How long should a real estate agency retain client and property data?

Data is in client files, financial reports, property disclosures, and closing papers. Agencies handle a huge amount of sensitive information. This convenience, however, brings a big job: figuring out exactly how long should a real estate agency retain client and property data. 

This is a key part of managing risk and staying legal. Think about this. More than 60% of data breaches are tied back to third parties or partners, which shows why strong internal data rules are so important. 

Plus, with the cost of a data breach in the real estate sector climbing fast, the risk to your money and reputation for getting this wrong is serious. Dealing with the mix of federal, state, and international rules, like RESPA in the U.S. or GDPR in Europe, needs a smart, clear plan for keeping data.

The legal basis for how long should a real estate agency retain client and property data

The answer to how long should a real estate agency retain client and property data comes from a collection of laws and regulations. 

These rules exist to make sure records are available for tax checks, court cases, and other legal needs, all while keeping client information safe. Agencies often have to balance different, sometimes conflicting, time limits set by various official bodies.

What federal and state laws require

In the United States, both federal and state laws set minimum times for keeping records. For example, the IRS usually requires records that support income and deductions to be kept for three to seven years, depending on the situation. Since real estate deals involve a lot of money data, this timeframe is often the starting point.

State real estate licensing boards also have their own rules. While the exact time changes from state to state, a common rule is that transaction files, like listing contracts, purchase agreements, and final closing statements, must be kept for at least three to five years after the sale closes or the agreement ends.

GDPR and data privacy

If your agency works with international clients or in areas covered by the GDPR (General Data Protection Regulation), your retention policy gets stricter. GDPR is built on the idea of 'storage limitation,' which means you cannot keep personal data longer than you need it for the reason you collected it.

This rule pushes agencies to look past the minimum legal timeframes and create a retention schedule based on purpose. For instance, client data gathered for one specific deal must be deleted or made anonymous once the deal is done and the required legal time has passed. 

The only exception is if you have a clear, written, and valid reason to keep it longer (like a pending lawsuit). Using strong enterprise content management (ECM) systems is vital for automatically managing these complicated, purpose-based rules.

Practical steps for building a data retention policy

A good data retention policy is the best way an agency can control risk and ensure compliance. It turns abstract legal needs into clear, repeatable actions.

1. Know what data you have

Before you set any time limits, you must know exactly what data your agency holds. You should sort your data based on how sensitive it is, what the law says about it, and how much business value it has.

• Client data: Names, contact info, financial pre-approvals, ID documents.
• Property data: Listing history, appraisals, inspection reports.
• Transaction data: Contracts, closing papers, commission agreements.
• Office data: HR files, internal emails, marketing materials.

Each type of data will have a different life cycle. For example, you might keep a property's listing history forever for market research, but a client's sensitive financial papers must be destroyed quickly after the mandatory period ends.

2. Set a clear schedule

Your schedule must list the exact time you will keep every type of data, along with the law or rule that requires it. It also needs a 'trigger event', the action that starts the clock (e.g., the closing date, the day a listing agreement ends, or the last time you talked to the client).

3. Automate compliance and deletion

Relying on people to manually manage data retention is risky. It can lead to deleting files too early (which hurts your legal defense) or keeping them too long (which increases the chance of a data breach). 

Modern compliance automation tools are necessary to make sure the policy is followed. These systems can:

• Apply retention tags: Automatically tag documents with the right retention time based on the document type and trigger event.
• Manage legal holds: Stop the deletion process for specific records if a lawsuit is expected or already happening.
• Secure deletion: Make sure data is completely and verifiably erased from all storage places (including backups) once the retention time is up.

4. Train your team and check your work

A policy is only useful if people follow it. You need to regularly train all staff, from agents to office workers, so they understand their role in handling data. Also, you must do regular internal and external checks of your data retention system to confirm the policy is being followed and is up-to-date with new laws.

The problem with keeping data too long (or not long enough)

Real estate agencies often keep data "just in case," thinking it's safer. But keeping data too long is a major problem. Every old piece of data you keep is an unnecessary risk, a target for hackers, and it costs more to store and search through. 

On the flip side, deleting data too soon can be a disaster. If you can't produce a key document in a lawsuit or an audit, your agency is exposed. The goal is to find the safe, compliant middle ground.

It's time to take control of your data

Don't let old data practices put your business at risk. KORTO offers the smart content management and compliance automation tools you need to set, enforce, and check your data retention policies without hassle.

Explore our solutions and schedule a consultation to secure your agency's future.