Maintaining Files on Transactions
The license law requires firms to maintain various documents for three years. The law specifically cites sales contracts, closing statements, brokerage engagements, and leases. In addition, the law makes the less specific requirement that the licensee maintain "other documents related to real estate closings" or " transactions."
A firm's broker must decide which "other documents" to maintain. However, the broker should base that decision not only on what the license law requires. In addition, the broker should meet the needs of good business record keeping practices, potential legal proceedings, and the requirements of other laws.
The firm should keep files on both accepted offers and unaccepted offers. Licensees should consider including the following documents and documentation in their files.
- Full names and address of principals with their telephone and fax numbers.
- Copies of the listing or property management agreement if the transaction involves one of the company's listings or management files.
- Copies of any broker price opinions or competitive market analyses prepared for any party related to the transaction.
- Copies of any good faith estimates of cost to be incurred by any party or net proceeds to go to any party.
- Copies of agency disclosure statements, owner property disclosure statements and/or tenant checklists presented to or signed by any party.
- A copy of any written disclosures as to property condition or financial ability made by any principal or agent.
- Evidence of all disclosures made by licensee(s) to the principal(s) and of recommendations made by a licensee(s) that a principal(s) did not act on.
- Any documents related to zoning and flood plains used in the transaction.
- A complete signed copy (or original) of the purchase and sale agreement or lease.
- Any offers, counter offers, or addendums to the purchase and sale agreement or lease.
- All signatures and initials should have their dates and times identified.
- A record of who presented any offers or counter offers and to whom they were presented. In addition, a summary of any representations (such as the financial ability of the buyer) that are not included in the contract and who made them at the presentation.
- A copy of any check, money order, promissory note, other valuable consideration used as earnest money or security deposit. (Cash should not be color copied or same sized copied.)
- Copies of records reflecting the disposition of any trust funds in the transaction.
- Evidence of timely supervision by the broker such as dated initials on documents.
- Any amendment or attempted amendment to the original agreement including removal of contingencies.
- Copies of any inspection reports, repair estimates, or clearances related to the transaction.
- Records of any buyer's progress in obtaining financing.
- Copies of any title problems identified, records of the time and date of their date of delivery to affected parties, and the time and date of their resolution.
- Copies of all correspondence, including fax messages, to or from the parties or their authorized representatives.
- Any diary notes generated by licensees in the transaction.
- A record of the parties attending the closing and any problems that were encountered there.
- A copy of the settlement statement(s). The seller's forwarding address.
- If the transaction failed to close, the reason why it did not and the disposition of any trust funds thereafter.
Comprehensive files can help refute later unfounded allegations and document company practices.
The information contained in this article is believed to be current and accurate. The GREC staff reviews the contents periodically and updates it when appropriate. If you have questions or comments about this article, you may contact us at firstname.lastname@example.org . Last reviewed August, 2006.