Brokerage Reminder: Closed File Storage Tips

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There’s nothing like cleaning up to get you ready for summer business. For real estate agents, this annual cleaning ritual consists of emptying the filing cabinets of closed transaction files and making room for new ones. However, storing physical files takes up valuable space in your home or office, and can be expensive if kept in a storage facility.

So how do you avoid storage costs associated with voluminous transaction records and other real estate documents? Nix the paper and file them numerically.

The Real Estate Department (DRE) obliges brokers to keep real estate documents for three years if the documents were:

  • used in a transaction requiring a real estate broker’s license; and
  • executed or obtained by the broker or the broker’s agent.

Upon notice from DRE, these records shall be made available for review, inspection and copying by a representative of DRE. [Business and Professions Code §10148]

Documents are easily digitized and stored electronically on hard drives or drives. As another alternative to paper, you can use electronic image storage media to retain and store copies of all documents executed by you and your agents in connection with any transaction conducted under your broker’s license. Copies of real estate documents (i.e. listings, purchase agreements, deposit receipts, canceled checks, trust fund records, etc.) may be stored on storage media. electronic images if the following requirements are met:

  • electronic storage is non-erasable “write once, read many” (“WORM”) and does not permit modification of the stored document or record;
  • the stored document is made or kept in the ordinary course of business;
  • the original record was prepared by the broker or the broker’s employees at or about the time of the event reflected in the record;
  • the custodian of the recording is able to identify the stored recording, the mode of its preparation and the mode of storage thereof;
  • the electronic storage contains a reliable indexing system that provides immediate access to a desired document or record, proper quality control of the storage process, and date-ordered disposition of stored documents; and
  • the copied and stored recordings are retained for three years. [DRE Regulations §2729(a)]

You must also maintain a means of viewing these documents stored at your office and provide a hard copy of any document or record requested by DRE. [DRE Regs. §2729(b)]

Plan your storage media

The first step in converting to digital storage is to digitize your files and preserve your records. To avoid scanning closed files and converting them from paper to digital format, keep your files digital from the start. Go paperless, if you will. Alternatively, convert paper documents to digital format as the transaction progresses, creating a digital file as you go.

As part of planning for electronic storage of records, you must first determine where and how your records will be stored.

The three most common options are:

  • on line;
  • networked; and
  • removable media.

It is recommended that you select the appropriate media and systems to maintain your records for the required period of time. Thus, files may need to be refreshed, transferred to new media, or migrated to a different format.

To begin with, all paper files must be converted to digital format. This is best accomplished either:

  • document scanning; Where
  • the adaptation of a system of dematerialized forms and the use of electronic signatures.

Online storage allows immediate access to files stored on the Internet. Properly secured online storage provides access to authorized users only.

A popular method of online storage is known as online storage. Files “on the cloud” are stored by a third party and accessed through its web service.

However, as with any external provider, it is important to research possible accessibility issues and the security of confidential files. It’s best to ask about the cloud provider’s policies and procedures for storing, preserving, and providing access to files and records.

Also, be careful because cloud networks can go down, delaying access to your files. Additionally, most cloud storages require payment of monthly or annual fees.

Another method of electronic storage includes offline media, such as storage area networks (SANs). SANs allow access to remote disks with the same comfort as internal hard disks. These files can also be easily accessed by any authorized user within the network.

Removable media are files that are not immediately accessible. These files are stored offline. This type of media includes:

  • external hard drives;
  • DVD+/-R;
  • SD cards; and
  • flash drives.

However, using removable media can be risky. This method requires safe storage so that the data is not corrupted by external influence, such as excessive heat or degaussing.

Even when properly maintained, all digital and electronic storage media and materials have a limited life expectancy. Media life depends on a number of factors, including:

  • manufacturing quality;
  • age and condition prior to registration;
  • handling and maintenance;
  • access frequency; and
  • storage conditions.

Hardware and software can also be replaced by rapid advances in technology. Therefore, careful planning is imperative depending on how long a file needs to be stored.

Keep backup copies of all stored materials, preferably in an off-site, geographically different location that does not share the same disaster threat.

Create policies and procedures for backing up files. Develop storage media labeling procedures. Each outer label must contain unique information about what is stored.

Take advantage of today’s technology. If done correctly, you can save money on managing required real estate records and free up valuable space in your office.

Have you developed any file storage strategies that we may not have mentioned? Let us know in the comments below.

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