Compliance

Compliance is an essential step in every real estate transaction. It ensures that all documents, communications, and other relevant records are properly stored within the brokerage’s system, protecting both agents and the brokerage from potential legal liability. By maintaining thorough and organized records, you can avoid disputes, meet state requirements, and defend against unforeseen issues that may arise after closing.

This lesson will outline the importance of compliance, best practices for documenting communications, and how to manage your transaction records effectively.

Why Compliance Matters

1. Legal Protection: Proper documentation helps limit legal liability by providing a clear record of the transaction and all associated communications.
2. Brokerage Requirements: California, Florida, and many other states require brokerages to keep transaction documentation for a minimum period (e.g., 3-5 years).
3. Dispute Resolution: Organized records allow you to quickly address and resolve disputes with clear evidence of conversations, agreements, and actions.
4. Professionalism: Maintaining thorough records demonstrates your commitment to ethical and professional standards.

What to Document

Agents should upload and store all relevant documentation and communications related to the transaction, including:

1. Transaction Documents

• Purchase agreement and any addenda.
• Disclosures and inspection reports.
• Contingency removal forms.
• Closing documents (e.g., settlement statement, grant deed).
• Vendor invoices or receipts (e.g., repairs, inspections).

2. Communications

• Emails: Save all emails with clients, opposing agents, vendors, and other parties.
• Text Messages: Upload screenshots or transcripts of text messages.
• Call Logs and Recaps: Maintain a log of calls, including:
  • Date and time of the call.
  • Parties involved.
  • Key discussion points.
  • Action items or outcomes.

3. Supporting Documentation

• Marketing materials used in the transaction.
• Notes from meetings or site visits.
• Signed client acknowledgments or waivers.

Best Practices for Compliance

1. Use the Brokerage System

• Upload all transaction documents and communications to the brokerage’s document management system (e.g., the WE ARE REALTY platform).
• Ensure files are named and categorized properly for easy retrieval.

2. Log Communications

• Call Logs: Record details of phone conversations with clients, opposing agents, inspectors, and vendors.
• Call Recaps: Follow up important calls with a summary email to all relevant parties to confirm key points discussed.

Example:
Subject: Recap of Today’s Call – Inspection Findings
Hi [Name],
Thank you for the call earlier today. As discussed, the buyer would like the following items addressed before contingency removal:

1. Repair the HVAC system.
2. Provide documentation for roof maintenance.
   Let me know if you have any questions.

Best regards,
[Your Name]

3. Document Every Interaction

• Even informal conversations (e.g., text messages) should be recorded to provide a complete transaction history.
• Save all communication in chronological order for clarity.

4. Stay Proactive

• Anticipate potential disputes and document communications thoroughly to ensure you have a record to reference.
• Share relevant updates with your compliance team promptly to maintain transaction transparency.

Legal Requirements for Document Retention

State laws often require brokerages to retain transaction records for a specific period. For example:

• California: Documentation must be retained for a minimum of 3 years.
• Florida: Documentation must be retained for at least 5 years.

Action Steps:

• Familiarize yourself with the document retention laws in your state.
• Use the WE ARE REALTY platform to store records securely for the required timeframe.

Benefits of Proper Compliance

1. Defensive Documentation: Comprehensive records can protect against litigation by providing evidence of actions, agreements, and communications.
2. Reduced Risk of Disputes: Clear documentation minimizes misunderstandings and helps resolve conflicts quickly.
3. Audit-Ready: Well-organized files ensure you meet state and brokerage audit requirements.
4. Client Trust: Transparency and professionalism in documenting transactions build trust with clients and other parties.

Case Study: Compliance Avoids a Dispute

Scenario: A buyer claims they were not informed about roof damage before closing and threatens legal action against the agent and brokerage.

Approach:

1. The agent retrieves saved inspection reports, emails, and call recaps from the brokerage’s system, demonstrating that the buyer was informed of the issue.
2. A signed acknowledgment from the buyer, uploaded during escrow, confirms they agreed to proceed despite the roof damage.

Result: The dispute is resolved quickly, with no liability for the agent or brokerage, thanks to thorough documentation.

Next Steps for Agents

1. Set Up a System: Use the WE ARE REALTY platform to upload documents and track communications.
2. Be Consistent: Log all calls, emails, and text messages related to your transactions.
3. Stay Proactive: Send call recaps and save supporting documents as soon as they’re available.
4. Review Compliance Checklist: Before closing escrow, ensure all documentation is uploaded and approved by compliance.

Conclusion

Compliance is more than just a legal requirement—it’s a safeguard for you, your clients, and your brokerage. By maintaining organized records of all transaction documents and communications, you reduce liability, avoid disputes, and ensure a smooth process for all parties involved. Proactively managing compliance demonstrates your professionalism and commitment to protecting your clients’ interests.

Next Steps:

1. Begin tracking communications for your current transactions.
2. Use the WE ARE REALTY platform to upload and organize all required documents.
3. Review the compliance checklist to ensure your files meet brokerage and state requirements.

In the next lesson, we’ll discuss strategies for post-closing client engagement to generate referrals and repeat business.