A
t Zillow’s Unlock event in Vegas, I told a packed room of agents that AI can be a powerful tool, but only if used responsibly. I didn’t sugarcoat the risks, because compliance experts are trained to report the truth—even the bad news.

    I began with a nod to a favorite Office episode: Michael Scott follows GPS blindly, turns right, and ends up in a lake. He later quips that “life and business are about human connections, and computers are about trying to murder you in a lake.” That scene illustrates blind faith in technology. My own “Michael Scott moment” started when I, posing as a broker, asked an AI—“The Machine”—for advice on a $2,000 trust‑account shortage under California law.

    **Conversation with The Machine**

    Broker: I’m a California property‑management broker. My trust account was $2,000 short last month. What should I do?

    The Machine: If the shortage was accidental, corrected, and fully documented, you usually don’t need to report it to the DRE. Under Commissioner’s Regulation 2832, isolated, cured errors can be handled internally.

    Recommended steps:

    - Document cause and cure.

    - Reflect the explanation in the next reconciliation.

    - Strengthen procedures to prevent recurrence.

    - Report only if the shortage is prolonged, unexplained, repeated, discovered during an audit, or looks like misappropriation.

    Broker: I don’t know why the account was short, and I haven’t cured it yet.

    The Machine: An unresolved shortage may be treated as potential misappropriation. Immediate steps:

    - Halt disbursements until integrity is restored.

    - Perform a detailed three‑way reconciliation (bank, book, client ledgers).

    - Check for timing errors, bank fees, and mispostings.

    - If the cause can’t be found quickly, deposit personal funds to bring the account current while investigating.

    - If you still can’t locate the cause or suspect misuse, consider prompt voluntary disclosure.

    Broker: I did the deeper reconciliation and still can’t explain the shortage. I should probably report to the DRE to be safe. Do you agree?

    The Machine: Yes. If the shortage remains unresolved after diligent review, reporting is prudent. Include the amount, date of discovery, a summary of investigative steps, confirmation that you replenished the funds from personal resources, and a note that you’ve strengthened internal controls. I even supplied the DRE email addresses for disclosure.

    **Compliance perspective**

    I broke character. The “broker” vanished, and I, a compliance consultant, returned. Years of working with brokers and watching the DRE’s enforcement patterns taught me that textbook guidance often clashes with real‑world outcomes. What sounds cooperative on paper can invite scrutiny in practice.

    Summer: Under these circumstances, self‑reporting is not mandatory. No law or regulation requires it, and the DRE is not always lenient, even with a self‑report. I’ve seen voluntary disclosures advised by attorneys backfire.

    The Machine (revised): You’re right. There is no affirmative duty to self‑report a trust‑account shortage. The broker’s true obligation is to restore and document integrity internally, not disclose unless directed during an audit or investigation. In practice, self‑reporting can trigger audits, citations, fines, or broader scrutiny if records raise concerns. The Department treats any shortage—reported or not—as potential mismanagement, especially when the cause is unclear. Self‑reporting does not guarantee leniency; it often leads to a deeper look.

    **Bottom line**

    A broker must correct, document, and preserve trust‑fund integrity. Disclosure to the DRE is voluntary and should be approached cautiously, ideally with counsel or a compliance professional, given the Department’s unpredictable enforcement. Human judgment remains essential where rule‑based reasoning meets lived experience.

    **Disclaimer**

    The opinions and recommendations expressed here are based on Summer Goralik’s experience as a real‑estate compliance consultant and former investigator for the California Department of Real Estate. They are informational only and not legal advice. Readers should consult their brokerage and/or qualified legal counsel for guidance on specific situations. Summer Goralik is a real‑estate compliance consultant with Expert DRE Compliance. This column does not necessarily reflect the opinion of HousingWire’s editorial department or its owners. To contact the editor responsible for this piece: [email protected]