29.3 AL – Accountability and Reporting Issues
Topic 29.3: Violations — Accountability and Reporting Issues
This category focuses on how licensees handle money, records, commissions, disclosures, and cooperation with AREC investigations. These violations often come down to “paper trail” rules: where funds go, what gets documented, and how quickly you respond.
Why this matters (and why it shows up on the exam)
Alabama license law doesn’t just regulate what you say to consumers—it regulates what you do with other people’s money, what you keep in your files, and how you respond when the Commission requests information. Many violations here are “avoidable” if you follow a consistent office process.
Accountability & reporting violations (what to recognize)
Licensees must account for all money received that belongs to someone else. Failing to properly account for funds (amount, date received, who it belongs to, etc.) is a violation.
Example: holding earnest money without documenting it and without turning it over for proper deposit.
Commingling means mixing other people’s money with personal or business funds. Funds belonging to others must be turned over to the qualifying broker and deposited into the proper trust account—not a personal account.
Money belonging to others must be deposited into a separate federally insured account in a financial institution located in Alabama. (Federal insurance typically protects deposits up to $250,000.)
Example: holding cash for weeks and/or depositing it into an out-of-state bank account.
If a document is created or handled during real estate activity, the qualifying broker must receive a copy for the file. Records (contracts, leases, listings, and trust fund records with names/dates) must be kept for at least 3 years.
Violations can occur if the licensee doesn’t provide copies, the broker doesn’t retain them, or trust fund records are incomplete.
An unlicensed person may not be paid a commission/fee/profit for performing acts that require a license (showing property, negotiating, etc.). Allowing unlicensed activity and compensating it are both violations.
Note: a licensee may own an unlicensed business entity that only receives payments (and does not perform licensed acts).
Alabama prohibits paying/receiving a rebate after closing. Incentives must be given before or at closing and must be disclosed to all parties (including lender/guaranteeing agency where applicable).
An undisclosed incentive can also trigger violations for misrepresenting the true terms of the sale to the lender/agency.
Offering free lots or conducting lotteries to influence a purchase/lease is a violation. Lotteries are also prohibited under Alabama criminal statutes.
If something of value is given, it must be disclosed and transferred before or at closing (otherwise it can look like an illegal rebate).
Salespersons and associate brokers may accept compensation only from their qualifying broker. Taking commission directly from a seller/buyer/other party is a violation.
Licensees must prepare and present estimated closing statements: to the buyer when an offer is written and to the seller when an offer is received. Waiting until acceptance is a violation.
AREC may demand documents/books/records for inspection. Failing or refusing to produce them is a violation. Licensees/brokers must also provide requested information within a reasonable time.
“Reasonable time” means as soon as circumstances permit—not months of delay.
If a party provides a document and later requests it back, the licensee must return it to the rightful owner unless there is legal cause not to.
If the business address changes, the licensee must notify AREC in writing within 30 days (including old and new address). The qualifying broker must return company and individual licenses with required transfer fees.
Accountability to AREC
Choose the best answer for each question, then select Check Answers.
A salesperson receives earnest money from a buyer. Which action is MOST clearly a violation?
That’s commingling and mishandling trust funds (and may also violate the requirement for proper trust account handling and timely safeguarding of funds).
Which statement about rebates/incentives is TRUE in Alabama?
Alabama prohibits post-closing rebates and requires disclosure of incentives given before or at closing to all relevant parties.
Great job! You have the key points of this topic down.
