When AI says ‘Turn Yourself In’: A real estate broker’s cautionary tale

At Zillow’s Unlock event recently in Vegas, I told a room absolutely packed with real estate agents to use artificial intelligence but only if they do so responsibly. My tone? I didn’t mince words or buckle under the glamour and promise of AI tools. After all, compliance professionals are seasoned in reporting the truth, even when it’s bad news.

As a preface to the following piece (and a bit of foreshadowing), I have to give a nod to one of my favorite episodes of The Office. Michael Scott is behind the wheel of a rental car, following the GPS directions without question. As Michael obediently turns right, Dwight frantically yells, “It can’t mean that—there’s a lake there!” But Michael, in full conviction, shouts back, “The machine knows where it’s going!” Moments later, they’re submerged in water.

Later, Michael delivers one of his most unintentionally profound (and comical) lines: “Life and business are about human connections, and computers are about trying to murder you in a lake.”

• Document the cause and cure.

• Reflect the explanation and correction in the next reconciliation.

• Strengthen procedures to prevent recurrence.

• Consider reporting if the shortage was 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: If the shortage still exists and the cause is unknown, you are out of trust. Under B&P Code §10176(i) and Regulation 2832, 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 you can’t find the cause 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 the prudent and protective course. I recommend including the amount and date of discovery, a summary of your 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 where your disclosure should be sent.

At this point, I broke character. The “broker” in the prompt disappeared, and the compliance expert returned. After years of working with brokers and watching the DRE’s enforcement patterns up close, I knew The Machine’s textbook guidance didn’t align with real-world outcomes. What sounds cooperative on paper can invite scrutiny in practice, and often does.

Summer: I don’t agree. Under these circumstances, self-reporting is not mandatory. There is no law or regulation that specifically requires it. And the DRE is not always lenient, even with a self-report. I have examples where voluntary disclosure advised by attorneys backfired.

In practice, self-reporting can invite unintended consequences, including audits, citations, fines or broader scrutiny if records raise concerns. Historically, the Department treats any shortage, reported or not, as potential mismanagement — especially when the cause isn’t clear. Self-reporting doesn’t guarantee leniency; it often triggers a deeper look.

A broker’s duty is to correct, document and preserve trust fund integrity. Disclosure to the DRE is voluntary and should be approached cautiously, ideally with the advice of counsel or a compliance professional, given the Department’s unpredictable enforcement posture.

Avoid the machine error

Eventually, The Machine reverses course.

“You’re right to push back. What you said reflects real-world DRE culture, where the textbook answer (cooperation) and the practical outcome (heightened scrutiny) don’t always align. That kind of nuance underscores the gap between rule-based reasoning and lived experience, the very space where human judgment still matters.”

For the record, I agreed with The Machine’s final conclusion. Of course, every case has its own unique set of facts. But if I hadn’t pushed back, if I had followed its first confident instruction, we might not have gotten there. I might be in the middle of a DRE audit right now, testing its theory of leniency with a license to lose.

Don’t let technology drive you into a lake — or into a DRE audit. The Machine may know the law, but it doesn’t always know what’s at risk or have to live with the consequences.

Summer Goralik is a real estate compliance consultant with Expert DRE Compliance.

Summer Goralik is a Real Estate Compliance Consultant and licensed Real Estate Broker (#02022805). Summer offers real estate brokers a variety of consulting services including assistance with California Department of Real Estate investigations and audit preparation, mock audits, brokerage compliance guidance, advertising review, and training. She helps licensees evaluate their regulatory compliance and correct any non-compliant activities. Summer has an extensive background in real estate which includes private sector, regulatory and law enforcement experience. Prior to opening her consulting business in 2016, she worked for the Orange County District Attorney’s Office as a Civilian Economic Crimes Investigator in their Real Estate Fraud Unit. Before that, Summer was employed as a Special Investigator for the DRE for six years. Among many achievements, she wrote several articles for the DRE, which still live on the Department’s website today. Prior to her career in government and law enforcement, Summer also worked in the escrow industry for nearly five years. For more information about Summer’s background and services, please visit her website.

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