Compliance Audits

Audits can be performed upon request of the broker, if the Division receives a substantial increase in complaints in the brokerage’s geographical area, and upon the Superintendent’s request.

The purpose of the audit is twofold: first, to provide education and awareness of real estate law; and second, to provide assistance to brokerages to ensure compliance with all real estate license laws.

If investigators find areas of noncompliance, they will work with brokers to make necessary corrections. As one Division investigator often says to brokers who are scheduled for an audit, "We are here to help you. We’re not the IRS!" The most important feature of the audit process is that it allows investigators to interact with the real estate community and establish rapport with the brokerages the Division serves.

Since January of 2002, investigators have met with more than 300 brokerages. Often brokers express appreciation for the investigators’ audits as it allows them an opportunity to ask questions, gain information, and rectify any discrepancies that may be found during the audit.

When an investigator schedules a compliance audit with a brokerage, the Division sends a fax with a confirmation letter and company policy checklist to the brokerage. The confirmation letter describes the types of documents the investigator will examine, and it requests that the brokerage make these documents

available for review on the scheduled audit date.

The company policy checklist is a fairly new procedure implemented by the Division’s enforcement section in May 2002. This checklist is used to help alleviate confusion in the industry and to ensure compliance with the "Written Company Policy for Brokerage" as required pursuant to Section 4735.54 of the Revised Code and Administrative Code Rule 1301:5-6-03. The brokerage should review and complete the checklist prior to the scheduled date of the audit. The compliance audit is a very thorough regulatory and education process. Some examples of the types of activities undertaken during an audit include:

• Review of all licenses held
• Review of trust accounts
• Examination of all advertising, business cards, and yard signs
• Review and discussion of office policiesReview of mandated real estate forms such as listing agreements and agency disclosure forms

To ensure your audit goes smoothly, take time to cover some basic real estate areas:

• Do you have a company policy for brokerage and a company policy on agency?
• Are you maintaining a columnar ledger for all trust account funds?
• Do all of your agency agreements contain the mandated fair housing language?
• Do all of your agency agreements contain a definite expiration date?
• Are you seeing to it that all agents are instructed to ensure that a definite expiration date is clearly noted?
• Are you maintaining ALL transaction related records for a period of three years?
• Is your account for earnest money clearly marked as a "trust" or "special" account, and is the account non-interest bearing?
• Are ALL licenses properly displayed?
• Is there clear signage on the premises that identify the brokerage, even if you operate out of your own home?

Compliance audits serve to help inform and educate brokers and ensure compliance to real estate law. Division investigators perform audits to provide information, answer questions, and assist brokers in understanding all aspects of license law. Brokers should look upon a compliance audit as a positive opportunity to meet with a Division representative and to receive any necessary assistance.