Audits: Real estate
When audits are conducted
We conduct routine audits on a regular schedule, and may conduct special audits in response to customer complaints or other priorities.
You must keep records for at least 3 years. All records must be available to the auditor at the license location upon request.
The following are basic guidelines used by auditors when conducting audits. Auditors aren’t required to follow these guidelines exactly, and may examine more or less than the areas listed. This information is provided only as a guide to licensees as they conduct their business.
During an audit, the auditor will:
- Review the law about controlling interest in a real estate business (RCW 18.85.053) with the designated broker or representative.
- Observe business signage and advertising, including, but not limited to letterhead, business cards, and promotional items.
- Examine the licenses of the firm, designated managing broker, managing brokers, and brokers to verify:
- The licenses are current and up to date.
- The licenses are available to the public.
- The license names are used properly.
- Verify that the firm’s Business License and Uniform Business Identifier (UBI) numbers match the DOL license.
- Verify controlling interest in the firm.
- Verify all assumed (DBA) names.
- Review the firm’s written policy/procedures manual and delegations of authority.
- Confirm that any civil or criminal actions have they been reported to the Department of Licensing (DOL).
- Determine if the office is a main office, a branch, or the only office for the firm.
- Determine where branch office records are kept.
- Review brokerage transaction files within the last 3 years, including:
- Log files
- Listing agreements
- Closed and pending purchase and sale contracts, including addenda special agreements and attachments
- Failed sales
- Relationship disclosures for dual agency
- Mutual agreement dates
- Closing statements
- Earnest money receipts (delivery of earnest money) for both listing and sales files
- All other documents and correspondence related to transactions
- Reviews of brokerage service contracts involving any affiliated licensee with less than 2 years’ experience.
- Review and reconcile brokerage trust accounts, including owners, tenants, associations, and earnest money accounts. The auditor will generally examine bank records for all trust accounts for the 3 months before the audit. However, he or she may request up to 3 years of records if necessary. The audit may review the following records:
- Bank statements
- Pre-numbered check stock
- Canceled checks (back and front)
- Deposit slips (receipted by bank)
- Wire transfer confirmations
- Voided checks (defaced)
- Check registers or other records of receipts and disbursements.
- Brokerage trust account reconciliations.
- Property Management trust accounts corresponding invoices or receipts (to verify actual expenses).
- Ledgers (liabilities)
- Examine a sample of management agreements to verify that agreements are signed by both the designated managing broker and the property owner.
- Review current brokerage (firm) to owner propery management agreements to make sure they comply with state laws and rules.
- Examine a sample of leases or rental agreements, and compare the security deposit liability in the lease/rental agreement to the liability in the security trust account.
- Review current tenant leases for compliance with state laws and rules.
What happens after the audit
- The auditor will prepare a written report to be signed by the designated managing broker or their representative.
- The auditor will deliver the report to the audit manager, who will determine if more documentation or clarification is needed.
- The audit manager decides what action to take. He or she may decide to:
- Take no further action.
- Send a letter asking for more information or documentation.
- Send a letter asking for compliance.
- Refer the report to our legal staff for a disciplinary action or fine.
- If the auditor found minor irregularities, and the designated managing broker agrees to come into compliance, the audit will be filed.
- If the audit is referred for legal action, we will contact the broker with the results when the audit investigation is complete and has been reviewed by the legal staff.
If the audit finds problems
The designated broker should immediately start correcting any problems found in the audit.
- If the audit finds overages or shortages in trust accounts, the designated broker should identify the source of the overage or shortage and immediately take corrective action.
- If the designated broker disagrees with the auditor’s finding, he or she should contact the audit manager to request further review.
- To get the latest information about real estate laws and audits, subscribe to our LISTSERV® to get email updates.
- If you’re a managing broker, you may want to be familiar with RCW 59: Landlord Tenant Act so you can be aware of any potential civil liability associated with property management.