Supervising Licensees' Real Estate Transaction Files

Instructor: Tara Schofield

Tara has a PhD in Marketing & Management

Brokers and real estate agents must abide by certain rules having to do with record keeping and file holding related to each real estate transaction. Learn what the files include and why the records may be needed.

Maintaining Transaction Files

You've just started your real estate career and are working your new broker, Linda. She has a training program to help you and the other new agents get up and running. Today your training focuses on transaction files.

Linda explains that transaction files contain all documentation regarding a sale, listing, purchase, or any other transaction. While all signed documentation must be saved, Linda explains that she wants to keep copies of emails or other communication relating to each home handled in the agency.

You walk through an exercise with the team where you review the details of a recent sale. In the file you find the listing agreement, agent disclosure, sales contract, copies of the inspection, and all other paperwork related to the home purchase. The expectation is that you carefully and consistently keep copies of the documents in the file, ensuring everything is organized and easy to find.

After having a thorough explanation of the file, Linda explains the reason you need to have files available.

Reasons for Documentation

You need to have complete files saved for three years or more, depending on what state you are in. There are many reasons you may have to access these records after a sale is completed or a listing expires. Let's go over them now.

  • Legal Issues

Imagine a seller claims you mishandled the sale and didn't do what you promised to do. The transaction file can prove that you did everything you agreed to as outlined in the listing agreement. By saving the email communication with your seller, you can prove that the seller repeatedly stated they were happy with your work and satisfied with what you were doing to sell their home. The transaction record is critical for protecting yourself in court and proving that you completed your responsibilities.

There may be times other parties are sued or have legal problems that are not directly related to you or your agency. However, you may have documents that are necessary for their court case. There is a period of time after a transaction in which a party can take legal action. In many states that statue of limitation is five years. Make sure you know what the law is in your state and how long you are required to keep files in your agent's office.

  • Errors and Omissions Insurance

Errors and omission insurance (E & O) is protective insurance for agents in the event of negligence or mistakes in dealing with clients. Not only do you need to keep your files current with the most recent policy of your E & O, it's a good idea to have a record of all clients you work with, interactions with those clients, and key points of conversation.

You should also have clients sign a document stating recommendations you made that the client chose not to follow. This will help protect you in the event your client later claims you overlooked issues or never advised them regarding specific issues in a transaction. Linda explains this record can protect you in the event there is an errors and omissions issue.

To illustrate, imagine you are representing a buyer, Mark, who is eager to close as quickly as possible on his home. Mark's family is staying in a hotel, anxious to move into their new house. Originally the closing date was scheduled for 30 days after the offer was accepted. However, with the urgency to purchase, the closing date had been moved up to 10 days.

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