The state agency that regulates the real estate industry is taking a closer look at the books.
The Department of Professional and Occupational Regulation started random inspections of real estate firms this month to make sure they are following guidelines — in particular whether escrow accounts containing security deposits are being handled correctly.
“The intent is to insure compliance, not to jam anybody up,” said Mary Vaughan, communications director for the department.
One reason for the sweep is a pattern of complaints involving missing escrow funds that have come before the department’s Real Estate Board during the past several years. The board authorized the investigation in July.
Vaughan said the goal is to inspect every firm in the state, which as of this month was 4,541 firms. That could take a while.
“It’s too early to tell how this will fall in terms of resources and the number of man hours it will take,” Vaughan said.
The inspections will be conducted by DPOR investigators, whose job it is to look into complaints against licensees in the more than 30 professions regulated by the state. That includes a variety of jobs: barbers, tattooists, geologists and architects, to name a few.
The investigators will give firms advance notice when they have been selected to undergo an inspection. Some potential violations may be handled and corrected on the spot, but if that is not an option it could lead to disciplinary action including fines or revocation of a license.
In response, real estate groups like the Virginia Association of Realtors are reaching out to members to provide refreshers on state policies.
The VAR has sent out advisories to its member brokers about the inspections and has conducted workshops with DPOR staff and executives of the association’s local chapters.
Jay DeBoer, vice president of law and policy for the organization, said most firms shouldn’t have much to worry about.
“DPOR investigators are not interested in office hours, dress codes and things like that,” DeBoer said.
DeBoer, who previously served as director of DPOR for four years, said the goal of the investigation is to protect the public.
“The law is very clear that the board has the power and authority, and some would say the responsibility, to conduct this kind of inspection,” DeBoer said.
DeBoer said mishandling of escrow accounts is the main reason for the inspections.
“People dipping into them receives more attention when economic times get a little hard,” DeBoer said. “There is something just so attractive to an account that just sits there that people believe they can manipulate and replace before anyone notices. That often leads to very negative consequences.”
It can also be a headache for other firms.
“It is a very good thing that these random inspections are going to be happening,” said Nathan Hughes, a commercial real estate broker for Bandazian & Holden.
This year his firm acquired the property management accounts from St. John’s Realty after its owner passed away, only to discover that more than $116,000 in escrow funds were missing. Hughes said his firm has been working with DPOR to handle the situation.
Hughes said the coming audits make now a good time for firms to review their procedures, even if they are sticklers for going by the book.
“It is more than just about people doing things wrong or against regulation. It helps the rest of us tighten up our ships even more,” Hughes said. “You go back and read what you are supposed to be doing and make sure you are doing right.”
You would think they would have been doing this all along.
They should be audited they are not above the law although many think they are!!!