RCW 18.85.011 Definitions +13Washington · Real Estate · English

The statute distinguishes three licensee categories. A 'broker' is a natural person acting on behalf of a real estate firm to perform brokerage services under supervision of a designated or managing broker. A 'managing broker' performs brokerage services under supervision of the designated broker and may supervise other brokers/managing brokers. A 'designated broker' owns a sole proprietorship firm OR is a person with controlling interest designated by a business entity to act on the firm's behalf, holding a managing broker license with a 'designated broker' endorsement.

• ✓A broker always works under supervision of a designated or managing broker
• ✓A designated broker must hold a managing broker license and receive a 'designated broker' endorsement
• ✓A managing broker may supervise other brokers and managing brokers licensed to the firm

Brokerage services include listing, selling, purchasing, exchanging, optioning, leasing, or renting real estate; negotiating such transactions; handling manufactured/mobile homes in conjunction with land; advertising oneself as engaged in brokerage; advising buyers/sellers/landlords/tenants; issuing a broker's price opinion; collecting/holding/disbursing transaction funds; and performing property management services. Services must be for compensation or expectation of compensation, or by a licensee on their own behalf.

• ✓Any negotiation of purchase, sale, lease, or rental of real estate is a brokerage service
• ✓A broker's price opinion is not an appraisal unless it complies with chapter 18.140 RCW
• ✓Property management includes marketing, leasing, renting, and physical/administrative/financial maintenance

Commercial real estate means any parcel other than real estate containing one to four residential units. It excludes single-family residential lots or units (condos, townhouses, manufactured homes, subdivision homes) sold on a unit-by-unit basis, unless the property is sold or leased for a commercial purpose.

• ✓Property with 1-4 residential units is not commercial real estate
• ✓Single-family units sold unit-by-unit are excluded unless for commercial purpose

'Controlling interest' means the ability to control operational or financial decisions (or both) of a firm. An 'inactive license' is a license that is not expired but is not affiliated with a firm; the holder cannot conduct brokerage services while inactive.

• ✓Controlling interest = ability to control operational and/or financial decisions
• ✓An inactive license is not expired but is not affiliated with a firm

An independent contractor relationship exists when (a) no written agreement states the broker is an employee, and (b) substantially all compensation is for real estate brokerage services provided by the firm. This status does not relieve the managing broker or firm of supervisory duties.

• ✓Requires no written employee agreement AND compensation tied to brokerage services
• ✓Independent contractor status does not eliminate the firm's supervisory duties

'Advertising' is any attempt by publication or broadcast (oral, written, or otherwise) to induce a person to use a firm's or broker's services. 'Clear and conspicuous' means the representation is of such color, contrast, size, or audibility, and presented so as to be readily noticed and understood.

• ✓Advertising includes oral, written, or broadcast attempts to induce use of services
• ✓Clear and conspicuous means readily noticed and understood

A branch manager is a natural person who holds a managing broker's license and has been delegated authority by the designated broker to manage a single physical location of a branch office. The department issues a specific endorsement for branch managers, distinguishing this role from other licensed positions.

• ✓A branch manager must hold a managing broker's license
• ✓Authority to manage a branch must be delegated by the designated broker
• ✓A branch manager manages only a single physical location of a branch office
• ✓The department issues an endorsement specifically for branch managers

Affiliated licensees are natural persons licensed as brokers or managing brokers who are employed by a firm and licensed to represent that firm in performing any of the acts specified in chapter 18.85 RCW. This term identifies the licensed individuals who operate under a firm.

• ✓Affiliated licensees must be natural persons (not entities)
• ✓They must be licensed as brokers or managing brokers
• ✓They must be employed by a firm
• ✓They are licensed to represent the firm in acts specified under chapter 18.85 RCW

Brokerage service contracts include, but are not limited to, purchase and sale agreements, lease or rental agreements, listings, options, agency agreements, and property management agreements. This broad definition covers the primary documents brokers use in real estate transactions.

• ✓The list is non-exhaustive ('include, but are not limited to')
• ✓Includes purchase and sale agreements, listings, and options
• ✓Includes lease/rental, agency, and property management agreements

A branch office means a separate physical office of the real estate firm that has a different mailing address from the main firm office and uses the real estate firm's UBI (unified business identifier) number. All three conditions must be met.

• ✓Must be a separate physical office of the real estate firm
• ✓Must have a different mailing address than the main firm office
• ✓Must use the real estate firm's UBI (unified business identifier) number

Words and terms used in this chapter carry the same meaning as under chapter 18.85 RCW unless the chapter clearly provides otherwise or the context clearly indicates a different meaning is intended.

• ✓Terms default to their chapter 18.85 RCW meanings
• ✓Exceptions apply only when clearly provided or clearly indicated by context

New applicants for their first broker's license under chapter 18.85 RCW must submit to a fingerprint background check with the department's authorized vendor. Applicants for their first managing broker's license using alternative qualifications must also complete a fingerprint background check. Applications submitted without the required fingerprint check are considered incomplete.

• ✓New first-time broker applicants must submit fingerprints to the department's authorized vendor
• ✓First-time managing broker applicants using alternative qualifications must submit fingerprints
• ✓An application without the required fingerprint background check is incomplete

Fingerprint background checks are required for every active renewal every six years. If a background check was completed within the last six years, no new check is required to activate a license. When fingerprints are rejected, the applicant must follow the vendor's resubmission procedures within 21 calendar days; failure results in license suspension until procedures are followed, and the applicant is responsible for additional fees.

• ✓Fingerprint background checks are required for active renewal every six years
• ✓No new background check is needed if one was done within the last six years
• ✓Rejected fingerprints must be resubmitted within 21 calendar days or the license is suspended

Individual broker and managing broker licenses must be kept available at the address shown on the license. Firm and branch office licenses have a stricter requirement: they must be physically displayed where the public can see them. Candidates should distinguish between 'available' (individual licenses) and 'displayed visible to public' (firm/branch licenses).

• ✓Real estate broker and managing broker licenses must be available at the address appearing on the individual license
• ✓All firm and branch office licenses must be displayed in an area visible to the public

The designated broker must keep specific trust account records on behalf of the firm. These records document all money flowing through the firm's trust accounts and must be maintained to allow verification of proper handling of client funds.

• ✓Must keep a duplicate receipt book or cash receipts journal recording all receipts
• ✓Must use sequentially numbered, nonduplicative checks with a check register, cash disbursements journal, or check stubs
• ✓Must keep validated duplicate bank deposit slips or daily verified bank deposit
• ✓Must keep a client's accounting ledger summarizing all moneys received and disbursed for each transaction or property management account
• ✓Must maintain separate ledger sheets for each tenant (including security deposit), lessee, vendee, or mortgagor
• ✓Must keep reconciled bank statements and canceled checks for all trust bank accounts

Beyond trust account records, the designated broker must maintain transactional documentation for the firm, including logs, copies of contracts, and transaction folders. All required records must be kept at a single licensed location.

• ✓Must keep an accurate, up-to-date log of all agreements or contracts for brokerage services submitted by affiliated licensees
• ✓A legible copy of the transaction or contracts for brokerage services must be retained in each participating firm's files
• ✓Must maintain a transaction folder containing all agreements, receipts, contracts, documents, leases, closing statements, broker price opinions, referral agreements, and material correspondence
• ✓All required records must be maintained at one location where the firm is licensed (main or any branch office)

All checks received in real estate or business opportunity transactions must be made payable to the real estate firm as licensed. This includes earnest money, security or damage deposits, rent, lease payments, and contract or mortgage payments on property owned by clients. An exception exists only when the principals mutually agree in writing that the deposit be paid to the seller or an escrow agent named in the agreement.

• ✓Checks for earnest money, deposits, rent, lease, contract, or mortgage payments must be payable to the real estate firm as licensed
• ✓An exception requires written mutual agreement by the principals to pay the seller or a named escrow agent
• ✓The real estate firm must retain a copy of any written agreement authorizing an alternate payee

All brokers and managing brokers must physically deliver all funds, moneys, negotiable instruments, or items of value received to the appropriate managing broker, branch manager, or their designated broker within a specified timeframe. This ensures client funds are promptly moved into proper trust handling and safeguards against misappropriation.

• ✓Funds/negotiable instruments must be delivered within two business days of the client's/customer's signature
• ✓Business days exclude Saturday, Sunday, and legal holidays as defined in RCW 1.16.050
• ✓Delivery must occur sooner than two business days if the client/customer contract requires quicker delivery
• ✓Delivery is made to the appropriate managing broker, branch manager, or designated broker

Any education provider or course developer may submit a course to the department for approval. Approval must be obtained before the course is offered for clock hour credit. Providers submit a completed application using the department's method, and the director or designee approves, disapproves, or conditionally approves based on commission criteria.

• ✓Course approval by the department is required prior to the date the course is offered for clock hour credit
• ✓The course provider must submit a completed course approval application using the method defined by the department
• ✓Applicant is notified in writing of approval, disapproval, or conditional approval; disapproval notice must include reasons

Once a course is approved, the approval lasts four years from the effective date. The core course is an exception, expiring after only two years.

• ✓Course approval expires four years after the effective date of approval
• ✓The core course approval expires after two years

The director regulates real estate brokerage practice for consumer safety because real estate transactions are often the largest financial transactions in a consumer's lifetime. A real estate license is a privilege granted by the state, not a right, contingent on meeting requirements and cooperating with audits/investigations.

• ✓A real estate license is a privilege granted by the state to those meeting licensing requirements and complying with all laws
• ✓Licensees must cooperate with audits/investigations of their brokerage activities
• ✓The director uses two primary enforcement methods: audits and investigations

When completing real estate brokerage transaction documents for consumers, licensees are held to the standard of practice of an attorney. This is a high professional standard reflecting the significance of the documents involved.

• ✓The standard of practice for real estate licensees is that of an attorney when completing transaction documents
• ✓This standard applies specifically to completing real estate brokerage transaction documents for consumers

When a real estate firm changes its office location, the firm's designated broker is responsible for notifying the real estate program. This must be done within ten days by submitting a completed change of address application, returning all licenses, submitting completed transfer applications, and paying the correct fees.

• ✓The designated broker must submit the change within ten days
• ✓A completed change of address application must be filed with the real estate program
• ✓All licenses must be returned with completed transfer applications
• ✓Correct fees must accompany the application

Required real estate records must be accurate, posted, and kept current. Records must be kept at a licensed office address, with specific rules for storing older, closed transactions at a central facility.

• ✓All required real estate records must be accurate, posted, and kept up to date
• ✓Records must be kept at an address where the firm is licensed to maintain a real estate office
• ✓Transactions closed for at least one year may be maintained at one central facility located in Washington
• ✓Records must be retained and available for inspection by the director for a minimum of three years
• ✓A listing of all transactions stored remotely must be maintained at the firm's licensed office

Records may be stored electronically or on remote devices as long as retrieval is immediate. The firm must be able to view and print all documents at its licensed office and maintain the equipment in good repair.

• ✓Records may be stored electronically or on remote devices provided retrieval of all documents is immediate
• ✓Retrieval must be possible at the firm's licensed office allowing viewing and printing of all documents
• ✓Document storage must be indexed to allow immediate retrieval of all documents
• ✓The designated broker must maintain equipment at the firm location in good repair for viewing and printing on demand

The real estate licensee is responsible for negotiating the agreement between seller and purchaser. At closing, the licensee must furnish a complete detailed closing statement to each buyer (as it applies to the buyer) and to each seller (as it applies to the seller). The firm must retain copies of all closing statements even when funds are not handled by a licensee and closing occurs elsewhere.

• ✓A complete detailed closing statement must be furnished to each buyer and each seller at the time the transaction closes
• ✓The firm must retain copies of all buyer and seller closing statements, even if closing is done elsewhere
• ✓The requirement applies to both real estate and business opportunity transactions where the licensee provides brokerage services

Closing statements for all real estate or business opportunity transactions in which a firm participates must show detailed transaction information, including the date of closing, total purchase price, and an itemization of all adjustments, money, or things of value with proper debit/credit attribution.

• ✓Closing statements must show the date of closing and the total purchase price of the property
• ✓All adjustments, money, or things of value must be itemized showing to whom each is credited and/or debited
• ✓The dates of adjustments and the names of payees, makers, and assignees of all notes paid, made, or assumed must be shown

The net proceeds of sale on all real estate transactions closed by a licensee are to be paid directly to the seller unless a written agreement provides otherwise.

• ✓Net proceeds of sale must be paid direct to the seller
• ✓An exception exists only when otherwise provided by written agreement

When a real estate sale involves more than one licensee and the purchaser deposits funds before closing, the firm that first receives the funds retains custody and remains accountable for them until distribution.

• ✓The firm first receiving the funds retains custody and remains accountable
• ✓Funds must be distributed or delivered in accordance with written instructions signed by all parties to the transaction

All licensees must keep the party to whom they provided brokerage services informed of the earnest money deposit status and must retain and provide copies of receipts to the principals and participating firms.

• ✓Licensees must keep their client informed of the earnest money deposit status
• ✓Licensees must retain and provide copies of receipts to principals and participating firms

A real estate broker who receives funds from any principal or party to a real estate/business opportunity transaction, property management agreement, contract/mortgage collection agreement, or advance fees must hold those funds in trust for the purpose of the contract or transaction. The broker may not use these funds for the benefit of the broker, managing broker, firm, or any person not entitled to the benefit.

• ✓Funds received must be held in trust for the purposes of the brokerage service contract or transaction
• ✓Trust funds may not be used for the benefit of the broker, managing broker, firm, or any unentitled person
• ✓Designated brokers are responsible for ensuring affiliated licensees safeguard client funds

The designated broker holds ultimate responsibility for the administration of trust funds and accounts, encompassing all key accounting functions from receipt to reconciliation.

• ✓Designated broker is responsible for depositing, holding, disbursing, receipting, posting, and recording funds
• ✓Designated broker is responsible for accounting to principals and reconciling/setting up the trust account
• ✓Designated broker must notify principals and cooperating licensees of material facts

All funds received pertaining to real estate/business opportunity sales, rentals, leasing, options, collections, or advance fees must generally be deposited by the next banking day, with specific exceptions for held checks. Cash has stricter timing.

• ✓Funds must be deposited in the firm's trust account not later than the next banking day following receipt
• ✓Cash must be deposited not later than the next banking day
• ✓An exception exists for earnest money checks when the agreement states the check is to be held for a specified time or until a specific event
• ✓Saturday, Sunday, and legal holidays (per RCW 1.16.050) are not considered banking days

A separate ledger sheet must be maintained for each client, showing all receipts and disbursements with specific credit and debit entry details. An 'opening account' ledger tracks firm funds used to open or maintain the account.

• ✓An individual client ledger sheet must be established for each client for whom funds are received in trust
• ✓An 'opening account' ledger is required for funds used to open the account or keep it from being closed
• ✓Credit entries must show date of deposit, amount, and item covered (e.g., earnest money, down payment, rent, damage deposit, interest, advance fee)
• ✓Debit entries must show date of check, check number, amount, payee, and item covered

The reconciled trust account balance must always equal total client liability plus the open account ledger. The designated broker must perform monthly reconciliations to keep all records in agreement.

• ✓The reconciled trust account balance must equal at all times the outstanding trust liability to clients plus the 'open account' ledger funds
• ✓The designated broker must prepare a monthly trial balance of the client's ledger, reconciling it with both the bank statement and the check register/bank control account
• ✓The checkbook balance, bank reconciliation, and client ledgers (including 'open account') must be in agreement at all times
• ✓A trial balance lists all client ledgers showing owner name/control number, date of last entry, and ledger balance

All disbursements must be made by check or electronic transfer drawn on the trust account and fully documented. Special safeguards apply to wire transfers.

• ✓All disbursements must be made by check or electronic transfer drawn on the trust account and identified to a specific transaction or agreement
• ✓Check number, amount, date, payee, items covered, and client ledger debited must be shown and agree exactly with the check written; no check numbers may be duplicated
• ✓No disbursement based on wire transfer receipts may occur until the deposit has been verified
• ✓A follow-up hard-copy debit memo must be provided for wire disbursements, and signed owner instructions identifying the receiving entity and account number must be retained in the transaction file

Only client transaction funds belong in the trust account. Broker/firm funds and unrelated funds are generally prohibited, with a narrow exception for minimal amounts to keep the account open.

• ✓No deposits of funds belonging to the designated broker or firm, except a minimal amount to open or keep the account from closing
• ✓No deposits of funds that do not pertain to a client's real estate/business opportunity transaction or rental, contract, or mortgage collection account

Disbursements must relate strictly to client transactions and may not exceed funds held for that transaction. Commissions to licensees and firm expenses must be paid from the regular business account.

• ✓No disbursements for items not pertaining to a specific transaction or collection account
• ✓No disbursements exceeding the actual amount held in the trust account for that transaction
• ✓Commissions to persons licensed to the firm and firm business expenses must be paid from the regular business account, not the trust account
• ✓Bank charges must be charged to the business account or paid separately from the firm's business account (except as specified in WAC 308-124E-110(1)(a) and (d))

Trust funds must be deposited in an insured financial institution capable of accepting service in Washington. This protects client funds through federal insurance and ensures accountability within the state.

• ✓Funds must be deposited in a bank, savings association, or credit union
• ✓The institution must be insured by the FDIC or the NCUA share insurance fund (or successor federal insurer)
• ✓The financial institution must be able to accept service in Washington state

Bank accounts must be properly designated as trust accounts and the broker must maintain an approved recordkeeping system providing a full audit trail. Alternative systems require prior written approval.

• ✓Bank accounts must be designated as trust accounts in the firm name or assumed name as licensed
• ✓The designated broker must maintain a records system approved by the real estate program providing an audit trail of all funds received and disbursed
• ✓All funds must be identified to the account of each individual client
• ✓Alternative record systems must be approved in advance in writing by the real estate program

Interest credited to a client's account must be recorded as a liability. Interest assigned to the firm by written agreement cannot remain in the trust account and must be credited to the firm's general account.

• ✓Interest credited to a client's account must be recorded as a liability on the client ledger
• ✓Interest assigned or credited to the firm by written agreement may not be maintained in the trust account
• ✓The designated broker must arrange with the institution to credit firm interest to the firm's general account

All funds received must be documented as they come in and all deposits must be traceable to their source and applicable transaction, forming part of the audit trail.

• ✓All checks, funds, or moneys received must be identified by date received, amount, source, and purpose on a cash receipts journal or duplicate receipt retained as a permanent record
• ✓All deposits to the trust account must be identified by source of funds and the transaction to which they apply

Voided checks must be preserved for record integrity, and commissions owed to another firm may be paid from the trust account promptly as a reduction of gross commissions.

• ✓Voided checks written on the trust account must be permanently defaced and retained
• ✓Commissions owed to another firm may be paid from the trust account and must be paid promptly upon receipt of funds
• ✓Commissions shared with another firm are treated as a reduction of gross commissions received

Trust account rules apply equally to manual and computerized systems, with specific requirements for backups, retrievable records, and source documentation of changes.

• ✓The system must provide the capability to back up all data files
• ✓Registers/journals, bank reconciliations, and monthly trial balances must be maintained and available for immediate retrieval or printing on department demand
• ✓A dated source document file or index file must be maintained to support any changes to existing accounting records

Licensees must create and maintain records of their real estate brokerage activities for regulatory purposes. These records must be kept and made available to the director for three years from the conclusion of the related services or transaction. Licensees have no privacy interest in records they are legally required to maintain.

• ✓Records must be maintained and made available to the director for three years from conclusion of the related services or transaction
• ✓Licensees are required to create and maintain records of their brokerage activities
• ✓Licensees have no privacy interest in records they are required to maintain by statute or rule