1. FINANCIAL CRIMES SYMPOSIUM

2. Department of Business & Professional Regulation Division of Real Estate REAL ESTATE ENFORCEMENT: WHAT WE DO TO PROTECT YOU

3. Real Estate Enforcement: What We Do to Protect You Overview How DRE Operates How DRE Combats License Law Violations Bullet Proof Your Practice Case Studies

4. Real Estate Enforcement: What We Do To Protect You How DRE Operates 1. DBPR / DRE / OGC 2. Our Boards: Commission: brokers / sales associates (FREC) Appraisal Board: appraisal licenses (FREAB)

5. Real Estate Enforcement: What We Do To Protect You How DRE Operates 3. What is a license law violation? Governed by Florida Statutes Chapters 120, 455 and 475 plus Florida Administrative Rules Administrative Law

6. Real Estate Enforcement: What We Do To Protect You How DRE Operates 4. Complaint Process Complaint filed Reviewed determining if colorable Complaint sent to investigation File sent to prosecutors File sent to probable cause panel Dismissed / Letter of Guidance; or Administrative Complaint

7. Real Estate Enforcement: What We Do To Protect You How DRE Combats License Law Violations 1.Notification to the State Attorney Criminal charges Example: theft, unlicensed activity 2.Emergency Suspension Orders Florida Statute Sections 120.60(6) and 455.225(8) 3.Escrow Disbursement Orders 4.Administrative Complaints.Top 5 Statutes FREC and FREAB

8. Top 5 FREC Charging Statutes VIOLATIONFLORIDA STATUTE Emergency Suspension Order If the agency finds that immediate serious danger to the public health, safety or welfare… Sections 455.225(8) and 120.60(6) Making misleading, deceptive or fraudulent representations in or related to the practice of licensees profession or employing a trick or scheme related to the practice of a profession Sections 455.227(1)(a) and (m) Guilty of Fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealings by trick scheme or device, culpable negligence, or breach of trust in any business transaction in this State Section 475.25(1)(b) Failed to keep and make available to the department such books, accounts, and records… Section 475.5015 Obstruction or Hindering A person may not obstruct or hinder in any manner the enforcement of this chapter or the performance of any lawful duty by any person acting under the authority of this chapter Section 475.42(1)(h)

9. Top 5 FREAB Charging Statutes VIOLATIONFLORIDA STATUTE Emergency Suspension Order If the agency finds that immediate serious danger to the public health, safety or welfare… Sections 455.225(8) and 120.60(6) Making misleading, deceptive or fraudulent representations in or related to the practice of licensees profession or employing a trick or scheme related to the practice of a profession Sections 455.227(1)(a) and (m) Guilty of Fraud, Misrepresentation, Concealment, False, False Pretenses, Dishonest Conduct, Culpable Negligence, or Breach of Trust in Any Business Transaction in this State Section 475.624(2) Retention of Records. An Appraiser Registered, Licensed, or Certified Under this Part Shall Retain, for at least 5 years, Original or True Copies of any Contracts Engaging the Appraisers Services, Appraisal Reports, and Supporting Data Assembled and Formulated by the Appraiser in Preparing Appraisal Reports. Section 475.629 Obstruction or hindering A person may not obstruct or hinder in any manner the enforcement of this section or the performance of any lawful duty by any person acting under the authority of this section… Section 475.626(1)(e)

10. Real Estate Enforcement: What We Do To Protect You Bullet Proof Your Practice – FREAB Look up Licensee http://www.myfloridalicense.com/dbpr/ Attend a Meeting Next FREC Meeting: November 13, 14, 2012 Next FREAB Meeting: December 3, 4, 2012 Document and Disclose

11. Real Estate Enforcement: What We Do To Protect You Bullet Proof Your Practice – FREC Disclose, Disclose, Disclose Keep Your Records Dont entrust others with your records Maintain control of the escrow account Maintain control of the escrow account Prepare/review monthly account reconciliations Prepare/review monthly account reconciliations

12. Real Estate Enforcement: What We Do To Protect You Case Study #1 Facts: Facts: Respondent was the listing agent for a property listed at 1827 SW 18 th Avenue in Miami Respondent was the listing agent for a property listed at 1827 SW 18 th Avenue in Miami The property was initially listed for $285,000 The property was initially listed for $285,000 The property sold for $350,000 The property sold for $350,000

13. Real Estate Enforcement: What We Do To Protect You Case Study #1 Facts: Facts: Respondent represented the buyer in a property located at 447 Aragon Avenue Respondent represented the buyer in a property located at 447 Aragon Avenue The property was listed for $545,000 The property was listed for $545,000 Respondent submitted an offer to purchase the property for $595,000 Respondent submitted an offer to purchase the property for $595,000

14. Real Estate Enforcement: What We Do To Protect You Case Study #1 Facts: Facts: Respondent represented the buyer in the purchase of property located at 1852 SW 10 th Street Respondent represented the buyer in the purchase of property located at 1852 SW 10 th Street The property was listed for $450,000 The property was listed for $450,000 Respondents buyer placed an offer to purchase the property for $499,000 Respondents buyer placed an offer to purchase the property for $499,000 Respondents buyer purchased the property for $515,000 Respondents buyer purchased the property for $515,000

15. Real Estate Enforcement: What We Do To Protect You Case Study #1 Facts: Facts: Respondent represented a buyer in the purchase of property located at 903 Red Road Respondent represented a buyer in the purchase of property located at 903 Red Road The property was listed for $499,000 The property was listed for $499,000 Respondents client purchased the property for $549,000 Respondents client purchased the property for $549,000

16. Real Estate Enforcement: What We Do To Protect You Case Study #1 Facts: Facts: Respondent represented the buyer in the purchase of property at 3707 Le Jeune Road Respondent represented the buyer in the purchase of property at 3707 Le Jeune Road The property was listed $525,000 The property was listed $525,000 The property was purchased for $575,000 The property was purchased for $575,000

17. Real Estate Enforcement: What We Do To Protect You Case Study #1 Facts: Facts: Respondent represented the buyer in the purchase of property located at 1631 SW 13 th Avenue Respondent represented the buyer in the purchase of property located at 1631 SW 13 th Avenue The property was listed at $390,000 The property was listed at $390,000 The property was purchased for $500,000 The property was purchased for $500,000

18. Real Estate Enforcement: What We Do To Protect You Case Study #1 Administrative Complaint Charge: Administrative Complaint Charge: Brokerage business records.Each broker shall keep and make available to the department such books, accounts, and records as will enable the department to determine whether such broker is in compliance with the provisions of this chapter. Each broker shall preserve at least one legible copy of all books, accounts, and records pertaining to her or his real estate brokerage business for at least 5 years from the date of receipt of any money, fund, deposit, check, or draft entrusted to the broker or, in the event no funds are entrusted to the broker, for at least 5 years from the date of execution by any party of any listing agreement, offer to purchase, rental property management agreement, rental or lease agreement, or any other written or verbal agreement which engages the services of the broker. Brokerage business records.Each broker shall keep and make available to the department such books, accounts, and records as will enable the department to determine whether such broker is in compliance with the provisions of this chapter. Each broker shall preserve at least one legible copy of all books, accounts, and records pertaining to her or his real estate brokerage business for at least 5 years from the date of receipt of any money, fund, deposit, check, or draft entrusted to the broker or, in the event no funds are entrusted to the broker, for at least 5 years from the date of execution by any party of any listing agreement, offer to purchase, rental property management agreement, rental or lease agreement, or any other written or verbal agreement which engages the services of the broker.

19. Real Estate Enforcement: What We Do To Protect You Case Study #1 Administrative Complaint Charge: Administrative Complaint Charge: The Respondent did not keep The Respondent did not keep Listing agreementsListing agreements Offers to purchaseOffers to purchase Counter offersCounter offers ContractsContracts ChecksChecks ANYTHING!ANYTHING!

20. Real Estate Enforcement: What We Do To Protect You Case Study #1 Outcome: Outcome: Administrative Judge found for the Department (a win!) Administrative Judge found for the Department (a win!) License revoked License revoked

21. Real Estate Enforcement: What We Do To Protect You Case Study #2 Case Study #2 Facts in Administrative Complaint: Facts in Administrative Complaint: Husband and wife (sellers) had two properties. In 2006, Respondent entered into listing agreements with the sellers to list one of the properties at $359,000, and the other at $350,000 Husband and wife (sellers) had two properties. In 2006, Respondent entered into listing agreements with the sellers to list one of the properties at $359,000, and the other at $350,000 In June 2006, Sellers entered into purchase contracts for the two properties, one for the amount of $329,000 and one for the amount of $325,000 In June 2006, Sellers entered into purchase contracts for the two properties, one for the amount of $329,000 and one for the amount of $325,000 Without telling the Sellers, Respondent raised the listing price for each property to $450,000 Without telling the Sellers, Respondent raised the listing price for each property to $450,000

22. Real Estate Enforcement: What We Do To Protect You Case Study #2 Case Study #2 Administrative Complaint Charge: Administrative Complaint Charge: 475.25(1)(b) - Has been guilty of fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme, or device, culpable negligence or breach of trust. 475.25(1)(b) - Has been guilty of fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme, or device, culpable negligence or breach of trust.

23. Real Estate Enforcement: What We Do To Protect You Case Study #2 Case Study #2 Elements of Fraud: Elements of Fraud: Misrepresentation of material fact Misrepresentation of material fact Maker of statement knew it was false Maker of statement knew it was false Maker intended another to act or rely on it Maker intended another to act or rely on it Injury or damages Injury or damages

24. Real Estate Enforcement: What We Do To Protect You Case Study #2 Case Study #2 What Happened at Closing of Properties: What Happened at Closing of Properties: Sellers all along thought each property was being sold for about $350,000 Sellers all along thought each property was being sold for about $350,000 At some point, the transactions were assigned to a new buyer. At some point, the transactions were assigned to a new buyer. At the closing, sellers first learned of the increased listing price to $450,000 for each property At the closing, sellers first learned of the increased listing price to $450,000 for each property Also at the closing, the assigned buyer showed up, looked like someone dragged off the street Also at the closing, the assigned buyer showed up, looked like someone dragged off the street

25. Real Estate Enforcement: What We Do To Protect You Case Study #2 Case Study #2 What Happened at Closing (Continued): What Happened at Closing (Continued): Also at the closing, it came to light that the bank did not know about the original contract on each property for $350-something, they only saw the contracts at $450. Also at the closing, it came to light that the bank did not know about the original contract on each property for $350-something, they only saw the contracts at $450. Sellers refused to complete the sale of these two properties. Sellers refused to complete the sale of these two properties.

26. Real Estate Enforcement: What We Do To Protect You Case Study #2 Case Study #2 What Was the Extra Hundred Thousand For: What Was the Extra Hundred Thousand For: In early stages Respondent told Sellers theyd use creative financing – buyer wanted to make improvements and theyd have to give back twenty or thirty thousand above selling price. In early stages Respondent told Sellers theyd use creative financing – buyer wanted to make improvements and theyd have to give back twenty or thirty thousand above selling price. Addendum - any difference in purchase price and appraisal value would be used to repair house. Addendum - any difference in purchase price and appraisal value would be used to repair house. Big difference between twenty thousand and one hundred thousand. Houses also didnt require one hundred thousand worth of repairs Big difference between twenty thousand and one hundred thousand. Houses also didnt require one hundred thousand worth of repairs

27. Real Estate Enforcement: What We Do To Protect You Case Study #2 Case Study #2 HUD: HUD: HUD said sellers would receive roughly $412,000 per property, which was simply not true. They were only getting 350-something. Title company said an addendum to the HUD would state what sellers would really be getting. When sellers attorney asked why that couldnt go in the HUD, she was told cause the lender couldnt see the addendum HUD said sellers would receive roughly $412,000 per property, which was simply not true. They were only getting 350-something. Title company said an addendum to the HUD would state what sellers would really be getting. When sellers attorney asked why that couldnt go in the HUD, she was told cause the lender couldnt see the addendum

28. Real Estate Enforcement: What We Do To Protect You Case Study #2 Case Study #2 Missing Players in Action: Missing Players in Action: The appraiser in this case is now somewhere in Panama The appraiser in this case is now somewhere in Panama Mortgage broker closed his office and disappeared Mortgage broker closed his office and disappeared

29. Real Estate Enforcement: What We Do To Protect You Case Study #2 Case Study #2 Listing Price: Listing Price: Generally, someones trying to get a loan at a higher amount, so when the lender is making the loan they check the listing. If they dont correlate, loan wont go through. So if the listing price is above what its selling for, someones pocketing extra money Generally, someones trying to get a loan at a higher amount, so when the lender is making the loan they check the listing. If they dont correlate, loan wont go through. So if the listing price is above what its selling for, someones pocketing extra money

30. Real Estate Enforcement: What We Do To Protect You Case Study #2 Case Study #2 Witnesses at Trial: Witnesses at Trial: Sellers Sellers Sellers attorney Sellers attorney Respondents broker Respondents broker Expert Witness Expert Witness Why we use expertWhy we use expert Respondent Respondent

31. Real Estate Enforcement: What We Do To Protect You Case Study #2 Case Study #2 Administrative Law Judges Ruling: Administrative Law Judges Ruling: In my proposed recommended order, I limited suggested charges to misrepresentation, concealment and breach of trust In my proposed recommended order, I limited suggested charges to misrepresentation, concealment and breach of trust Judge found him guilty of concealment, but not the other two. He relied on a couple of cases, has to do with intent Judge found him guilty of concealment, but not the other two. He relied on a couple of cases, has to do with intent

32. Real Estate Enforcement: What We Do To Protect You Case #2 Case #2 Cases Judge Relied Upon: Cases Judge Relied Upon: Munch v. DBPR, 592 So. 2d 1136 (1 st DCA 1992) Munch v. DBPR, 592 So. 2d 1136 (1 st DCA 1992) Real estate salesman was receiving commissions on behalf of condo association, which broker didnt know about. Realtor thought he was acting as community association manager, not real estate salesman.Real estate salesman was receiving commissions on behalf of condo association, which broker didnt know about. Realtor thought he was acting as community association manager, not real estate salesman. For there to be misrepresentation, concealment and breach of trust in violation of 475.25(1)(b) there must be wrongful intent or scienter.For there to be misrepresentation, concealment and breach of trust in violation of 475.25(1)(b) there must be wrongful intent or scienter. No intent to deceive here.No intent to deceive here.

33. Real Estate Enforcement: What We Do To Protect You Case #2 Case #2 Cases Judge Relied Upon: Cases Judge Relied Upon: Morris v. DBPR, 474 So. 2d 841 (5 th DCA 1985) Morris v. DBPR, 474 So. 2d 841 (5 th DCA 1985) Broker accused of fraud for passing a worthless check for property he wanted to personally buyBroker accused of fraud for passing a worthless check for property he wanted to personally buy Court found no evidence of fraudulent intent, because deposit was made on a Saturday, and even though insufficient funds on that day broker could have deposited sufficient funds on that Monday had he wanted to go through with the deal (he didnt)Court found no evidence of fraudulent intent, because deposit was made on a Saturday, and even though insufficient funds on that day broker could have deposited sufficient funds on that Monday had he wanted to go through with the deal (he didnt)

34. Real Estate Enforcement: What We Do To Protect You Case #2 Case #2 Administrative Law Judges Ruling: Administrative Law Judges Ruling: Judge didnt find Respondent guilty of fraud for the following reasons: Judge didnt find Respondent guilty of fraud for the following reasons: Complaint didnt charge him that way, no noticeComplaint didnt charge him that way, no notice Insufficient evidence to prove Respondent was aware of fraudulent activityInsufficient evidence to prove Respondent was aware of fraudulent activity

35. Real Estate Enforcement: What We Do To Protect You Case #2 Case #2 Penalty: Penalty: Judge in his Recommended Order issued: One year suspension, $1000 fine, costs of investigation Judge in his Recommended Order issued: One year suspension, $1000 fine, costs of investigation Commission upped penalty to revocation Commission upped penalty to revocation

36. Department of Business & Professional Regulation Division of Real Estate REAL ESTATE ENFORCEMENT: WHAT WE DO TO PROTECT YOU