Common DRE Violations in California (and How to Avoid Them)

Real Estate Compliance: Systems Over Luck

In my 20-plus years of educating California real estate professionals, I’ve seen thousands of agents move through the industry. Often what I notice is the ones who stay out of trouble aren't necessarily the ones who memorized the entire Business and Professions Code; they are often the ones with consistent systems.

Most California DRE violations aren't the result of "bad" people doing "bad" things. They are the result of "busy" people doing "sloppy" things. The Department of Real Estate (DRE) is a consumer protection agency. Their job is to ensure the public is protected, and they do that by enforcing transparency, supervision, and documentation.

If you treat compliance as a "to-do" list rather than a "worry" list, you’ll find that the DRE isn't something to fear—it’s just the framework of your business.

What "A Violation" Means in Practice

A violation isn't always a dramatic headline. In the real world, enforcement is usually triggered by small, preventable issues that accumulate into compliance problems.

• Complaint-Driven: A disgruntled client or a competing agent flags an ad or a missing disclosure.
• Visibility Issues: When a yard sign or social media profile is missing key details, it becomes an easy target for a random inquiry or a complaint from the public.
• Audit Triggers: The DRE performs audits of brokerages, including Investigative Audits (prompted by complaints) and Proactive Audits (routine checks, often targeting high-risk activities like property management).
• Documentation Gaps: Most discipline stems from what is missing—a signature, a date, or a record of a deposit.

The DRE focuses on patterns of neglect. One typo on a flyer might result in a warning or a minor administrative penalty; a team of ten agents all advertising without license numbers suggests a broader failure of supervision.

The Top Common DRE Violation Categories

1. Advertising & Marketing Compliance

What it looks like: Business cards, yard signs, or Instagram posts that look "clean" but omit the required license information.

The trigger: Public visibility. A "For Sale" sign or a digital ad without the agent's DRE number is easily flagged by the public or competing brokers.

How to avoid it: Every piece of "first point of contact" material must have your license number and your broker's name. Review our guide on Real Estate Advertising With Your License Number for specific visibility and legibility rules.

Quick self-check:

• Does my IG bio have my DRE # and Broker name?
• Is my license number as prominent as the other contact info?

2. Trust Fund Mishandling

What it looks like: An agent receives an Earnest Money Deposit (EMD) check and keeps it in their car for a few days before handing it over.

The trigger: Delays in depositing or recording funds. If money isn't handled correctly, it raises flags for "commingling" or, in extreme cases, "conversion."

How to avoid it: Per B&P §10145 and Reg 2832, a broker must generally deposit trust funds within three business days following receipt. As a salesperson, you must deliver funds to your broker or escrow immediately.Refer to Trust Fund Handling Rules for California Agents for timing nuances.

Quick self-check:

• Did I deliver this check the same day I received it?

3. Team Name & DBA Misuse

What it looks like: "The Premier Group" appears on a yard sign, but that name has not been submitted to and approved by the DRE as a DBA.

The trigger: Advertising under a business name not listed on the license. Audits specifically check for DBA approval.

How to avoid it:Any name used in your real estate business that is not your exact personal license name is a DBA and must be pre-approved by the DRE. To be approved, a DBA typically must include the surname of a licensee (e.g., broker or salesperson) and often uses a descriptor like "& Associates," "Group," or "Team." It cannot sound like a separate corporate entity (e.g., "Inc.," "Realty," "Properties" alone). You must have the DRE's approval letter on file before using the name.

4. Inadequate Supervision

What it looks like: A broker has 50 agents but hasn’t reviewed a transaction file in months.

The trigger: An agent makes a mistake, and the DRE discovers the broker had no oversight system.

How to avoid it: Brokers must establish written policies and review points. Agents must follow SOPs for every document.

Quick self-check:

• Has my broker or manager looked over the mandatory documents in this active file?

5. Unverified Claims & Misrepresentation

What it looks like: Advertising "brand new electrical" without verification, or claiming "#1 Agent in the City" without citing a source.

The trigger: A buyer relies on an unverified claim (B&P §10140) that turns out false.

How to avoid it: Stick to the facts. If you can't verify it with a permit or a receipt, use qualifiers like "per seller" and cite the source for any "ranking" claims.

Quick self-check:

• Can I prove this statement if an auditor asks for the source?

6. Transaction File Gaps (Completeness)

What it looks like: A file is "closed" but missing signatures or dates.

The trigger: Audit finds documents legally incomplete.

How to avoid it: Use a closing checklist. Do not move a file to "completed" until every required field is populated.

Quick self-check:

• Is every "Initial Here" box actually initialed and dated?

7. Record Retention Failures

What it looks like: A transaction closed three years ago, but the agent deleted the emails and cannot produce the file.

The trigger: Audit requests a file from the previous three years.

How to avoid it: Per B&P §10148, you must retain transaction records for at least three years from the date of closing (or the listing date if the deal fell through). This includes listings, deposit receipts, and all substantive correspondence.

Quick self-check:

• If the DRE asked for a file from three years ago today, could I produce it?

8. Unlicensed Activity

What it looks like: An unlicensed assistant "hosting" an open house and answering questions about property features.

The trigger: A client mentions the assistant discussed property features or terms.

How to avoid it:Know the line. Assistants can handle clerical tasks, schedule appointments, and courier documents, but they cannot show properties or negotiate terms. See What the California DRE Actually Enforces.

Quick self-check:

• Am I letting an unlicensed person discuss price or property features with a client?

9. Fair Housing Advertising Violations

What it looks like: Using phrases like "adults only" or "perfect for young families."

The trigger: Advertising that indicates preference or limitation based on protected classes.

How to avoid it: Focus strictly on the property’s features, not the type of person you think should live there. Avoid references to neighborhood demographics or religious facilities.

Quick self-check:

• Does my ad describe the house or the person I want to buy the house?

The Compliance Operating System

You don't need to be a lawyer to stay compliant. You just need a framework.

• Standardized Templates: Use your association's (C.A.R.) forms. Don't draft your own "mini-contracts."
• The Transaction Checklist: Use a "master list" for every file. If a signature is missing, the file isn't "done."
• Weekly Compliance Habit: Spend 15 minutes every Friday reviewing your active ads and digital profiles to ensure DRE #s are visible.
• The "Stop Sign" Rule: If a client asks you to do something that feels "grey" (like skipping a disclosure), stop and call your broker immediately.

Quick Compliance Checklist (Screenshot This)

• License #: On every email, business card, and social profile.
• Broker Name: Clearly visible on all marketing.
• Trust Funds: Handed off to broker/escrow immediately (Salesperson) or deposited within 3 business days (Broker).
• DBA: Team name is DRE-approved and includes required suffixes (Team/Group).
• Disclosures: Provided to the buyer as early as possible.
• File Completeness: Every signature, initial, and date is present.
• Retention: All records stored securely for a minimum of 3 years (§10148).
• Unlicensed Staff: Limited to administrative, non-licensed tasks only.
• Supervision: Broker has established review points for all contracts.
• Fair Housing: All advertising language focuses on property features, not people.

FAQs

What does the DRE actually enforce most often?

The DRE frequently cites issues related to trust fund mishandling, failure to supervise, and misrepresentation of material facts.

What triggers a DRE investigation?

Most investigations are reactive, triggered by consumer complaints or issues found during routine proactive office audits.

Can a first-time mistake get me disciplined?

Yes. While the DRE may issue a warning for minor technicalities, any violation of the Real Estate Law can lead to administrative penalties, license restriction, or suspension.

What’s the fastest way to clean up my advertising compliance?

Audit your social media "Linktree" and bio. Ensure your DRE number and broker’s name are visible without needing to click deep into your profile.

How long should I keep transaction records?

Per B&P §10148, you must keep records for at least three years. However, many brokerages require longer retention (5–7 years) for liability protection. Always follow your broker’s specific policy.

Stay Protected with the Master Guide

Compliance isn’t a personality trait; it’s a system you build into your business. By following these steps, you protect your license, your broker, and your clients. For a deeper dive into the specific statutes and requirements, visit our California Real Estate Laws & Compliance Guide.