File Audit Tag: I did a review of the file and found that the property disclosures and lead paint addendum were still missing from the file. They may have been submitted to the office yesterday, but it appears the file may be out of compliance with state required time limits for supervision of files. This is a subject that Lee Dunn and I have discussed at length, and requires attention at all levels of our profession. The Lead Paint addendum is a serious HUD violation as it is a federal requirement.
Agent Response: This is scaring me a bit. Please let me know what to do and any consequences I may expect?
Broker Explanation: This is why it’s so important for agents to attend sales meetings and training. Experienced agents in the branch can tell you the ramifications of required documents not being in the file and having the state give a reprimand. Not all agents realize their files, listing and sales are randomly pulled by the real estate agency periodically to check for compliance. When they find things they are concerned about, they ask for at least 3 more of that agents files in order to determine if there is a pattern.
They first look to see all required docs are in the file and they compare it to the companies checklist along with state and federal required, like agency, seller property disclosures (up to date by the way), lead based paint and wood stoves as an example.
Next they look for signatures, initials and dates of both the clients for complete transaction agreement and the agents receipting for the earnest money agreement.
Then they look for the managing broker’s signature and date to make sure paperwork is being turned in and reviewed per the agency law. They compare the earnest money promissory note if one is taken with its redemption date and deposit in escrow date and confirmation. If it’s a failed offer, they want to see a return of earnest money in the file.
It’s bad enough if they do a review and find things missing, then most the time it’s just a reprimand, (unless there is a pattern and/or it’s to do with failure to handle the clients earnest money properly) but it becomes a licensing issue if heaven forbid there’s a complaint. Agents don’t realize that even if the complaint is against the other agent, when they pull the file; guess who shows up as well on the file? You are now also subject to file review in handling your side of the transaction. The things they can call you out on may or may not have anything to do with the complaint.
So should you be worried? Only if you are guilty of any of the above. What can you do?
If it’s a closed file, it’s too late. It is memorialized and it is what it is. What you can do is make changes today to every client’s deal you handle. Have a log for each listing and each offer. Oh and don’t forget those offers you write that never go together…the things required in any offer, minus the signed all around contract, remains the same. Agency, earnest money handling, seller’s property disclosure, lead- based paint and wood stove, etc., if they apply, etc. So what to do? It’s ez. Become detail-oriented, task-oriented and outcome-oriented and you won’t have to be worried! Clean up any bad habits regarding paperwork, dates, signatures and turning in the paperwork. Follow our company checklists, compare them against what is in your file, get signatures and dates on time, turn in to us within 3 days of receipt and watch those deadlines for contingencies. Your working file should never contain items that are not in our file within 3 days of receipt.
Oh and one final thing. When there is an investigation by the agency into anyone’s file, the first thing the agency asks is for an attendance record for that agent of sales meetings and trainings. That is why Margaret keeps a log of attendance of every sales meeting. Attend sales meetings and trainings. When was the last time you participated? Sales meetings are for one hour twice a month….that little amount of time is not going to put a kink in your schedule but it might make a huge difference in the states review should you ever have the pleasure.
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