Ed Note: The following appeared originally in the Summer 2017 Issue of the Colorado Division of Real Estate Investigator Insights. While rules and regulations are specific to Colorado licensees, the concepts are valid everywhere. We encourage all real estate professionals to continue reading!
Do you remember the days when presenting an offer meant you’d get in your car, drive to the buyer’s house, review the contract and get signatures; then you’d drive to the listing broker’s office to deliver the offer and earnest money?
Times have certainly changed! One thing that hasn’t changed however is the amount of “paperwork” generated during a real estate transaction. Recently, for lots of good reasons, brokers and brokerages have gone to digital solutions for gathering signatures and retaining transaction files.
If you’re saving trees, gas and time by taking advantage of technology - good for you! Whether you’re currently adapting to technological advances, or started your career during the digital age, read on to see 3 ways your record retention habits may put you at risk of violating licensing laws.
According to §12-61-113(1)(i) C.R.S. it is a violation of licensing law if a broker fails “to maintain possession, for future use or inspection by an authorized representative of the commission, for a period of four years, of the documents or records prescribed by the rules and regulations of the commission…” Are you in compliance with this requirement?
Ask yourself the following questions:
Are there executed documents from a transaction that I would be unable to produce if called upon to do so?
Imagine this scenario: You’ve closed a transaction with a co-op broker. Some of the amendments and disclosures to the contract were created in the other agent’s contract software account. You haven’t saved pdf copies of the executed amendments because you think the file link will be available if you need it. A year later, when called upon to provide a copy, the documents have been removed or you no longer have permission to access them.
Do I have my own transaction file? Or does the only complete file reside with my brokerage firm?
Many brokerages do not have the capacity to store all of the transaction files on-site. They may use storage services, both actual and digital to free up their physical and digital space. How will you insure compliance if you’ve moved to a new brokerage? What if the retrieval process to get the file from archived storage takes too long? What if the brokerage firm does not have or cannot find the complete file?
Do I have copies of all executed documents? Or only the transactions that closed
It would be great if every listing went smoothly to closing with the first buyer who put it under contract. But in reality there are listings that don’t sell, contracts that fall and exclusive buyers who never close on a home. These scenarios still have executed contract documents that could be called upon for review by the Division of Real Estate and the Real Estate Commission.
How did you answer these questions?
Are your storage practices in need of an update? You should be able to provide copies of any/all executed documents that pertain to your brokerage activities for a period of four years. With the Commission’s authority to “impose administrative fines not to exceed two thousand five hundred dollars for each separate offense…” (§12-61-113(1) C.R.S.) isn’t it worth insuring that your record retention practices are compliant?
If you have questions about record retention and related topics please refer to §12-61-113(1)(i)C.R.S., Commission Rules E-3, E-4, E-5, E-6, Commission Position Paper CP-9 or speak with your employing broker or legal counsel.