgment rendered in any court in this state, the amount paid from the Recovery Account on his or her account. A discharge in bankruptcy shall not relieve a person from the penalties and disabilities provided in this chapter.
The Commissioner's power to enjoin; Bankruptcy and Receivership
Commissioner's Power to Enjoin 10081
(a) Whenever the commissioner believes from the evidence satisfactory to him that any person has violated or is about to violate any of the provisions of this part of Chapter 1(Commencing with Section 11000) or Part 2 or any, order, license, permit decision, demand or requirement, or any part or provision thereof, he or she may bring an action in the name of the people of the State of California in the superior court of the State of California against that person to enjoin him or her from continuing the violation or engaging therein or doing any act or acts in furtherance thereof.
In this action an order or judgment may be entered awarding such preliminary or final injunction as may be proper, but no preliminary injunction or temporary restraining order shall be granted without at least five days' notice to the defendant.
If the commissioner makes a showing satisfactory to the court that the violations or threatened violations jeopardize funds and properties of others in the custody or under the control of the defendant, the court may appoint a receiver for the management of the business of the defendant, including, but not limited to, the funds and properties of others in his or her possession or may make any other order as it deems appropriate to protect and preserve those funds and properties.
The order appointing the receiver shall specify the source of the funds for payment of the fees of the receiver and the costs attributable to administering the receivership. Unless provided for in the order, the commissioner shall not be liable for payment of the fees or costs.
(b) The commissioner may include in any action authorized by division (a), a claim for restitution on behalf of the persons injured by the act or practice constituting the subject matter of the action, and the court shall have jurisdiction to award appropriate relief to such persons.
Injunction--Appointment of Receiver 10081. 5
Whenever the commissioner believes from evidence satisfactory to him or her that any real estate licensee has violated or is about to violate the provisions of Section 10145, the Commissioner may bring an action in the name of the people of the State California, in the superior court of the State of California, to enjoin the licensee from continuing the violation or engaging therein doing any act or acts in furtherance thereof.
In the event the commissioner has conducted an audit which reflects commingling or conversion of trust funds in excess of ten thousand dollars ($10,000), the court may enter an order to restrain the licensee from doing any act or acts in furtherance thereof, from further exercising the privileges of his or her license pending further order of the court, provided that a hearing shall be held on the order within five days after the date thereof.
After such hearing in the manner provided by law, an order may entered appointing a receiver, or such other order as the court may deem proper. The order appointing the receiver shall specify source of the funds from which the fees of the receiver and the costs of administering the receivership are to be paid. Unless provided for in the order, the commissioner shall not be liable for payment of fees or costs.
A receiver appointed by the court pursuant to this section may with the approval of the court, exercise all powers of the licensee or its officers, directors, partners, trustees, or any person who exercise similar powers and perform similar duties, including the filing of a petition for bankruptcy of the licensee.
Civil Liability & Tax Liability
Ordinarily, the beneficiary of a trust may enforce his rights by proceeding either against the trust property or against the trustee personally. (McElroy v. McElroy (1948) 198 P. 2d 683, 32 C. 2d 828. ) The beneficiary may proceed against a new property even where the trustee had changed one form of property into another. Trustee would also be liable for all taxes paid or saved as a result of his or her breach of trust.
Even where the trustee is beyond the jurisdiction of the court, so long the property may be seized by the court, the beneficiary may enforce the trust in property. (McNeil v. Dow (1949) 200 P. 2d 859, 89 C. ANSWER: 2d 370. )
PROBATE CODE
Probate Code 16420
Breach of trust; actions
(a) If a trustee commits a breach of trust, or threatens to commit a breach of trust, a beneficiary or co-trustee of the trust may commence a proceeding for any of the following purposes that is appropriate:
(1) To compel the trustee to perform the trustee's duties.
(2) To enjoin the trustee from committing a breach of trust.
(3) To compel the trustee to redress a breach of trust by payment of money or otherwise. (4)To appoint a receiver or temporary trustee to take possession of the trust property and administer the trust.
(5) To remove the trustee.
(6) Subject to Section 18100, to set aside acts of the trustee.
(7) To reduce or deny compensation of the trustee.
(8) Subject to Section 18100, to impose an equitable lien trust on trust property.
(9) Subject to Section 18100, to trace trust property that has wrongfully disposed of and recover the property or its proceeds.
(b) The provision of remedies for breach of trust in subdivision(a) does not prevent resort to any other appropriate remedy provided by statute or the common law.
***
16440. Breach of trust; liability; good faith action
(a) If the trustee commits a breach of trust, the trustee is chargeable with any of the following that is appropriate under the circumstances:
(1) Any loss or depreciation in value of the trust estate resulting from the breach of trust, with interest.
(2) Any profit made by the trustee through the breach of trust with interest. (3) Any profit that would have accrued to the trust estate if the loss of profit is the result of the breach of trust.
(b) If the trustee has acted reasonably and in good faith under the circumstances as known to the trustee, the court, in its discretion, may excuse the trustee in whole or in part from liability under subdivision (a) if it would be equitable to do so.
16441. Interest; amount
If the trustee is liable for interest pursuant to Section 16440liable for the greater of the following amounts:
(a) The amount of interest that accrues at the legal rate in effect during the period when the interest accrued.
(b) The amount of interest actually received.
The aggrieved party may also proceed against the Real Estate Commissioner's Recovery Fund.
BUSINESS
Application for Payment from Recovery Account 10471
(a) When an aggrieved person obtains a final judgment in a court of competent jurisdiction or an arbitration award which includes findings of fact and conclusions of law rendered in accordance with the rules established by the American Arbitration Association or another recognized arbitration body, and in accordance with Sections 1281 to 1294. 2,inclusive, of the Code of Civil Procedure where applicable, and where the arbitration award has been confirmed and reduced to judgment pursuant to Section 1287. 4 of the Code of Civil Procedure, against a defendant based upon the defendant’s fraud, misrepresentation, or deceit, made with intent to defraud, or conversion of trust funds arising directly out of any transaction not in violation of Section 10137 or 10138 in which the defendant, while licensed under this part, performed acts for which that license was required, the aggrieved person may, upon the judgment becoming final, file an application with the Department of Real Estate for payment from the Recovery Account, within the limitations specified in Section10474, of the amount unpaid on the judgment which represents an actual and direct loss to the claimant in the transaction.
(b) The application shall be delivered in person or by certified mail to an office of the department not later than one year after the judgment has become final.
(c) The application shall be made on a form prescribed by the department, verified by the claimant, and shall include the following:
(1) The name and address of the claimant.
(2) If the claimant is represented by an attorney, the name, business address, and telephone number of the attorney.
(3) The identification of the judgment, the amount of the claim and an explanation of its computation.
(4) A detailed narrative statement of the facts in explanation of the allegations of the complaint upon which the underlying judgment is based.
(5) A statement by the claimant, signed under penalty of perjury, that the complaint upon which the underlying judgment is based was prosecuted conscientiously and in good faith. As used in this section, "conscientiously and in good faith'' means that no party potentially liable to the claimant in the underlying transaction was intentionally and without good cause omitted from the complaint, that no party named in the complaint who otherwise reasonably appeared capable of responding in damages was dismissed from the complaint intentionally and without good cause, and that the claimant employed no other procedural tactics contrary to the diligent prosecution of the complaint in order to provide access to the Recovery Account.
(6) The name and address of the judgment debtor known, the names and addresses of persons who may judgment debtor’s present whereabouts.
(7) The following representations and information from the claimant:
(A) That he or she is not a spouse of the judgment debtor nor a personal representative of the spouse.
(B) That he or she has complied with all of the requirements of this chapter.
(C) That the judgment underlying the claim meets the requirements of subdivision (a) .
(D) A description of searches and inquiries conducted by or on behalf of the claimant with respect to the judgment debtor's assets liable to be sold or applied to satisfaction of the judgment, an itemized valuation of the assets discovered, and the results of actions by the claimant to have the assets applied to satisfaction of the judgment.
(E) That he or she has diligently pursued collection efforts against other judgment debtors and all other persons liable to the claimant in the transaction that is the basis for the underlying judgment.
(F) That the underlying judgment and debt have not been discharged in bankruptcy, or, in the case of a bankruptcy proceeding that is open at the time of the filing of the application, that the judgment and debt have been declared to be no dischargeable.
(G) That the application was mailed or delivered to the department no later than one year after the underlying judgment became final.
(d) The application form shall include detailed instructions with respect to documentary evidence, pleadings, court rulings, the products of discovery in the underlying litigation, and a notice to the applicant of his or her obligation to protect the underlying judgment from discharge in bankruptcy to be appended to the application
TRANSACTIONS
To demonstrate the record keeping requirements discussed in this book, we have simulated trust account records for typical real estate transactions occurring over a thirty-day period. To set the stage, let us assume that James Adams, a real estate broker, owns and operates a small one-man real estate office specializing in residential sales and property management. Broker Adams has one trust fund bank account. We will look at the trust account activity for this office for the month of May, 1997.
The following sample transactions illustrate a system using columnar records. However, as previously discussed, the broker may use other types of records as long as they meet generally accepted accounting standards of practice.
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1997 |
TRANSACTIONS |
|
May 1 |
Opened a trust account with First County Bank, and deposited $100 of his own money to cover bank service charges. |
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May 1 |
Entered into agreements to manage the following rental properties: |
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Address |
Owner s Name |
Number of Units |
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a. 1538 South Ave. Anycity, CA |
T. Eddie |
1 |
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b, 3490 Tower St. Anycity, CA |
L. Stewart |
4 |
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c. 9152 High Way Anycity, CA |
W. Allen |
4 |
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d. 2351-2353 Kingston Way Anycity, CA |
S. Manly |
2 |
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e. 7365 Meadow Cir Anycity, CA |
J. Bird |
1 |
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May 2 |
Received a $2,000 check payable to broker from Mr. and Mrs. |
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Dennis White as deposit for their offer to buy a house at 615 |
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Lake Drive, Anycity, owned by Mr. and Mrs. Richard J. Jensen. |
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Buyers' offer instructed broker to hold the check uncashed until |
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their offer was accepted by the Jensens. |
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May 3 |
Deposited the following rents received from tenants of managed |
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properties: |
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Tenant's |
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Rent |
|
Property |
|
Name |
|
Received |
|
a. 1538 South Ave. |
|
B. Hamns |
|
$600 |
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b. 3490 Tower St. , |
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R. Robertson |
|
350 |
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Unit I |
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c. 2351 Kingston Way |
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L Warren |
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450 |
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Total |
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$1,400 |
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May 5 |
|
Received and deposited $750 from T. Sundance representing rent |
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of $500 for September 5 to 30, and $250 security deposits for |
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7365 Meadow Circle. |
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May 5 |
|
Was notified by the Jensens that they accepted the offer on their |
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property. |
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May 7 |
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Deposited the $2,000 check from Mr. and Mrs. White. |
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May 8 |
|
Obtained an exclusive listing to sell a six-plex at 915 Galaxy |
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St. , Anycity, owned by R. Jays. |
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May 9 |
Received $1,000 from W. Allen, owner ot 9152 High Way, to cover anticipated expenses for the property. Amount was deposited the same day. |
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May 10 |
Issued the following checks to pay for various expenses connected with the managed properties: |
|
Check No. |
Payee |
Purpose |
Amount |
|
1001 |
ABC Mortgage Co. |
Mortgage payment for 1538 South Ave. |
$450 |
|
1002 |
Anycity Treasury |
Utilities for 1538 South Ave. |
35 |
|
1003 |
Professional Cleaners |
Cleaning for 3490 Tower St. |
55 |
|
1004 |
Mr. Handyman |
Minor repairs on 2351 Kingston |
25 |
|
|
|
TOTAL |
$565 |
|
May 14 |
Received a $4,000 check from B. Sun, payable to Title Escrow Company, with an offer to buy the 915 Galaxy property. |
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May 15 |
Received R. Jays' acceptance of the buyer's offer on 915 Galaxy Street. |
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May 16 |
Delivered the $4,000 check from B. Sun to Title Escrow Company. |
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May 19 |
Issued check number 1005 for $2,000 to First Title Co. for account of Mr. and Mrs. White, buyers of the 615 Lake Drive property. |
|
May 22 |
Received an offer and a $3,000 check as deposit from R. Olive to buy a single family house at 31009 Technology Street owned by T. Evans. |
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May 24 |
Returned R. Olive's check after seller rejected the offer. |
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May 31 |
Charged property management fees to the following accounts and issued check number 1006 for $330 payable to himself: |
|
Property Owner |
Management Fee |
|
T. Eddie |
$45 |
|
L. Stewart |
100 |
|
W. Allen |
80 |
|
S. Manly |
60 |
|
J. Bird |
45 |
|
TOTAL |
$330 |
|
May 31 |
Sent statement of account to each owner of the managed properties. |
Background Information
James Adams keeps four types of columnar records:
1. Record of all Trust Funds Received and Paid Out--Trust Fund Bank Account (hereinafter referred to as "Bank Account Record"). This record is required under Commissioner's Regulation 2831 for each of the bank accounts.
2. Record of all Trust Funds Received--Not Placed in Broker's Trust Account (hereinafter referred to as "Record of Undeposited Receipts"). This is required under Commissioner's Regulation 2831.
3. Separate Record For Each Beneficiary or Transaction (hereinafter referred to as "Separate Beneficiary Record") . This is required under Commissioner's Regulation 2831. 1.
4. Separate Record For Each Property Managed (hereinafter referred to as "Separate Property Record"). This serves the same purpose as the Separate Beneficiary Record.
To explain the recording process, listed below are the entries made on the books by James Adams as well as the documents prepared or obtained as support for each transaction.
Note that:
- Each entry to any record shows all the pertinent information of the transaction, such as the date, name of payee, name of payor, amount, check number, etc.
- The daily Bank Balance is computed and posted on the Account Record after recording transactions.
- The balance owing to the client is computed and posted on the
Beneficiary Record or Separate Property Record, after posting transactions.
- Any entry made on the Bank Account Record has a corresponding
entry on a Beneficiary Record or a Separate Property Record, and vice versa.
ANSWER:
- All records except the Record of Undeposited Receipts show entries in chronological sequence regardless of transaction type. The Record of Undeposited Receipts shows the disposition of a trust fund in the same line as the receipt is entered, rather than in chronological sequence.
|
Step-By-Step Narrative Of Trust Account Entries (Actual recording shown on Exhibits 1 - 10 below) |
|
TRANSACTION DATE |
DOCUMENTATION |
ENTRIES |
|
May 1 |
Deposit slip prepared by broker. |
Record the deposit on:
|
|
May 1 |
Management agreements signed by property owners and broker. |
No entries needed since there was no receipt nor disbursement of trust funds. |
|
May 2 |
Real Estate Purchase Contract and Receipt for Deposit signed by Mr. and Mrs. White. Collection receipt No. I issued to the Whites. |
Enter transaction on the Record of Undeposited Receipts. (Exh. 3) No Separate Beneficiary Record is necessary since the check was not deposited. |
|
May 3 |
Collection receipts Nos. 2, 3 and 4 issued to B. Hamns, R. Robertson, and 1. Warren, respectively. |
Record the $1,400 receipt
on:
|
|
May 5 |
Collection receipt No. 5 issued to T. Sundance. Receipt showed that $500 of the $750 was for rent and the other $250 was for security deposit. |
Record the $750 deposit on:
|
|
May 5 |
Real Estate Contract and Receipt for trust funds were received for Deposit signed by Mr. and Mrs. Jensen. |
No entries were made since no trust funds were received or disbursed. |
|
May 7 |
Deposit receipt prepared by broker. |
Record $2,000 deposit on:
|
|
May 8 |
Exclusive Listing Agreement signed by sellers and broker. |
|
|
May 9 |
Collection receipt No. 6 issued to W. Allen. |
Record receipt on:
|
|
May 10 |
Checks issued by broker. Supporting papers for each check. |
Record disbursements on:
|
|
|
Real Estate Purchase Contract and Receipt for Deposit signed by B. Sun. |
Record receipt on the Record of Undeposited Receipts. (Exh. 3) |
|
May 15 |
Real Estate Purchase Contract and Receipt for Deposit signed by R. Jays. |
No entry was needed since there was no receipt or disbursement of funds. |
|
May 16 |
Receipt issued by Title Escrow Company. |
Note disposition of check on the Record of Undeposited Receipts. (Exh. 3) |
|
May 19 |
Check issued by broker. Receipt issued by First Title Company. |
Record disbursements on the:
|
|
May 22 |
Real Estate Purchase Contract and receipt for Deposit signed by R. Olive. |
Record details of receipt on the Record of Undeposited Receipts. (Exh. 3) |
|
May 24 |
Real Estate Purchase Contract and Receipt for Deposit rejected by T. Evans. |
Post the return of check on the Record of Undeposited Receipts. (Exh. 3) |
|
May 31 |
List showing the breakdown of the check amount, showing the charge to each owner. |
Record disbursements on the:
|
|
|
(NOTE: A list is necessary as support for a check disbursement chargeable to a number of beneficiaries. Posting the entries on the separate records without such a list is not sufficient. ) |
New Owners Balance
|
After recording the daily transactions, the next step in the trust fund accounting process is the reconciling of records at the end of the month. James Adams prepared reconciliation schedules by comparing the bank balance on the Bank Account Record with the bank statement balance (the bank reconciliation) and also with the total of the Separate Beneficiary Records balances (the reconciliation report). The bank statement and reconciliations are shown on the next two pages.
Questions and Answers on Trust Fund Requirements and Record Keeping
QUESTION: Are security deposits on rental units the property of the owner or should they be held in trust by the broker for the tenant?
ANSWER: They are trust funds. As such control and disbursement of the security deposits are at the instruction of the property owner.
QUESTION: Am I permitted to wait until checks deposited to my trust account have cleared before I would issue a trust check to refund a customer's check?
ANSWER: Although the Real Estate Law is silent on this, good business practice dictates that you wait until customer's check deposited to your trust account has cleared prior to the issuing of your trust check as a refund.
QUESTION: How should I handle an earnest money check which is to be deposited into escrow upon acceptance of the offer?
ANSWER: Such a check may be held until the offer is accepted and then placed in escrow, but only when directed to do so by the buyer and the fact the check is being held in uncashed form is specifically disclosed to the seller. In such cases it is good practice to include such a provision in the deposit receipt. You must keep a columnar record of the receipt of the check, the name of the escrow company and the date the check was forwarded to the escrow.
QUESTION: As a broker-owner of rentals, do I have to put security deposit moneys in a trust account?
ANSWER: Moneys you receive on your own property would be moneys received as a principal, not as an agent. As such, these are not trust funds and should not be placed in the trust account.
QUESTION: Must I keep a deposit receipt signed only by the buyer and rejected by the seller?
ANSWER: Yes. Such a record must be maintained for the three-year period.
QUESTION: May I maintain one trust fund account for both collections from my property management business and deposits on real estate sales transactions?
ANSWER: Since property management funds usually involve multiple receipt of funds and several monthly disbursements, it is suggested that separate trust fund accounts be maintained for property management funds and earnest money deposits; however, all trust funds can be placed in the same trust fund account as long as separate records for each trust fund deposit disbursement are maintained properly and the account is not an interest bearing account.
QUESTION: If the buyer and seller decide to go directly to escrow and the buyer makes out a check to the escrow company and hands it directly to the escrow clerk, do I have to maintain any records of this check?
ANSWER: No. You must maintain records only of trust funds which pass through your hands for the benefit of a third party.
QUESTION: How long must I keep deposit receipts?
ANSWER: Deposit receipts must be maintained for three years.
Summary
We might say we have reviewed in this textbook the three Rs of
trust funds--Responsibility, Requirements and Records. It is the real estate broker's responsibility
to protect clients' funds at all times and keep clients fully informed of the
nature and disposition of all trust funds.
To aid the broker in carrying out this responsibility, the Real Estate
Commissioner has set forth in regulations the legal requirements concerning
trust funds. The real estate broker
also needs to meet other requirements from a practical business point of
view. To protect clients' funds
adequately and in the business-like fashion expected, the broker must, of
necessity, keep accurate records. Strict
attention to these three Rs is expected.
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COLUMNAR RECORD OF |
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1997 |
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Received |
PAID OUT |
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DATE RECEIVED |
FROM WHOM RECEIVED OR To WHOM PAID |
Description |
Amount Received |
Reference |
Date of DEPOSIT |
XX |
Amount Paid Out |
Check Number |
Date of Check |
XX |
DAILY BALANCE OF TRUST BANK Account |
|
|
James Adams |
Open TA Account |
100. 00 |
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|
100. 00 |
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5-3 |
B. Hamns |
Rent: 1538 South Ave. |
600. 00 |
#2 |
5-3 |
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|
700. 00 |
|
5-3 |
R. Robertson |
Rent: 3490 Tower St. ,
Unit 1 |
350. 00 |
#3 |
5-3 |
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1,050. 00 |
|
5-3 |
1. Warren |
Rent: 2351 Kingston Way |
450. 00 |
#4 |
5-3 |
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1,500. 00 |
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5-5 |
T. Sundance |
Rent: $500; Dep.
$250. |
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7365 Meadow Circle |
750. 00 |
#5 |
5-5 |
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2,250. 00 |
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5-2 |
Mr. & Mrs. Dennis White |
Deposit: 615 Lake Drive |
2,000. 00 |
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5-7 |
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4,250. 00 |
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5-9 |
W. Allen |
Owner Contribution |
1,000. 00 |
#6 |
5-9 |
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5,250. 00 |
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ABC Mortgage Co. |
Mtg. Pmt. 1538 South Ave. |
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450. 00 |
1001 |
5-10 |
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4,800. 00 |
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Anycity Treasury |
Utilities: 1538 South Ave.
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35. 00 |
1002 |
5-10 |
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4,765. 00 |
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Professional Cleaners |
Cleaning: 3490 Tower St. |
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55. 00 |
1003 |
5-10 |
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4,710. 00 |
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Mr. Handyman |
Repairs: 2351 Kingston |
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25. 00 |
1004 |
5-10 |
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4,685. 00 |
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First Title Co. |
Deposit: 615 Lake Drive |
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2,000. 00 |
1005 |
5-19 |
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2,685. 00 |
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James Adams |
Mgmt. Fees: See Schedule |
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330. 00 |
1006 |
5-30 |
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2,365. 00 |
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First County Bank |
May Bank Service Charge |
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7. 00 |
DM |
5-31 |
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2,348. 00 |
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EXHIBIT 1
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SEPARATE RECORD FOR EACH BENEFICIARY OR TRANSACTION
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IDENTIFICATION OF TRANSACTION (names, addresses, account numbers. etc. ) James A. Adams Trust Fund Balance - Broker
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DESCRIPTION |
DISCHARGE OF TRUST ACCOUNTABILITY FOR FUNDS PAID OUT |
TRUST ACCOUNTABILITY FOR FUNDS RECEIVED |
ACCOUNT |
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Date of Check |
Check Number |
Amount |
Date of Deposit |
Amount |
BALANCE |
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Open TA Account |
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100. 00 |
100. 00 |
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May '97 Bank Service Charge |
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SM |
7. 00 |
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93. 00 |
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- |
EXHIBIT 2
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RECORD OF |
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19-27- DA7E RECEIVED |
Form of receipt (cash, note, etc. ) |
Amount |
Received from |
Description of property or other identification |
Disposition of funds (to escrow, principal. trust account. or returned) |
Date of disposition |
|
|
check |
2,000. 00 |
Mr. & Mrs. Dennis White |
615 Lake Drive |
To Trust Account |
|
|
5-14 |
check |
4,000. 00 |
B. Sun |
915 Galaxy |
To Tide Escrow Company |
5-16 |
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5-22 |
check |
3,000. 00 |
R. Olive |
31009 Technology Street |
Returned to Buyer |
5-24 |
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EXHIBIT 3
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SEPARATE RECORD FOR EACH PROPERTY MANAGED |
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OWNER: T. Eddie |
DEPOSIT |
$ |
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ADCalBRESS: 439 Alberta Way, Any city |
MONTHLY |
$ |
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1538 South Ave. , Any city |
COMMISSION: |
$ |
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Tenant's Name: B. Hamns |
LEASES |
$ |
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Units |
COLLECTION |
$ |
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Remarks: |
MANAGEMENT |
$ |
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DATE |
RECEIVED FROM OR PAID TO |
DESCRIPTION |
RECEIPT/ CHECK No. |
AMOUNT RECEIVED |
DATE DEPOSITED |
AMOUNT DISBURSED |
BALANCE |
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B. Hamns |
Rent - May 97 |
#2 |
600. 00 |
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600. 00 |
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5-10 |
ABC Mortgage Co |
Mortgage Payment |
1001 |
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450. 00 |
150. 00 |
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5-10 |
Any city Treasury |
Utilities |
1002 |
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35. 00 |
115. 00 |
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5-31 |
James Adams |
Management Fee |
1006 |
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45. 00 |
70. 00 |
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EXHIBIT 4
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SEPARATE RECORD FOR EACH PROPERTY MANAGED OWNER |
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OWNER: L. Stewart |
DEPOSIT |
$ |
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ADDRESS: 10037 Airline Place, Anycity |
Monthly Rent |
$ |
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PROPERTY: 3490 Tower St. , Anycity |
COMISSION: |
$ |
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TENANT'S NAME R. Robertson
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LEASES |
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REMARKS |
COLLECTION |
$ |
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MANAGEMENT |
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DATE |
RECEIVED FROM OR PAID To |
DESCRIPTION |
RECEIPT/ CHECK No. |
AMOUNT RECEIVED |
DATE DEPOSITED |
AMOUNT DISBURSED |
BALANCE |
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R. Robertson |
May 97 |
#3 |
350. 00 |
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350. 00 |
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5-10 |
Professional Cleaners |
Cleaning |
1003 |
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55. 00 |
295. 00 |
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5-31 |
James Adams |
Management Fee |
1006 |
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100. 00 |
195. 00 |
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EXHIBIT 5
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SEPARATE RECORD FOR EACH PROPERTY MANAGED |
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OWNER: S. Manly,
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DEPOSIT
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$ |
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PROPERTY: 2351 Kingston Way,
Anycity ,
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COMMISSION:
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$ |
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UNITS |
COLLECTION |
$ |
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REMARKS |
MANAGEMENT |
$ |
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DATE |
RECEIVED FROM OR PAID TO |
DESCRIPTION |
RECEIPT/ CHECK No. |
Amount Received |
DATE DEPOSITED |
AMOUNT DISBURSED |
BALANCE |
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1. Warren |
Rent - May 97 |
#4 |
450. 00 |
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450. 00 |
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5-10 |
Mr. Handyman |
Repairs |
1004 |
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35. 00 |
425. 00 |
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5-31 |
James Adams |
Management Fee |
1006 |
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60. 00 |
365. 00 |
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EXHIBIT 6
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SEPARATE RECORD FOR EACH PROPERTY MANAGED |
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OWNER J. Bird
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Deposit |
$ |
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882 Flight Lane- Anycity |
Monthly Rent |
$ |
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7365 Meadow Circle, Anycity |
Commission: |
$ |
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TENANTS NAME: T. Sundance |
LEASES |
$ |
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UNITS REMARKS |
Collection |
$ |
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Security Deposit |
MANAGEMENT |
$ |
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DATE |
RECEIVED FROM OR PAID TO |
DESCRIPTION |
RECEIPT/ CHECK No. |
Amount RECEIVED |
DATE DEPOSITED |
Amount Disbursed |
BALANCE |
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T. Sundance |
Deposit |
#5 |
250. 00 |
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250. 00 |
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EXHIBIT 7
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SEPARATE RECORD FOR EACH PROPERTY MANAGED |
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OWNER J. Bird |
DEPOSIT |
$ |
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ADDRESS 736 Meadow Circle Any city |
MONTHLY |
$ |
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PROPERTY 7365 Meadow Circle, Any City |
COMISSION: |
$ |
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TENANT'S NAME T. Sundance |
LEASES |
$ |
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UNITS REMARKS |
COLLECTION MANAGEMENT |
$ |
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DATE |
RECEIVED FROM OR PAID To |
DESCRIPTION |
RECEIPT/ CHECK No. |
AMOUNT RECEIVED |
DATE DEPOSITED |
AMOUNT DISBURSED |
BALANCE |
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T. Sundance |
Rent - May 97 |
#5 |
500. 00 |
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500. 00 |
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5-31 |
James Adams |
Management Fee |
1006 |
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45. 00 |
455. 00 |
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EXHIBIT 8
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SEPARATE RECORD FOR EACH BENEFICIARY OR TRANSACTION
|
||||||
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IDENTIFICATION OF TRANSACTION: (names, addresses, account numbers, etc. ) Mr. & Mrs. White/Mr- & Mrs. Jensen |
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RE: 615 Lake Drive, Anycity |
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DESCRIPTION |
DISCHARGE OF TRUST ACCOUNTABILITY FOR FUNDS PAID OUT |
TRUST ACCOUNTABILITY FOR FUNDS RECEIVED |
ACCOUNT BALANCE |
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Date of Check |
Check Number |
Amount |
Date of Deposit |
Amount |
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Purchase Deposit |
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2,000. 00 |
2,000. 00 |
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Deposit to Tide Co. |
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1005 |
2,000. 00 |
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-0- |
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EXHIBIT 9
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SEPARATE RECORD FOR EACH PROPERTY MANAGED |
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OWNE R W. Allen |
DEPOSIT |
$ |
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ADDRESS 43 River Lake Drive, Anycity |
MONTHLY |
$ |
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PROPERTY 9152 High Way, Anycity |
COMMISSION: |
$ |
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TENANT'S NAME |
LEASES |
$ |
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UNITS |
COLLECTION |
$ |
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REMARKS |
MANAGEMENT |
$ |
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DATE |
RECEIVED FROM OR PAID To |
DESCRIPTION |
RECEIPT/ CHECK No. |
AMOUNT RECEIVED |
DATE DEPOSITED |
AMOUNT DISBURSED |
BALANCE |
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|
W. Allen |
Owner Contribution |
#6 |
1,000. 00 |
|
|
1,000. 00 |
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5-31 |
James Adams |
Management Fees |
1006 |
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80. 00 |
920. 00 |
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EXHIBIT 10
© Copyright 1994
(Revision
E-mail: americanschools@morelight. net