Real Estate Broker Competency:
I’ll Take Real Estate Geography for a Thousand, Alex
From Alamosa to Yuma and Springfield to Dinosaur, an individual that holds a real estate broker’s license in the State of Colorado can help clients all across this great State. However, before working outside of your usual area of expertise you must assess your competency to work in that area. Just because you can work outside of your usual area, does not always mean that you should.
One of the functions of the Division of Real Estate is to investigate complaints filed against real estate brokers. There are many examples of complaints alleging that the broker was not competent to handle the transaction. Sometimes a complaint is filed by the broker’s own client! A broker may complete multiple transactions with skill and competence only to find themselves facing a license law violation when they step into new territory without gaining the necessary knowledge and training.
Real Estate Commission Position Statement 41 states
“Prior to performing any acts that require a real estate broker’s license, a broker should determine whether he or she possesses the knowledge, experience, and/or training necessary to perform the terms of the transaction and maintain compliance with the applicable federal, state or local laws, rules, regulations, or ordinances. If the broker does not have the requisite knowledge, experience and/or training necessary to consummate the terms of the agreement, the broker should either decline to provide brokerage services or seek the assistance of another real estate broker who does have the necessary experience, training, and/or knowledge. The Commission will have grounds to discipline a broker’s license if a broker fails to take the measures necessary to gain competence and violations of the license law are substantiated.”
Competency Example
Consider Bob Broker. He has worked with Carla Client for 10 years helping Carla buy investment properties in Greeley, CO. Carla likes owning properties in college towns and wants to expand to Fort Collins. Bob finds Carla a great 5 bedroom home a few blocks from the Colorado State University campus. The cash flow and return on investment are very attractive when at least 4 of the bedrooms are rented. Carla is planning to rent to 4 or (hopefully) 5 college students. Did you know that the City of Fort Collins has a local ordinance known as “U plus 2” which allows for no more than three unrelated people living in a dwelling unit?
What about Linda Licensee who has a client, Billy Buyer who is looking in Summit County for a place where he and his extended family can come together for an annual winter getaway. They need lots of parking because 14 of them drive in from all over the state. Last summer he bought the perfect property, only to find out that in winter half of the parking spaces are reserved for the plows to use as snow storage.
Do you know which counties have requirements for the transfer of properties with Onsite Wastewater Treatments Systems (OWTS)? If you have a client who wants to purchase a property to use as an Airbnb, do you know which cities and towns have registration requirements for short term rentals, and if those registrations transfer with the properties? Are you familiar with the term condotel, where condotels exist and how that could affect the financing of that property?
For many people the choices they consider for their real estate investments are some of the most important decisions they will make. They rely on the expertise, skill and care of a real estate professional. When expanding your service area you have options. One is to seek out and complete the training necessary to be competent. You can also seek the assistance of another broker who already has the experience, training and knowledge and work with them or make a referral. Remember, it is a violation of the license law if a licensee demonstrates unworthiness or incompetency to act as a real estate broker by conducting business in such a manner as to endanger the interest of the public. If you find yourself faced with a new opportunity and are not sure how to proceed with competence, consult your employing broker, attorney or compliance officer.