Top Mistakes Brokers Are Making

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DOL Trends Show That Compliance is Easier Than Discipline

The Washington Department of Licensing (“DOL”) regulates real estate brokers and disciplines licensees for non-compliance with statutory and regulatory requirements. DOL disciplinary trends reveal the most common mistakes brokers are making. Violations are often the result of inadvertence or ignorance of the law rather than intentional misconduct. Coming into compliance with the requirements will be far easier for brokers than enduring the time-consuming, expensive and license-threatening disciplinary process.

This article is the first of two articles that will examine the most common, non-trust account violations for which DOL disciplined brokers in 2015. The articles will identify the violation and the solution, which typically requires nothing more than a broker changing basic practices.

Earnest Money Documentation.

Listing and selling brokers must confirm buyer’s timely deposit of EM, notify seller of any failure and document both actions in every transaction file.

DOL expects listing brokers and selling brokers to confirm that buyer’s earnest money deposit was made timely. The simplest way a broker can confirm timely deposit is for broker to obtain a receipt showing timely deposit. For that reason, DOL expects to see one or more earnest money receipt(s) in every transaction file. If buyer delivers EM directly to the agreed holder of the EM funds (closing agent or real estate firm trust account), then listing firm and selling firm transaction files must include a receipt showing timely delivery by the buyer to the holder of the funds.

If buyer delivers EM to buyer’s broker, then both listing and selling firm transaction files must include a receipt showing timely delivery by buyer to buyer’s broker and a separate receipt showing timely delivery by buyer’s broker to the holder of the funds. There is no particular form required for either of these receipts but Form 89 is a good choice for documenting buyer’s delivery of EM to buyer’s broker. The transaction file receipt(s) must simply serve as proof that earnest money funds were properly and timely delivered. DOL expects listing and selling firms to cooperate with one another in sharing documentation to show timely delivery.

So…what if buyer fails to timely deposit earnest money? In that case, the transaction files for both listing and selling firms must contain proof that listing and selling broker put seller on notice, not later than the day following the day on which EM was due, that buyer failed to timely deposit. The listing file must show broker’s communication with seller and the selling firm’s file must show buyer broker’s communication with listing broker. Said differently, if there is not a receipt in the file by the day after the EM is due, showing timely deposit, then the file must show action taken by broker to notify seller of buyer’s failure. Record of broker compliance must be maintained in a transaction file for both listing and selling firms.

As a side note, DOL has seen an increase in buyer brokers taking a photocopy of a buyer’s “earnest money” check, delivering the photocopy to seller as proof of buyer’s delivery of the EM check, but then returning the EM check to buyer. First, brokers should not retain a photocopy of a buyer’s check in a transaction file nor provide it to the seller. Information contained on the face of the check should be treated as confidential. Moreover, when buyer broker delivers the photocopy of the check to the seller, that is done to create the impression that buyer’s broker is holding the check for deposit upon mutual acceptance. If buyer’s broker returns that check to buyer, buyer’s broker deceives seller as to buyer’s “payment” of earnest money. This practice violates minimum Agency Law duties owed to all parties.

Presenting offers.

Brokers have an Agency Law duty to present all written offers in a timely manner.

When multiple offers are received, listing brokers sometimes attempt to consolidate the review of offers by summarizing the offer terms or by selecting the “best” offers to present to the seller. Brokers are not given this discretion. Washington law requires that ALL offers be presented in a timely manner. If a summary of each offer is presented to seller, to assist seller in processing the information, the entirety of each offer must also be provided to the seller. It is unlawful for a broker to present something less than the offer as written. The chances of missing a detail, important to the seller, are too great.

Moreover, all offers must be presented timely. What “timely” means depends upon the circumstances at issue. Certainly, “timely” requires presentation before the offer expires, unless it is impossible to present the offer prior to expiration. If seller is unavailable or refuses to review an offer prior to expiration, then listing broker’s file should reflect those circumstances. Even if seller set an offer review date in the future, broker must notify seller if an offer comes in from a buyer with an expiration date prior to seller’s established review date. Seller must be informed that an offer will expire, and thus be void, before the pre-determined offer review date. It is always up to seller whether seller will review an offer earlier than previously identified as the review date.

Similarly, absent a seller’s instruction, it is not appropriate to delay presentation of an offer while listing broker hopes for additional offers to be presented, including offers from listing broker’s buyer. If listing broker believes that delayed presentation of an offer is beneficial to seller, listing broker must advise seller of the circumstances and adhere to seller’s subsequent instruction. If seller instructs delay, broker should document that instruction, in writing, in broker’s transaction file.

The duty to timely present all written offers persists even after mutual acceptance. If buyer or seller makes an offer to the other, after mutual acceptance, typically an offer to modify the contract, that offer must be presented timely. If a different buyer makes an offer to seller after seller is already in a binding agreement with a buyer, that new offer must also be presented timely to seller.

It is important to note that this “failure to present offers” has become a significant discipline issue for DOL. It is unlikely that listing brokers are actually failing to present all offers timely. It is far more likely that listing brokers are failing to give unsuccessful buyer brokers proof that seller actually reviewed and rejected buyer’s offer, leaving buyer and buyer’s broker to wonder whether seller saw buyer’s offer at all. Buyers and buyer brokers, frustrated by not getting the property and uncertain as to whether buyer’s offer was seen, are more likely to file a complaint with DOL, claiming listing broker failed to present the offer. When DOL investigates, listing broker will have to prove that listing broker timely presented all written offers. Unfortunately, a typical listing file contains no proof of timely presentation.

Listing brokers can avoid this DOL investigation and discipline altogether by giving buyer brokers the courtesy of notification that seller rejected buyer’s offer. Returning the offer with the word “rejected” written across the face of the offer, signed and dated by seller, provides proof of seller’s timely review and rejection of the offer.

Written Occupancy Agreements.

If a non-owner occupies the property, a written rental agreement is essential. When a person occupies the property of another without a written occupancy/rental agreement, there are significant legal consequences that follow. Questions of personal injury liability, maintenance obligations, rent requirements, removal from the property, insurance and other important details are not addressed between the parties. Because brokers are held to the standard of care of a lawyer when drafting purchase agreements, brokers are not allowed to create any more risk for a party, based on drafting (or drafting omissions) than a reasonable lawyer would create. DOL believes that a reasonable lawyer would document, in writing, the terms of possession by a non-owner.


Regardless of whether buyer occupies the property prior to closing or seller retains possession after closing, DOL expects the transaction file to include a written and signed occupancy agreement. This is true regardless of the length or scope of possession by a non-owner occupant. Too many times, DOL has seen non-owner occupancies that were only supposed to last a few days or only intended to allow the non-owner occupant to store a few things in the garage, stretch into nightmares for the property owner who then could not contractually regulate or terminate the occupancy.

The statewide forms create the opportunity for a signed rental agreement anytime possession transfers outside the closing date, but brokers must know how to use the forms to create the required result. The boiler plate language of Form 21 says that if possession is transferred at any time other than closing, the parties agree to sign either Form 65A for buyer’s early occupancy or Form 65B for seller’s delayed possession. But that agreement to sign is only half the battle. Forms 65A and 65B both require the parties to agree on a variety of terms. As a result, the brokers cannot wait until the day of possession to obtain the parties’ agreement to Form 65A or 65B because the parties may not agree to the terms written into the blanks. What happens if buyer is about to take occupancy or a transaction is set to close with seller retaining possession…but the parties cannot agree on the terms of the rental agreement? The likely result is a sale fail.

This outcome is avoided if brokers complete the blanks on Form 65A or 65B and attach it, as an exhibit, to the Form 21, prior to mutual acceptance. The “exhibit” is not signed at the time the purchase agreement is signed but the exhibit is initialed by both parties, evidencing each party’s agreement to the terms stated on the rental agreement. If this is done, then “mutual acceptance” pertains to the terms of sale and the terms of the rental agreement. The parties can then execute the rental agreement prior to possession, but the terms of the rental agreement are not subject to negotiation after mutual acceptance.


In the rush of a busy market, it seems that brokers (and firms) are forgetting to retain “all material correspondence.”

Often times, DOL discovers that there is NO correspondence retained in a firm’s transaction files. Correspondence can be critical in proving what happened during a transaction, who said what, what agreements were made, what opportunities were purposefully waived, whether a referral to seek an expert was given by broker, etc. Correspondence can occur, at a minimum, in the form of text, email, letters, hand written notes and social media.

Brokers must ingrain in their practice, the need to print and retain ALL material correspondence, regardless of the medium on which the correspondence was made. Retaining all material correspondence is not only required, it is a good business practice. Chances are good that brokers are communicating with clients and taking actions based on a client’s instruction. However, in the face of a dispute, if broker cannot provide a written record of what was said by the client, the controversy is likely to devolve to a “he said, she said” debate and the consumer often emerges the victor in that battle.

Enduring a DOL disciplinary investigation is time consuming and stressful, even if broker succeeds in avoiding disciplinary action. Simple steps, like those discussed in this article, will often prevent the investigation altogether.


Hotline Attorney Annie Fitzsimmons writes the Legal Hotline Question and Answer of the Week.  If you’d like to submit questions to the Legal Hotline, e-mail them to  Please reference your NRDS number when you e-mail the Hotline with your question.  View the LEGAL HOTLINE DATABASE.  The Legal Hotline lawyer does not represent Washington Association of REALTORS® members or their clients and customers.  

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