Director's Corner
Single Agent or Transaction Broker?
Performing Brokerage Relationship Duties in Accordance with License Law
We continue to see examples of brokers who do not perform their brokerage relationship duties in accordance with the license law. Within the past month, we received a complaint that alleged, among other things, that a broker had represented both sides of a transaction as a transaction broker. The problem is that the sellers in the transaction were the broker’s parents. We’ve also seen cases of brokers representing their spouses or children as transaction brokers. The Commission has consistently decided in these types of cases that the broker should have been a single agent for the client to whom they are related. The Commission recently reviewed a complaint investigation where one broker (“Broker A”) was a member of a team with the Employing Broker (“Broker B”) of the Brokerage Firm. Broker A took a listing to sell a property, but then represented Broker B as a transaction broker in Broker B’s purchase of that property. The Commission ruled that Broker A had violated the brokerage relationship act and should not have acted as a transaction broker for the Employing Broker.
What to Consider
There are two scenarios that we commonly see during our examinations where Brokers hold the funds of others, and do so outside of their licensed Brokerage Firm: 1) short term rentals (not owned by the broker) and 2) the rental of Broker’s own investment properties. There are quite a few Brokers performing short term rentals these days. One of the common issues that we see is that the guest deposits, owner funds, and State or local sales taxes are not placed in trust or escrow accounts. It is pretty typical for Brokers to perform the accrual basis of accounting, which is acceptable as long as the owner agrees to the accrual basis of accounting in writing. With investment rental properties owned by the Broker, the Commission expects to see the security deposits placed in a trust or escrow account because those are technically the tenant’s funds, until such time as the tenant forfeits the security deposit. Rental proceeds should not be placed in such trust or escrow accounts because those funds belong to the Broker landlord and doing so would constitute commingling of funds. In either scenario, the rest of the Commission’s regulations still apply, including the requirement of performing monthly three-way reconciliations and the Commission has the authority to audit the accounts and records.
Director Marcia Waters
About the Director
Marcia Waters has been with the Colorado Division of Real Estate since August 2005. Marcia started with the Division as a Criminal Investigator for the Real Estate Commission and was promoted to Chief Investigator in 2006. In 2007, she was promoted to the position of Investigations and Compliance Director. In that capacity, she managed the investigatory and settlement programs for the Division. On October 15, 2010, she was promoted to the position of Division Director. The Division of Real Estate licenses and regulates approximately 50,000 real estate professionals. Ms. Waters serves as the administrator for the Real Estate Commission, the Board of Real Estate Appraisers, the Board of Mortgage Loan Originators, the Community Association Manager Program and the HOA Information and Resource Center. Ms. Waters manages the Division’s $6.5 million budget, oversees a staff of approximately 57 full-time employees, and establishes the direction of Division programs based on market and industry trends.