DRE Warns Brokers on Improper Commission Disbursements
The California Department of Real Estate (DRE) and the Department of Financial Protection and Innovation (DFPI) have issued a joint bulletin warning real estate brokers about improper commission disbursements.
The agencies have identified cases where brokers instructed escrow agents—via Commission Disbursement Authorizations (CDAs)—to pay personal or business expenses directly from escrow accounts. These expenses have included credit card bills, car payments, office rent, and even payments to unlicensed individuals involved in transactions.
Key Takeaways for Brokers:
Escrow agents may only release funds according to written instructions from transaction principals (buyers, sellers, borrowers, or lenders).
Brokers are not considered principals and cannot direct escrow funds to third parties without express authorization.
Violations may breach California Real Estate Law, Escrow Law, and federal laws like RESPA’s anti-kickback provisions.
The DRE and DFPI confirmed they will investigate questionable referral fee arrangements and CDA practices to ensure transparency and fairness in real estate transactions.
Brokers should review their commission disbursement procedures carefully to avoid regulatory penalties.
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