Home Brokers & Agents CALBRE to Keller Williams: Drop Dead

CALBRE to Keller Williams: Drop Dead

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I’ve been on the road driving all around Florida since Labor Day, so obviously, blogging has been light. But I was sent some news by a reader — again, the best informed audience in real estate — and I was really struck by the forceful language.

CALBRE (California Bureau of Real Estate) has released a Licensee Alert on September 1 that poses some real challenges for some popular business models, particularly that of Keller Williams, the largest real estate company in the U.S. by agent count. The sub-heading, which pretty much tells you what the Alert is about reads as follows:

Disciplinary Warning to Real Estate Salespersons Who Act, Conduct Themselves, and/or Advertise as “Independent” Real Estate Professionals — and a Simultaneous Caution to Brokers Who Allow or Support Such Practices

Oh my. Let’s dive in.

The Alert, Summarized

Basically, CALBRE is making it absolutely clear that agents may not advertise themselves as “independent” and also telling brokers that they cannot allow or support such a thing.

First, CALBRE says clearly that that engaging in property management as a licensee without “broker affiliation and supervision” is a crime.

Second, CALBRE says that agents who are providing real estate services either without broker affiliation or without the knowledge of the broker is acting unlawfully.

But the real kicker comes here:

Also, it is evident that a number of salespersons have branded themselves as independent real estate practitioners, and they practice and advertise as such. That is unlawful as well, and the advertisements in connection therewith are false and misleading to the public. Furthermore, and depending on the language used with respect to the “branding”, there might be a violation of the law relative to the use of fictitious names. Please see the prior guidance given by CalBRE on the use of fictitious names. [Emphasis added]

The prior guidance mentioned above is here and reads in relevant part:

Additionally, AB 2018 defines a “team name” as a professional identity or brand name used by a salesperson, and one or more other real estate licensees, for the provision of real estate licensed services. AB 2018 specifies that the use of a team name, as defined above, does not constitute a fictitious business name and would not require a separate license if (1) the name is used by two or more real estate licensees who work together to provide licensed real estate services, or who represent themselves to the public as being a part of a team, group, or association to provide those services, (2) the name includes the surname (last name) of at least one of the licensee members of the team, group, or association in conjunction with the term “associates,” “group,” or “team,” and (3) the name does not include any term or terms, such as “real estate broker,” “real estate brokerage,” “broker,” or “brokerage” or any other term that would lead a member of the public to believe that the team is offering real estate brokerage services, or imply or suggest the existence of a real estate entity independent of a responsible broker.

Under this, a “team name” must include the last name of at least one agent (presumably, the team leader). So the top agent team in Florida “The Jills” would not pass muster in California, nor would a top team in the Chicagoland market, such as Home Discovery Team or Chicago Home Partner.

And then we have this:

Finally, it has been reported to CalBRE, although it has not been verified, that some brokers are assisting associated salespersons with some of the practices above. In this regard, CalBRE has been told that some brokers are helping salespersons with “independent branding” and the advertising related to that branding. This notice will serve as a warning to any such brokers that they (the brokers) have a legal obligation to reasonably supervise the licensed activities of their affiliated salespersons, and remain accountable and are responsible for the work requiring a license performed by those salespersons.

As part and parcel of the supervision mandate, brokers have the obligation to establish policies, rules, procedures, and systems to “review, oversee, inspect and manage” the advertising by their associated salespersons of any services for which a real estate license is required. [Emphasis added]

Oh me oh my oh. Look at Miss Ohio.

What It Means…

We are, of course, talking about “personal branding”. Now, let me take you back a few years to when social media was the hot new thing in real estate. Remember the hoopla over “personal branding”? Gurus famous and infamous would go on and on about how real estate agents needed to establish a personal brand on the Web, using the social media tools that were new and sparkly at the time.

At the same time, the rise of the Agent Team along the Millionaire Real Estate Agent model, popularized by Keller Williams, was taking place. KW took the position, which it still holds, that the brokerage brand simply doesn’t matter.

Remember, that’s the official position of KWRI, the franchise. And it has gone out of its way to support the creation and maintenance of strong agent and agent team brands.

Apparently, California Bureau of Real Estate begs to differ with KWRI. Brokerage brand may not matter to consumers, but they matter a whole crapload to the regulators.

The KW business model — which has been copied by many a brokerage — that elevates the agent’s personal brand and the agent team’s brand over the brokerage brand is directly in the sights of CALBRE. I have to imagine other real estate regulators are looking at this as well, since somebody brought the issue to CALBRE’s attention. Remember this phrase: “Finally, it has been reported to CalBRE, although it has not been verified, that some brokers are assisting associated salespersons with some of the practices above.” Reported to CalBRE… by whom? For what purpose? Who else might report various brokerages to other state regulators?

Questions…

So reading this Alert, I have some questions.

What exactly does this mean?

As part and parcel of the supervision mandate, brokers have the obligation to establish policies, rules, procedures, and systems to “review, oversee, inspect and manage” the advertising by their associated salespersons of any services for which a real estate license is required.

What does this “obligation” mean exactly? Do brokerages have to hire some “compliance officer” to look over all agent branding/advertising to make sure that the brokerage brand is prominent? If the brokerage doesn’t have such an employee, is that evidence that the brokerage isn’t fulfilling its obligation? Does the brokerage logo have to be larger than the agent team’s logo going forward? What is the consequence if the broker is held to have violated this “review, oversee, inspect and manage” provision? Loss of license? Fines? What?

For that matter, what does this really mean?

…(the brokers) have a legal obligation to reasonably supervise the licensed activities of their affiliated salespersons…

What does “reasonable supervision” actually look like? That’s awful broad. So for example, does a brokerage employee have to review every offer that the agent writes? I don’t know of any brokerage that reviews offers (vs. contracts). Does the brokerage have to review the agent’s photography of a listing? I mean, “reasonable supervision” is an awfully vague standard. I could argue that the broker has to review the photographs of a listing to make sure there isn’t some huge blue monster in the picture? Would CalBRE?

I have to imagine that some of the 100% commission shops and small brokerages aren’t exactly compensated to provide all this oversight and “reasonable supervision”.  I have to imagine that if KWRI has to start intruding on the business practices, the advertising and the marketing of its super-agent teams (that KW is encouraging to expand geographically), those same super-agents are not going to take that kindly. I have to imagine that is the whole point of whoever it was that “reported” this issue to CalBRE.

In any event, I have no answers, since I’m not CalBRE and I’m not Wayne S. Bell, California Real Estate Commissioner. But I hope that my friends at CAR and in various brokerages throughout California might be able to provide some insight.

Keep an eye out for what this could transform into.

-rsh

11 COMMENTS

  1. Interesting read, for sure.
    We see a LOT of this in our market, as well. MANY brokerages seem to “tolerate” it, not just KWRI.

    It will be interesting to see if any real change comes from this. Thanks for sharing, Rob.

  2. I would dearly love to talk about brokerage supervision of agents, as the regular practice of such is the root of many of the problems in the industry. Supervision requires that brokers do things that, you know, take time and knowledge and management to agent ratios that allow that supervision to take place.

    In the specific instance of Keller Williams, though, KWI is merely the franchise organization. That organization is one step removed from the broker-agent management problem. The individual franchise owners and the BIC of each office have the responsibility for supervision. So while I agree that KW is known to support agent and team branding, I don’t know how CBRE can hold KWI responsible for the decisions made the individual owners.

    A third thought is that I wonder why the branding of an agent or team is necessarily related to the issue of supervision. Why would the consumer be better served by Susie Smith, agent with XYZ brokerage rather than The Great Team with XYZ brokerage? Especially in states with designated agency, the broker is responsible for supervision regardless of what the name badge says.

    I dunno. I guess I’m just suspicious of unwarranted regulation.

  3. I hang my license in CA with Coldwell Banker Residential Brokerage. CBRB has very specific rules about personal logos, for example, being no larger than the company’s logo (which, of course, means the company logo better be present). There are other similar rules. Presumably the BRE only cares about not creating confusion to the public as to who is ultimately responsible if something goes sideways in a transaction. Also, regarding team names, there is an exception to agents having to use their personal name if they obtain a legal DBA. Hopefully the regulators have only set their sights on agents who completely omit broker information. I’ve noticed this comes up a lot here in LA with postcard mailings and open house signage.

    I also want to bring up the point that there is a tension between broker supervision and independent contractor status that belongs in any discussion about what brokers should be doing with agent marketing. I think CBRB strikes the right balance. Their position is “if you want to hang your license with us, these are the marketing rules. You, agent, go figure out your own marketing in compliance with our rules.”

  4. ‘Adequate supervision’ has been dumbed down to compliance = supervision. As long as team leaders turn in complete files, then management thinks they have done their job.

    The tricky part is when the broker and team leader signs an agreement that transfers the job of supervision to the team leader – does that mean the broker is off the hook? I don’t think so, and it sounds like the CA BRE doesn’t think so either.

    If this means that brokers/managers will have to take a more active role in their agents’ practices, they will be shocked to see what’s happening out here.

  5. Jim Klinge has it pegged! The KWRI has an awesome business model (in my opinion) however there are many franchise owners who believe that the model means hands off for ownership and Broker alike. Just let the unlicensed Team Leader make the decisions regarding compliance and the REALTOR Code of Ethics. There is a broker here in Louisiana who is proud to advertise that he is the managing broker of 5 independent franchises in Louisiana….in most cases he is several hours drive away. His answer is always “Call your attorney”. I think California is recognizing a huge disconnect in what the public is led to believe is happening and what is really happening. 90 hours to get your license then next to zero supervision when that agent is out representing you in a huge financial decision? If a new agent wants help and guidance in a KWRI organization they have to pay someone in the brokerage or wing it and pray they don’t misrepresent the client!

  6. Independent Contractor status is under fire. Is it only in CA? I haven’t paid attention to this issue on a broader level. Agents want IC status and so do brokers. There is only so much supervision that can go on. It’s a nuanced balancing act and not as simple as some of the commenters here make it out to be.

  7. Our entire industry is totally botching the concept of consumer protection. Our agency laws across the country make little sense to consumers and I don’t see how any entity is doing anything better in the name of consumer protection. 5 days ago Inman reported, “Zillow ads increase prospects of double-sided transactions for agents”. http://www.inman.com/2015/09/10/morgan-stanley-zillow-ads-increase-prospects-of-double-sided-transactions-for-real-estate-agents/?utm_source=20150910&utm_medium=email&utm_campaign=newsflash
    That’s great for listing agents…how is that helping a consumer? No red flags anywhere anymore.

  8. Isn’t this kinda common sense though? Just because you are an agent who is an “independent” contractor, in terms of taxes, doesn’t mean you are independent real estate entity. This makes complete sense to me. That’s why there are so many laws about advertising and how your brokerage has to be the main emphasis, and there should not be any confusion about what brokerage a client is in correspondence with. I kinda don’t feel bad for anyone who promotes as “independent” as gets called in by the division. Thanks for sharing! Love the info!

    • No, Matt. It’s not just about taxes. We run our own independent businesses under the supervision of a broker. And I’m not aware of any laws requiring my broker’s branding to be more prominent than mine.

  9. Seems like a lot of agents and brokers get away with this all the time. I’m not in CA but I find it hard to believe that brokers with a lot of agents really monitor them the way they should be. Not sure if anything will be changed or not but it does I can see FL being another place it happens.

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