The Commissioner of the California Bureau of Real Estate (CalBRE), Wayne S. Bell, has become concerned about Salespersons, “who mislead consumers into falsely believing that they are Brokers.” Commissioner Bell has issued 2 warnings to these salespeople and their licensed Brokers “who permit or support such practices.” The first of these warnings was published in September, 2005 and the second in March, 2017.
The CalBRE issues licenses to Brokers and to Salespersons. By law, only a Broker has the right to enter into contracts to provide real estate services for the sale, acquisition, trade or management of real estate. The core of the problem appears to be with salespersons who advertise real estate services independently of their responsible brokers.
Consumers are not as aware as they should be that the contract by which they hire a real estate “agent” is a contract between a licensed Broker and the consumer, and not between themselves and the soliciting salesperson.
It is not uncommon that licensed Broker-b will sign a contract with Broker-a under which agreement Broker-b agrees to act as an “associate Broker” but recognizing that the licensee who has the full responsibility of representation is Broker-a, the Broker of Record.
A licensed salesperson, however, who solicits and obtains a service agreement with a consumer is acting only as an “agent’ of the Broker. The contract with the consumer is a bilateral contract between the consumer and the licensed Broker of Record. The agreement does not extend to the salesperson except as an agent of the Broker of Record. The salesperson must have a separate employment agreement with the Broker that specifies the rights and duties of both the Broker and the salesperson, and the method of payment for commissions earned.
Some licensed Salespersons look longingly to the day when they can carry on separately as licensed Brokers and not be required to share commissions. To that end, some have filed a business under a Fictitious Business Name (a DBA) and engaged in an independent real estate practice without the knowledge of their Broker of Record, thereby enabling them to develop their own brand. According to Commissioner Bell, they brand “themselves as independent real estate practitioners, and they practice and advertise themselves as such. This is unlawful as well, and the advertisements in connection therewith are false and misleading to the public.”
It is interesting to note that very few residential salespersons refer to themselves as ”brokers,” but when it comes to commercial salespersons the great majority reference themselves as Brokers.
Real estate investors are advised to verify the experience, training, education and license status of an individual whom they expect to represent them in providing competent services. References are important as is the information about both salespersons and licensed Brokers available via the CalBRE. The information is informative and free.