Legal Topics Public Law Real Property Law Tort Law

Helping Real Estate Brokers Stay Clear of Fraud

The most common claims made against real estate brokers are for fraud and deceit. Most brokers are sued for either not providing information or misrepresenting the information they do provide. Brokers who cross the line are being aggressively pursued by California’s Department of Real Estate (DRE), despite its staff and budget shortages. In fact, the DRE has revoked 50% more licenses in 2009-2010 than in 2006-2007.

To keep your broker clients on the right path and clear of DRE discipline, share with them this handy do’s and don’ts list:

Do’s for Brokers

  • Put your client’s interest ahead of yours.
  • Perform with diligence in your client’s interest.
  • Keep organized and clean copies of each transaction or transaction-in-progress in separate, readily accessible files.
  • Present all offers to your listing clients and all viable listings to your buyer or tenant clients.
  • Provide competent advice about the transaction, within personal knowledge.
  • Sit down with listing clients to discuss their disclosures.
  • Get disclosures in listing client’s handwriting.
  • Refer clients to counsel or other experts if advice requested is beyond the broker’s knowledge.
  • Consider verifying disclosures about building through public records.
  • Properly account for all fees and compensation earned on each transaction.

Don’ts for Brokers

  • Practice law.
  • Give advice on tax implications, unless qualified.
  • Speculate about property conditions as disclosed.
  • Mislead your client or parties on other end of transaction.
  • Encourage listing clients to be vague on disclosures.
  • Endeavor to acquire secret profits from transactions you are involved in.
  • Act as dual agent without full disclosures to and consent from both sides.
  • Agree to work with a dishonest client or a client suggesting anything illegal related to a transaction.

On bringing and defending fraud actions against real estate brokers, see CEB’s award-winning California Real Estate Brokers: Law and Litigation §§11.37-11.47 (Cal CEB 2009).

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© The Regents of the University of California, 2010. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

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