Wait! Are you my agent or might broker? And if you're my agent, then who's my broker?
And why is this, what's the difference and why is this so confusing?!
All of these are fair questions, and in this video I'll do my best to provide
some context and answers so stay tuned.
My name is Jason Allen-Rouman, and I'm a real estate agent in Palm Springs,
California. First a little history. Before the turn of the 20th century, the sale
and purchase of real estate was about as regulated as general dentistry, and
heaven help those who needed a tooth pulled or wanted to buy a house. If
you've ever read Upton Sinclair's novel The Jungle, which was published in 1906,
then you have some idea of the shenanigans that help shape the sorts of
consumer protections we all enjoy today. But, to get from a completely deregulated
industry to one governed by ethical standards and laws, two things happen.
First, our trade group called the National Association of REALTORS® formed
in 1908, and then in 1917 the state of California passed its first real estate
laws. So, at the crux of both movements was an effort to protect consumers from
the financial high stakes of buying or selling real property. In order to do
that, they focused on the individual at the heart of it, namely the
real estate broker. He, and let's face it, it was all men in those days, had to be
reined in. No longer was it acceptable for him to wheel and deal with impunity.
So the National Association of REALTORS® said if you want to be part of our
organization, you must abide by this new set of ethical standards we've written.
Now, I've included a link to them and in the notes below you can see what the
full set looks like today. Alright. In exchange for acting ethically and
according to our professional standards, you may then use the title of REALTOR®
and otherwise benefit from our association. That was the selling point
for the National Association of REALTORS®, and I'll get to a couple of important
benefits in just a moment. Meanwhile, The State laid down specific
laws. Initially, they were broad and focused on the safe handling of earnest
money, but over time, they've grown considerably. Now,
throughout, they have focused on what a real estate broker can and cannot do. All
right, set all of that aside for a moment and let's discuss how a small service
business commonly starts. Someone acquires a trade or skill and then
begins performing that service for others in exchange for compensation.
Before common currency, they may have traded their services for goods, like
trading housekeeping for food and lodging. But eventually, money was
developed and an economy was born. Now, let's take a modern plumber as a good
example. He learns his trade, say from a mentor or a school, and then eventually
goes out on his own. At some point he realizes he can't grow beyond the number
of hours he can work, so he brings on an assistant. Eventually that assistant
learns the trade and begins servicing clients of his own or her own, only they
don't want all of the trouble that a boss has in finding new customers,
marketing plumbing, answering phones, well, you know, so on and so forth.
This young plumber decides instead to continue working for the boss. Okay back
to real estate. In the early days, brokers quickly realized that they too were
limited by the number of hours in a day and so they started bringing in people
to assist them. Only now, there were laws dictating who may and may not act as a
real estate broker, and since much of the state's concerned around real estate
broker centers on the safeguarding of money changing hands, a solution that
emerged satisfied both the brokers and the government. An additional licensee
designation of real estate agent emerged. This is someone with many of the same
responsibilities of a broker, but in exchange for working under a broker's
name is absolved from some of the laws that otherwise govern the duties of a
broker. Now, full disclosure: this video is more of a practical guide, and I'm
sidestepping the concept of Agency for now. Just know that this isn't intended
to be illegal treaties. Okay. So how does all of this play out in the real world?
Well, you have the big brand real estate companies. Some of them are national
chains. Some of them are regional players. And
others are smaller boutique operations. In California,
each real estate office must have a named broker of record. This person is
ultimately responsible to The State for the transactions of that
office and, depending upon the size of the company, say in multi-office brands,
like some of those here in the Coachella Valley, there might be someone at each
office that acts as a managing broker, and he or she often oversees the daily
operation of that office. All agents have a managing broker or a broker of record
under whom they operate. Let me say that again. A licensed broker may open an
office and act independently to engage in the business of real estate or they
may go to work for a large national chain or even a small brokerage chain.
His or her office might be in a storefront or in their back bedroom. A
licensed agent may only engage in the business of real estate under the
watchful eye of a licensed broker. Now, there's a third category of licensee, but
let's hold off on that for just a moment. This state mandated operational
structure explains why many of the forms we use to conduct real estate business
are clear to identify the broker or brokerage and not the individual agents
serving the clients. Only licensed brokers are allowed by The State to
officially engage in real estate. Agents can talk about real estate, show property,
market property, and all sorts of other things, including bringing the parties
together in the form of a deal, but ultimately only brokers can broker. Love
it or hate, it it's the system under which we operate, and, frankly, it works
pretty well. Now, I promise to circle back to two things. fFrst, there is a third
category for real estate licensee in the state of California, and it's called an
Associate Broker. This is an individual who has completed all of the education
to be a broker and has passed the exam to become a broker, but has chosen to do
business under another broker's license. In other words, they act like an agent
under a managing broker at a real estate company. Second, the thing I said I'd talk
about is the National Association of REALTORS®.
Membership in NAR and a local REALTOR® association means everyone operates
under an established set of norms and rules that go beyond the laws of any
particular state. Deviate and you're kicked out. Getting kicked out handicaps you
from being an effective agent, and there are very few agents who don't see the
importance of being part of a REALTOR® association. Separately, REALTOR®
associations facilitate broker and agent access to the Multiple Listing Service
and without that tool, well, forget it. I hope all of this sheds some light on the
differences between agents and brokers. This video was longer than usual and I'm
glad you made it this far. If I've missed anything or you have questions or
comment, please leave them in the YouTube section below, and I'll be sure to
respond. If there's ever anything real estate oriented that I can do for you,
please let me know. If I can't help you myself, I'll do my best to connect you
with someone in my personal network across the U.S. and Canada that can.
Until next time, thanks for watching.
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