One missed disclosure can cost a commission and more.

The inspection duty and its two-year clock

California Civil Code 2079 covers sales of residential real property with one to four dwelling units, or a manufactured home. When the broker has a written contract with the seller to find or obtain a buyer, or acts in cooperation with that broker, the licensee owes the prospective buyer a reasonably competent and diligent visual inspection of the property offered for sale and must disclose to that buyer all facts materially affecting the value or desirability of the property that an investigation would reveal.

Under Civil Code 2079.3, the inspection does not include areas that are reasonably and normally inaccessible to this type of inspection, and it does not require an affirmative inspection of areas off the site or of public records or permits concerning the title or use of the property. For a unit in a planned development, condominium or stock cooperative, it does not cover more than the unit offered for sale, if the seller or the broker complies with Sections 4525 to 4580.

Civil Code 2079.4 sets the outside limit: an action for breach of this duty cannot be started more than two years from the date of possession, meaning the date of recordation, close of escrow or occupancy, whichever occurs first.

• Write up your walk-through the same day, noting areas you could not reach.
• Keep that note in the transaction file for at least two years from the date of possession.
• Outside California, the duty and the deadline vary by state.

Trust funds and the three-business-day rule

California Department of Real Estate regulation 10 CCR 2832 requires a broker to place funds accepted on behalf of another not later than three business days following receipt by the broker or the broker's salesperson. The funds go to the owner of the funds, a neutral escrow depository, or a trust fund account in the broker's name as trustee at a bank or other financial institution.

The regulation allows an exception for an offer check. The broker may hold it uncashed until the offer is accepted only if the check is not negotiable by the broker by its terms or the buyer gave written instructions not to deposit or cash it before acceptance, and the seller is told the check is being held before or when the offer is presented. After acceptance, the check must go to a neutral escrow depository, the trust fund account, or (if both parties expressly provide in writing) the seller within three business days, unless the seller gives the broker written authorization to keep holding it. A broker acting as escrow holder in a transaction without an Escrow Law license has a shorter deadline: the next business day after receipt.

• Keep the buyer's hold instruction and the seller's written authorization in the file.
• Tell me on the application whether anyone in the office handles client money, including rents for property management.

Trust account rules vary by state.

Real estate wire fraud in the FBI's 2025 numbers

The FBI Internet Crime Complaint Center (IC3) 2025 annual report counted 12,368 complaints in its Real Estate crime type, with $275,110,419 in reported losses. In 2024 the same crime type showed 9,359 complaints and $173,586,820. IC3 defines Real Estate fraud as loss of funds from a real estate investment or fraud involving rental or timeshare property. Business email compromise (BEC) drew 24,768 complaints and $3,046,598,558 in reported losses in 2025.

The report describes an August 2025 BEC/Real Estate complaint: people closing on a home got an email impersonating their attorneys and sent a wire of over $449,000. After the IC3 complaint, the Recovery Asset Team asked the receiving bank to freeze the account, and the bank reported the full amount was still there and on hold. IC3 says complaint details help that freeze process when complaints are filed as quickly as possible.

• Tell clients in writing at the start that wiring instructions will never change by email.
• Confirm any change by calling a number already on file, never one in the email.
• If money goes to the wrong account, contact the sending bank immediately to request a recall, and file at IC3 with the full transaction details.
• Read how your E&O, cyber liability insurance and any crime policy each word a misdirected client wire.

Official sources

• California Civil Code 2079 (licensee duty to inspect and disclose)
• California Civil Code 2079.3 (scope of inspection)
• California Civil Code 2079.4 (two-year limit)
• California Civil Code 1102.3 (TDS delivery and termination)
• California Civil Code 1102.12 (broker delivery duty)
• California Civil Code 1103.2 (Natural Hazard Disclosure Statement)
• Cal. Code Regs. tit. 10, 2832 (trust fund handling), Cornell LII
• California Civil Code 1670.50 (buyer-broker representation agreements)
• California DRE licensee advisory: changes to buyer representation (AB 2992)
• FBI IC3 2025 Annual Report