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Navigating Washington State Real Estate License Laws: A Guide for Brokers

September 24, 2024

As a real estate broker in Washington State, staying compliant with license laws is crucial to maintaining your reputation and avoiding disciplinary actions. The Revised Code of Washington (RCW) outlines specific grounds for disciplinary action that every broker should be aware of. In this blog post, we’ll break down these potential violations, provide practical examples, and offer guidance to help you navigate your responsibilities effectively.

1. Violating Provisions of Relevant Chapters and Rules

What It Means: Any breach of the laws outlined in chapters 18.85, 18.235, 64.36, 19.105 RCW, or RCW 18.86.030, including any rules adopted under these chapters.

Example: Failing to disclose a conflict of interest in a real estate transaction as required by RCW 18.86.030.

Implication: Such violations can lead to disciplinary actions, including fines or suspension of your license.

2. Misleading Statements and False Promises

What It Means: Making or distributing false statements or promises that could reasonably induce someone to act, especially if you knew or should have known they were false.

Example: Advertising a property as having "ocean views" when it doesn’t to attract more buyers.

Implication: This not only damages your credibility but also exposes you to legal action from misled parties.

3. Engaging in Fraud or Misrepresentation

What It Means: Knowingly participating in any fraud, misrepresentation, or scheme where others rely on your word or actions.

Example: Colluding with an appraiser to inflate a property’s value to secure a higher commission.

Implication: Such unethical behavior can lead to severe penalties, including revocation of your license and possible criminal charges.

4. Employing Unlicensed Brokers

What It Means: Accepting services from or working with brokers who are unlicensed, or whose licenses have been revoked or suspended.

Example: Hiring a friend to show properties who doesn’t hold a valid real estate license.

Implication: This can jeopardize transactions and lead to disciplinary action against you and your firm.

5. Conversion of Funds or Property

What It Means: Using money or property entrusted to you for purposes other than intended, especially without the owner’s consent.

Example: Using a client’s earnest money deposit to cover personal expenses.

Implication: Misappropriation of funds is a serious offense that can result in legal action and loss of licensure.

6. Failure to Cooperate with the Director’s Investigation

What It Means: Not disclosing information or refusing to produce documents when requested by regulatory authorities.

Example: Ignoring a subpoena to provide transaction records during an investigation.

Implication: Non-compliance can escalate the situation and result in additional penalties.

7. Continuing Hazardous Sales Practices

What It Means: Persisting in sales methods that endanger public interests after receiving written objections from the director.

Example: Continuing aggressive door-to-door sales tactics after being warned about consumer complaints.

Implication: Ignoring official warnings can lead to sanctions and damage your professional reputation.

8. Improper Advertising

What It Means: Advertising without clearly and conspicuously including your real estate firm’s licensed name or assumed name.

Example: Running a social media ad for a property listing without mentioning your affiliated brokerage.

Implication: Misleading advertising can confuse consumers and result in disciplinary action.

9. Mishandling Earnest Money

What It Means: Accepting non-cash earnest money without informing the owner before they accept the offer, and not noting it in the purchase agreement.

Example: Accepting a promissory note as earnest money but failing to disclose this to the seller.

Implication: This can lead to disputes and potential legal issues for failing to properly disclose terms.

10. Dual Compensation without Disclosure

What It Means: Receiving compensation from more than one party in a transaction without full written disclosure to all parties.

Example: Accepting fees from both the buyer and seller without informing them.

Implication: Undisclosed dual compensation can be seen as a conflict of interest and is unethical.

11. Accepting Undisclosed Benefits

What It Means: Receiving any undisclosed commission, rebate, or profit on expenditures made for a principal.

Example: Getting a kickback from a contractor for recommending their services to your client without disclosure.

Implication: Such actions breach trust and can lead to disciplinary measures.

12. Contingent Appraisal Values

What It Means: Accepting appraisal employment or compensation contingent on reporting a predetermined value.

Example: Agreeing to appraise a property at a specific value to secure future business.

Implication: This compromises the integrity of the appraisal and can have legal consequences.

13. Undisclosed Property Interests

What It Means: Issuing reports on properties in which you have an interest without clearly stating that interest.

Example: Evaluating a property for a client without disclosing that you own a stake in it.

Implication: This lack of transparency can lead to mistrust and legal issues.

14. Misrepresenting Association Memberships

What It Means: Falsely claiming membership in any real estate association.

Example: Advertising that you are a member of the National Association of Realtors when you’re not.

Implication: This misrepresentation can damage your credibility and result in penalties.

15. Discrimination

What It Means: Discriminating against anyone in hiring or providing services based on protected characteristics.

Example: Refusing to show properties to someone because of their race or religion.

Implication: Discrimination is illegal and unethical, leading to severe legal and professional consequences.

16. Failing to Keep Proper Records

What It Means: Not maintaining escrow or trustee account records for at least three years.

Example: Discarding transaction records after one year to save space.

Implication: Lack of proper records can hinder audits and investigations, resulting in penalties.

17. Inadequate Record Preservation by Firms

What It Means: Firms and designated brokers not preserving transaction records for three years after submission.

Example: A brokerage failing to keep digital copies of contracts and agreements.

Implication: This can lead to compliance issues during regulatory reviews.

18. Not Providing Copies of Contracts

What It Means: Failing to furnish copies of relevant contracts to all signatories promptly.

Example: Delaying sending the signed purchase agreement to the buyer.

Implication: This can cause misunderstandings and disputes, affecting transaction timelines.

19. Accepting Improper Compensation

What It Means: Brokers accepting commissions from anyone other than their licensed real estate firm.

Example: Receiving a direct payment from a client for services instead of through your brokerage.

Implication: This violates agency agreements and can result in disciplinary action.

20. Undisclosed Kickbacks

What It Means: Referring clients to services like lenders or escrow companies in expectation of a kickback without disclosure.

Example: Steering a client to a specific mortgage company because they pay you a referral fee, without telling your client.

Implication: This is unethical and illegal, potentially leading to fines and license suspension.

21. Not Disclosing Licensee Status in Personal Transactions

What It Means: Buying, selling, or leasing property without disclosing in writing that you are a licensed real estate professional.

Example: Purchasing a property for personal investment without informing the seller of your broker status.

Implication: Failure to disclose can be seen as deceptive, leading to legal issues.

22. Inadequate Supervision by Brokers and Firms

What It Means: Managing or designated brokers failing to supervise their brokers' activities adequately.

Example: A managing broker not providing training or oversight to new brokers, resulting in compliance errors.

Implication: Firms can be held accountable for their brokers' actions, leading to collective penalties.

23. Demonstrating Bad Faith or Incompetence

What It Means: Engaging in any conduct during a transaction that shows dishonesty or incompetence.

Example: Neglecting to verify property details, leading to misinformation being provided to clients.

Implication: Such behavior can harm clients and tarnish your professional reputation.

24. Acting as an Unlicensed Vehicle Dealer

What It Means: Selling vehicles like mobile homes without the appropriate dealer license.

Example: Facilitating the sale of multiple mobile homes without being licensed as a vehicle dealer.

Implication: This is illegal and can result in substantial fines and legal action.

25. Failing to Transfer Title in Mobile or Manufactured Home Transactions

What It Means: Not ensuring that the title is properly transferred when dealing with mobile or manufactured homes.

Example: Completing a sale of a manufactured home but neglecting to process the title transfer under RCW 46.12.

Implication: This oversight can cause legal complications for both you and your client.

Conclusion

Staying informed about these potential violations is essential for ethical practice and compliance with Washington State laws. Always prioritize transparency, honesty, and diligence in all your real estate activities. If you’re ever unsure about a particular action or requirement, consult with legal counsel or reach out to the Washington State Department of Licensing for guidance.

Remember: Your license is not just a certification — it’s a testament to your commitment to professional integrity in the real estate industry.

Disclaimer: This blog post is for informational purposes only and does not constitute legal advice. Always consult with a professional attorney for legal matters pertaining to your specific situation.


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