Compliance Review Information

Examinations of Real Estate Offices

Commission employees examine records and trust accounts through a compliance review by mail program and by onsite visits.

The primary purpose of examinations is to determine that funds received by licensees in real estate transactions are properly handled.  Examiners track funds to be sure they are properly deposited, there are no unauthorized or early disbursements, and funds are not co-mingled or converted to personal use.

Examiners also review contracts and other documents in the transaction files to monitor compliance with law and regulations.

Regulations

K.A.R. 86-3-10
All records relating to the broker's real estate business are to be retained in the broker's files for three years.

K.A.R. 86-3-22
Transaction numbers are to be assigned and placed on all applicable records in the form mandated by this regulation.

K.A.R. 86-3-18
If the broker maintains a trust account, a complete record of all monies received or escrowed on real estate transactions must be maintained.

Transaction Files

Each transaction file, whether PENDING, CLOSED or CANCELLED, should contain all of the following records (IF APPLICABLE) to the transaction:
  • Agency Agreement with Seller
  • Agency Agreement with Buyer
  • Transaction Broker Agreement
  • Transaction Broker Addendum
  • Offers, Counteroffers
  • Contract
  • Lot Reservation Agreement
  • Commercial Lease
  • Option
  • Receipt for Purchase Agreement and Earnest Money
  • Closing Statements
  • Authorization to disburse Earnest Money on Transaction which did not close
  • Any other record generated in connection with Transaction

Trust Account Records

A complete record of all monies received or escrowed on real estate transactions must be maintained:

  • deposit slips showing transaction number, date of deposit, amount and where deposited
  • monthly trust account bank statement, canceled checks and deposit slips
  • a check register which shows the chronological sequence in which funds are received and disbursed
    • for funds received: date of deposit, transaction number, amount
    • for disbursement: date, transaction number, payee, amount
    • the current balance
  • a ledger for each transaction, including:
    • names of principals
    • property address
    • transaction number
    • amount of each deposit
    • date of each deposit
    • check number
    • date of check
    • payee
    • amount of each disbursement
    • the current balance
  • a ledger for broker's funds, if applicable

Reconciling Trust Account Records

Reconcile trust account records monthly.

Step 1: How much money is in the trust account?
Balance the bank statement.

Step 2: How much money should be in the trust account?
Establish trust account liability by adding the balances of all ledgers. If ledgers are properly maintained and no errors are made, the total of all ledgers will be the trust account liability.

Step 3: Compare trust account liability to the reconciled bank balance.
Does the bank balance match trust account liability? If they don't match to the penny, find out WHY.

Frequently Asked Questions

  • What documents must a broker maintain as a part of the brokerage records?

  • How long do I have to keep transaction files?

  • What is the purpose of a compliance review?

  • How will I be contacted if I am selected for the Compliance Review by Mail program?

  • Is it acceptable to send requested items to the examiner by email?

  • If violations are found, will the examiner tell me how much I will be fined?

  • How soon after the compliance review is complete will I receive the official results?

  • What if I do not agree with the examiner's findings?