Washington Managing Broker Exam — All Questions

A broker leaves a Washington firm and wants to take her listings with her. Under RCW 18.85.275(2), listings and other brokerage service contracts are:

• a.property of the broker who signed them, subject to a fee payable to the firm
• b.property of the real estate firm, so they do not go with a departing broker✓
• c.property of the principal, who alone chooses which broker keeps servicing them
• d.property of the managing broker who reviewed them, absent a written objection

RCW 18.85.275(2) states that "listings, transactions, management agreements, and other contracts relating to providing brokerage services are property of the real estate firm." The same subsection sets up the chain of custody that follows from that ownership: brokers must timely deliver to their appointed managing broker all funds and records the firm must hold, the managing broker becomes responsible for them only on receipt, and the designated broker likewise only once they reach him. So the contracts belong to the firm from the outset, and no fee arrangement, principal's preference, or reviewing manager's involvement changes the ownership. RCW 18.85.291 completes the picture at departure: the firm holds the licenses, they cease to be in force when the broker stops representing the firm, and the designated broker must notify the director and surrender the license.

When a Washington broker terminates his affiliation with a firm, WAC 308-124A-730 provides that the designated broker:

• a.may hold the license until the broker's pending transactions have all closed
• b.may not condition surrender of the license on the broker performing any act✓
• c.may hold the license until the broker repays advances the firm has made
• d.may release the license only once the department approves a transfer request

WAC 308-124A-730(1) lets either side end the relationship unilaterally, requires the termination to be in writing, and requires notice to the real estate program "without delay" accompanied by the surrendered license. Subsection (1)(c) is the operative sentence here: the managing broker, branch manager, or designated broker "may not condition his or her surrender of license to the real estate program upon performance of any act by the broker or managing broker." If the surrender is being conditioned anyway, the licensee tells the department in writing and the program processes the release or transfer. Neither an open transaction nor an unpaid advance is a lawful hold, and no departmental pre-approval stands between the broker and release. The termination date is the postmark, fax, or hand-delivery date. RCW 18.85.291 makes a designated broker's failure to notify promptly, after demand, a ground for discipline against the firm and that broker.

RCW 18.85.361 treats a firm's or managing broker's failure to exercise adequate supervision over its brokers as:

• a.a defense for a firm whose broker acted outside the scope of his employment
• b.a matter of internal firm policy the department has no authority to reach
• c.an independent ground for discipline against the firm and its managing brokers✓
• d.a ground for discipline only where the supervised broker was disciplined too

RCW 18.85.361(22) makes it a ground for disciplinary action, "in the case of real estate firms, and managing and designated brokers, failing to exercise adequate supervision over the activities of their brokers and managing brokers within the scope of this chapter." It stands on its own: the department need not first discipline the supervised broker, and the failure is the firm's own violation rather than a defense to anything. Supervision is a statutory duty, not house policy — RCW 18.85.275(1) requires the designated or managing broker to "supervise the conduct of brokers and managing brokers for compliance with this chapter, chapter 18.235 RCW, and RCW 18.86.030," and RCW 18.85.201 places responsibility for their conduct on the designated broker, with a branch manager also answerable for those working under him at a branch. RCW 18.85.275(3) allows supervisory tasks to be delegated in writing to a managing broker licensed to the firm; the accountability does not disappear.

A buyer offers a promissory note rather than cash as earnest money. Under RCW 18.85.361(9), the licensee may accept it only if that fact is:

• a.communicated to the owner at closing and shown in the seller's final settlement statement
• b.communicated to the designated broker, who then decides whether the seller must be told
• c.communicated to the escrow agent and shown in the firm's own transaction folder records
• d.communicated to the owner before acceptance and shown in the purchase and sale agreement✓

RCW 18.85.361(9) makes it a ground for discipline to accept "other than cash or its equivalent as earnest money unless that fact is communicated to the owner before the owner's acceptance of the offer to purchase, and such fact is shown in the purchase and sale agreement." Two things are required and both must happen before the seller accepts: the owner is told, and the agreement itself records it. Telling anyone else instead — the designated broker, the escrow agent — leaves the owner deciding on an offer he does not understand, and a note recorded only in the firm's own file or on a settlement statement produced at closing arrives long after the moment the statute protects. Related handling rules sit nearby: WAC 308-124D-200 requires earnest money checks to be payable to the firm as licensed unless the principals agree in writing that they go to the seller or a named escrow agent.

A Washington managing broker buys a rental house for her own account through a limited liability company she controls. RCW 18.85.361(21) requires her to:

• a.route the purchase through her firm and hold her funds in its trust account
• b.obtain the department's written consent before any licensee may buy property
• c.surrender her managing broker endorsement for the period of her ownership
• d.disclose in writing that she is a real estate licensee, even buying for herself✓

RCW 18.85.361(21) makes it a ground for discipline to be "buying, selling, or leasing directly, or through a third party, any interest in real property without disclosing in writing that the person is a real estate licensee." The phrase "or through a third party" is what catches the entity here: interposing a company she controls does not remove the duty. The disclosure is of licensee status, so nothing requires the deal to run through her firm, and a licensee's own money is not client money — RCW 18.85.285(5) and WAC 308-124E-105(15)(a) actually forbid depositing the broker's or firm's own funds in the trust account beyond the minimum needed to keep it open. No departmental consent or surrender of a credential is involved. The advertising rule bends the same way: RCW 18.85.361(8) requires the firm's licensed name in advertising generally, but a licensee advertising personally owned property need only disclose that she holds a license.

An affiliated broker closes a cooperative sale and asks the other firm to pay her share directly. RCW 18.85.301 makes that unlawful, because a Washington broker may be paid:

• a.only through the designated broker of the firm she is licensed with✓
• b.only after the department has approved a written compensation agreement
• c.only by the party the broker actually represented in that transaction
• d.only in the calendar quarter in which the transaction finally closed

RCW 18.85.301(3) makes it unlawful for brokers or managing brokers "to pay any part of their commission from brokerage services or other compensation to any person, whether licensed or not, except through the firm's designated broker," and subsection (2) makes it unlawful for a firm to pay a broker not licensed to that firm. RCW 18.85.361(19) states the same rule from the receiving side: a broker may accept compensation for licensed acts only from the licensed firm she is licensed with. Subsection (1) bars paying anyone unlicensed who performed brokerage services, and subsection (4) carves out the single exception, sharing with a manufactured housing retailer licensed under chapter 46.70 RCW. Nothing turns on departmental approval, on which party the broker represented — RCW 18.86.080(2) says paying compensation does not by itself create an agency relationship — or on the timing of the payment.

RCW 18.86.080(7) lets a firm receive compensation for brokerage services only under a services agreement stating the terms of compensation, except that a firm may:

• a.give any buyer an oral summary of its fees before that buyer signs a purchase and sale agreement
• b.give a buyer of commercial real estate a written "Compensation Disclosure" before that buyer signs an offer✓
• c.rely on the offer of cooperating compensation the listing firm published in the multiple listing service
• d.collect the fee from the seller at closing, since a seller-paid commission needs no written agreement

RCW 18.86.080(7) requires a services agreement containing the amount the principal agrees to pay, the principal's consent to sharing compensation between firms, the principal's consent to being compensated by more than one party, and — in a buyer agreement — whether the appointed broker will show properties when no party has offered to pay the firm. Subsection (8) supplies the one substitute: for a buyer of commercial real estate the broker may instead disclose in writing, before the buyer signs an offer, the sources and amounts of any compensation expected, in a separate paragraph titled "Compensation Disclosure." Subsection (9) adds a narrow exception for a broker's price opinion or a pure referral where the referring firm rendered no brokerage services. Nothing lets an oral summary stand in for the writing, and who pays is not the test: subsection (1) allows compensation from the seller, the buyer, a third party, or shared between firms, but the writing is still needed.

Client funds such as earnest money received by a Washington firm must be:

• a.deposited into the firm's trust account, apart from the firm's own money✓
• b.wired at once into the listing broker's own individual bank account at closing
• c.held in cash by the affiliated broker until the transaction has actually closed
• d.deposited into the designated broker's personal savings account

RCW 18.85.285(5) requires every licensee to keep "separate and apart and physically segregated from the licensees' own funds" all client money held pending closing, and WAC 308-124E-105 requires the money to be held in trust, deposited in a federally insured institution able to accept service in Washington, and never used for the benefit of the broker, the firm, or anyone not entitled to it. Whose personal account receives the money is beside the point — a listing broker's or the designated broker's own account breaks the same separation. Holding cash leaves no audit trail and misses the deposit deadline in WAC 308-124E-105(6). Cite the trust rules to the right chapter: chapter 308-124 WAC is only "Real estate—Definitions and brief adjudicative proceedings" and contains no trust-account rule; trust procedures are chapter 308-124E WAC and records are chapter 308-124C WAC.

WAC 308-124E-105(6) requires funds received in a real estate transaction to be deposited into the firm's trust bank account:

• a.not later than the next banking day after receipt, unless the agreement holds the check✓
• b.not later than three business days after receipt, counting Saturdays but not holidays
• c.not later than the date of mutual acceptance, whichever of the two happens first
• d.not later than closing, provided the broker keeps the instrument in the transaction file

WAC 308-124E-105(6) requires all funds received for the sale, renting, leasing, or optioning of real estate, or for contract or mortgage collections or advance fees, to be deposited "not later than the next banking day following receipt thereof," with cash always on that schedule. The single exception in (6)(b) is a check received as an earnest money deposit "when the earnest money agreement states that a check is to be held for a specified length of time or until the occurrence of a specific event" — which is why the exception is written into the agreement, not decided by the broker. Subsection (6)(c) confirms that Saturdays, Sundays, and legal holidays under RCW 1.16.050 are not banking days. Nothing in the rule counts Saturdays, nothing keys the deadline to mutual acceptance, and holding an instrument in the file until closing is the practice the deposit rule exists to prevent.

A broker takes an earnest money check at a Saturday signing. WAC 308-124E-100 requires him to deliver it to his managing broker, branch manager, or designated broker within:

• a.two calendar days of the client's signature, with both weekend days counted in the period
• b.five business days of the client's signature, or sooner if the buyer should ask for it
• c.one banking day of the client's signature, the same as the deposit deadline
• d.two business days of the client's signature, or sooner if the contract requires it✓

WAC 308-124E-100 requires brokers and managing brokers to physically deliver all funds, negotiable instruments, or items of value to the appropriate managing broker, branch manager, or designated broker within the shorter of two business days of the client's signature, or sooner if the terms of the client contract require faster delivery; the rule states in terms that business days are not Saturdays, Sundays, or the legal holidays defined in RCW 1.16.050. So the clock here starts on Monday. Keep the two rules distinct: this one governs delivery from the broker to the supervisor, while the next-banking-day rule in WAC 308-124E-105(6) governs the firm's deposit of the money into the trust account. RCW 18.85.275(2) supplies the same order — the broker delivers to the managing broker, who delivers to the designated broker, each becoming responsible only on receipt.

Washington's required-records rule obliges a firm to keep trust-account records that:

• a.summarize only annual totals, with no per-transaction detail at all
• b.are optional whenever a title company closes the firm's transactions
• c.support a full accounting of client funds and a department audit✓
• d.may be destroyed as soon as each individual transaction has closed

WAC 308-124C-105 is captioned "Required records" and opens by naming the responsible person: "the designated broker is required to keep the following on behalf of the firm." The list is built for tracing money — a duplicate receipt book or cash receipts journal, sequentially numbered nonduplicative checks with register or stubs, validated duplicate deposit slips, a client's accounting ledger for each transaction or management account, separate ledger sheets for each tenant, lessee, vendee, or mortgagor, and reconciled bank statements with canceled checks. It also fixes location: all required records are maintained at one location where the firm is licensed, main office or branch. Annual totals could never show what became of one client's money. Using a title company to close moves nothing, because the firm received and handled the funds. And destroying files at closing would defeat the three-year retention in WAC 308-124C-110(2) and RCW 18.85.361(16) and (17).

WAC 308-124C-110 requires a Washington firm's real estate records to be:

• a.retained and available for the director's inspection for a minimum of ten years
• b.retained and available for the director's inspection for a minimum of three years✓
• c.retained only until the department has completed its next scheduled audit of the firm
• d.retained only on paper, because electronic storage is not an approved method of keeping them

WAC 308-124C-110(2) requires records to be kept at an address where the firm is licensed and provides that "all records shall be retained and available for inspection by the director or the director's authorized representative for a minimum of three years." RCW 18.85.361(16) and (17) run in parallel, making it a disciplinary ground to fail to keep trust records for three years or, for a firm and its designated broker, to fail to preserve transaction records for three years after they reach the firm. Transactions closed at least a year may move to one central Washington facility, provided a list of them stays at the licensed office and they are produced on demand. Electronic storage is expressly allowed by subsection (3) so long as retrieval is immediate at the licensed office and every document can be viewed and printed. An audit does not end the retention period; WAC 308-124I-020 repeats the three years and adds that licensees have no privacy interest in records they must keep.

A Washington licensee is named as the defendant in a criminal information. WAC 308-124C-115 requires him to notify the real estate program within:

• a.twenty days after conviction, since an unproven charge need not be reported
• b.ten days after service, but only where the charge involves a real estate deal
• c.twenty days after service or knowledge of it, whether or not he is convicted✓
• d.thirty days after the appeal period runs and the judgment has become final

WAC 308-124C-115 requires every licensee, "within twenty days after service or knowledge thereof," to notify the real estate program of any criminal complaint, information, indictment, or conviction in which the licensee is named as a defendant, including a plea of guilty or nolo contendere. The trigger is service or knowledge of the charge, so waiting for a conviction, for a final judgment, or for an appeal period to expire all miss the deadline. The same rule requires notice of a civil order, verdict, or judgment involving any real estate or business-related activity — expressly "regardless of any pending appeal" — and of any other professional license fined, suspended, revoked, or refused by a government agency. Only the civil branch is limited to real estate or business subject matter; the criminal branch is not.

A Washington firm opens a second office with its own street address. RCW 18.85.241 requires that the branch:

• a.be licensed under a separate firm name and keep its own trust account records
• b.operate with no license of its own, since a branch shares the firm's credential
• c.be supervised only by the designated broker, because a branch has no manager
• d.be licensed under the firm's name and have a branch manager who is a managing broker✓

RCW 18.85.241 lets the designated broker apply for authority to establish branch offices "under the same name as the real estate firm" on payment of the fee, has the director issue a duplicate license for each branch showing the firm and the particular branch, requires that license to be prominently displayed at the branch, and requires "each branch office... to have a branch manager who shall be a managing broker authorized by the designated broker to perform the duties of a branch manager." WAC 308-124-300(4) defines a branch office as a separate physical office with a different mailing address that uses the firm's own unified business identifier number — so a branch never carries a separate firm name. RCW 18.85.201 makes the branch manager answerable, in addition to the designated broker, for the licensees working under him. There is one narrow exemption in the statute: no branch license is needed for sales activity confined to a single subdivision or tract lying within thirty-five miles of a licensed office.

WAC 308-124D-215 requires every property a Washington firm manages to be supported by a written management agreement signed by:

• a.the owner and the tenant, and stating the security deposit and the rent due monthly
• b.the owner and the designated broker, and stating the firm's compensation and authority✓
• c.the owner alone, whose signature binds the firm without any broker signing at all
• d.the managing broker alone, who signs for the owner under the firm's written policy

WAC 308-124D-215(1) requires all properties managed by the firm to be "supported by a written management agreement signed by the owner and designated broker and retained," and to state at minimum the firm's compensation; the type and number of units or square footage; whether the firm may collect and disburse funds and for what purposes; any authority to hold security deposits and how they may be disbursed; and how often summary statements go to the owner. Subsection (5) requires any amendment to be written and signed by the same two people. The tenant is a party to the separate rental or lease agreement required by subsection (2), not to the management agreement. No one may sign in the owner's place. Subsection (3) then prescribes what each owner's summary statement must show, from the balance carried forward through total rent receipts and itemized expenses to the ending balance.

Under Washington's rules on brokerage supervision, a managing broker who supervises other licensees is required to:

• a.assure the brokerage services in which he takes part comply with the licensing law✓
• b.delegate all recordkeeping to the affiliated brokers and conduct no review of their work
• c.let affiliated brokers hold client funds in their own personal bank accounts instead
• d.avoid reviewing transaction files so as to reduce his own personal liability

WAC 308-124C-135(1) states the managing broker's duty as "assuring all real estate brokerage services in which he/she participated are in accordance with chapters 18.85, 18.86, 18.235 RCW and the rules promulgated thereunder," and the rest of that section adds cooperating with departmental investigations and audits, knowing those chapters, following the designated broker's home-inspector policy, delivering transaction documents within two business days of mutual acceptance, and following the rules on safe handling of client funds and on proper advertising. Handing recordkeeping over with no review inverts the duty, since RCW 18.85.275(3) lets tasks be delegated but never the accountability. Letting brokers hold client money personally is the commingling RCW 18.85.285(5) forbids. And staying away from files creates exposure rather than removing it: RCW 18.85.361(22) makes failure to supervise adequately its own ground for discipline.

A firm's written office policy must provide for review of every brokerage service contract involving a broker licensed less than two years. That review must be completed within:

• a.five business days of the listing being taken, with proof kept in the broker's own file
• b.thirty days of mutual acceptance, with proof produced only when the department asks
• c.two business days of mutual acceptance, which is also the document delivery deadline
• d.five business days of mutual acceptance, with documented proof kept at the record location✓

WAC 308-124C-125(9) puts on the designated broker the duty of "maintaining, implementing and following a written policy" addressing home-inspector referrals, levels of supervision for all brokers, managing brokers and branch managers, and, at (9)(c), "review of all brokerage service contracts involving any broker of the firm licensed for less than two years," which "must be completed by the designated broker or their delegated managing broker within five business days of mutual acceptance," with documented proof kept at the firm's record locations. WAC 308-124C-137(13)(c) repeats the five-day window for a managing broker who has been delegated the duty. The two-business-day figure in the last option is real but measures something else — WAC 308-124C-125(11), -135(7) and -140(7) give affiliated licensees two business days from mutual acceptance to submit their transaction documents. Mutual acceptance, not the listing date, starts the review clock.

A team inside a Washington firm advertises under a team name it has not licensed as an assumed name. Which name complies with WAC 308-124B-210?

• a."Cascade Realty," shown with the firm's licensed name and approved in writing by the designated broker
• b."The Cascade Group," shown with the firm's licensed name and approved in writing by the designated broker✓
• c."Cascade Group LLC," shown with the firm's licensed name and approved in writing by the designated broker
• d."The Cascade Group," shown on its own and approved in writing by the designated broker and branch manager

WAC 308-124B-210(2) allows brokers and managing brokers to advertise using an unlicensed name, title, or brand only on four conditions: they must always display the firm's licensed name or licensed assumed name clearly and conspicuously alongside it; they must not use a name suggesting a legal entity separate from the firm, "such as 'Inc.,' 'LLC,' 'LLP,' 'Corp.,' 'firm,' or 'company'"; they must not use a name commonly understood to reference a firm or office, "such as 'realty,' 'realtors,' 'firm,' or 'real estate'"; and they must have advance written approval from the firm's designated broker. "Cascade Realty" fails on the third condition and "Cascade Group LLC" on the second, however correct the display and approval around them; the fourth option has the approvals but drops the firm's name, which subsection (1) requires in all advertising including web pages and email. RCW 18.85.361(8) makes advertising without the firm's licensed name a disciplinary ground in its own right.