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We survived our first audit from DOL

I found out Friday that the Washington State Department of Licensing audits all new real estate brokerages their first year.  I found out because of a phone call from the auditor who was waiting outside my home/office. (Yes, we run the company out of our home. I meet clients at their office, home, at a property they are buying/selling/leasing, or if all else fails, Starbucks.

Unfortunately for the auditor, I was visiting a client and no one is there to meet him.  So, we rescheduled for today.

I’m happy to say things went fine.  I was mostly confident it would.  But, part of our conversation on Friday had me worried.

Signs, signs, everywhere signs….

The Friday conversation was about office signs.  Not the signs our office uses on properties we list… but actually a sign at the office. The city of Duvall says home-based businesses can have no signs. The auditor said the state requires I have a sign. I reviewed the rules and regulations closely when I opend the business and was confident when I responded, “I don’t think so.” (Hey, it would do no good to be too forceful with the auditor… and I am human, I could have missed something.)  I asked him to be sure and point out the regulation when we met today.

In the end, it turns out we are both right. (I will continue to play nice wth the DOL.)  According to the auditor when he came for the appointment today, the regulation for the sign has been removed, but by accident. He said it will be re-instated by end of year.  I’ll be writing the real estate commission to suggest it stay removed.  I don’t want to have to choose between following DOL rules, city rules, or having to change my business model to have a ‘real’ office that does my clients no good.

Business Card

Business Card

Anyway, on to the rest of the audit…

The rest of the audit went smoothly.  The auditor reviewed the paperwork for closed in in-process transactions.  The main focus was making sure that earnest money deposits were handled correctly.  Our policy is to always have buyers deposit earnest money with 3rd party escrow.  So, that makes the audit process much simpler.  No ‘trust account’ to review.  And, happily all the deposits happened on-time and we had all the receipts.

Other items reviewed were:

  • My business cards, which passed muster. Check it out for yourself.
  • Our business and real estate licenses (which you can view from “Client Resources” links on this page). Again, all fine.
  • Transaction summaries – Our auditor was a bit of a geek, like me, so was interested in our use of Office 365 and sharepoint to track this information.
  • Issues we would have to deal with if we had other brokers in the office (all good info for the future)

Areas for improvement – written procedures

Of course, we are not perfect.  The one area where we had shortcomings is in written procedures.  This is something I’ve been working on, but as a sole broker, its been a low priority to write down procedures and policies for me to follow.  But, the auditor pointed out that there are regulations that require some policies and procedures to be written, even though I am the sole practitioner. So, its now on the schedule to get these written up. I’ll take that oppotunity to outline the additional procedures needed for when we bring other brokers on board.

All in all, not a terrible experience.  No audit is pleasant, but this wasn’t as bad as I feared.  Apparently, I get to look forward to repeating the experience about once every 3 years.  I plan on the future visits to go at least as smoothly (signs or no signs).

 

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