Alabama Real Estate: Office Audits & Checklist

Instructor: Tara Schofield

Tara has a PhD in Marketing & Management

Office audits are a possibility for all real estate brokerages, whether randomly selected or in response to a complaint against the broker or agent. Learn how to prepare for the audit and what information will be reviewed.

What is an Office Audit?

Your broker, Paula, has strict policies about how to handle paperwork and records in her office. She explained in a recent training that the Alabama Real Estate Commission has the right to do an office audit, a review of files and information to ensure sales are handled properly and clients are appropriately represented. The audit also reviews financial records. The commission has the right to review records at any time during normal business hours.

There are two reasons Paula's records may be reviewed. The first is a random audit that is conducted by the commission. Her agency may be selected for a review without any specific reason or concern, just an arbitrary selection from all of the real estate offices in the state.

The second reason for an audit is to respond to a complaint by a client or another party related to the real estate office. Examples of such triggers include trust account funds that are being used for another purpose or a check written to the commission bouncing. These events would likely trigger an audit. If a client files a grievance stating that an agent is not maintaining files or inappropriately gives copies of documents to a client, the commission will review the broker's records to see if everything is in order.

The Audit Checklist

In the event of a commission audit, the auditor will review many forms of information in the office, including:

  • Office and business signage to make sure it meets requirements
  • Real estate licenses for the business and all agents
  • Closed sale files for the past 3 years
  • All pending transaction files
  • Paperwork relating to leases, management agreements, and property management documents
  • Bank statements for the past 6 months with copies of canceled checks
  • Bank reconciliation records
  • Bank account records and register, with deposit receipts from the bank

Keeping Complete Transaction Files

The commission requires realtors to keep all records for a minimum of three years. If for some reason, one of your clients is sued or sues someone concerning the sale or purchase of a home you handled, you must keep those records for several more years in case there is further litigation or there are further problems with the sale.

Financial records must also be kept for at least three years. The auditor has the right to review any documents relating to a complaint on a transaction within the last three years. The records from a random audit will be the current records but the auditor has the right to look at older records, especially if errors or incomplete files are found during the random audit.

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