Unprofessional conduct includes any court action regarding unethical actions on the part of the licensee. The court action could be criminal in nature or simply a litigation case between the licensee and a client. At the disciplinary hearing a certified copy of a final holding of any court of competent jurisdiction is conclusive evidence of the conduct of the license holder or applicant upon which a conviction or the final holding is based. Upon a conviction, however, the judgment and sentence is conclusive evidence at the ensuing disciplinary hearing of the guilt of the license holder or applicant of the crime described in the indictment or information, and of the person's violation of the statute on which it is based.
This RCW states that the findings of the involved court are conclusive evidence of unprofessional conduct. A guilty verdict in a court case will be the evidence utilized by the DOL in a disciplinary hearing.
Disciplinary action can be taken by the DOL for the following:
When receiving real estate documents from clients and/or customers for transactional purposes, they must be returned to the rightful owner within a 30 day period. If not returning the documents within this time frame, it is also considered conversion.
Managing Broker License
Managing Broker License - In order to supervise the activities of other licensees, an individual must hold a managing broker's license. This includes:
Managing broker means a natural person acting on behalf of a real estate firm to perform real estate brokerage services under the supervision of the designated broker, and who may supervise other brokers or managing brokers licensed to the firm. The only licensee that can supervise other brokers is a person who holds a managing broker license. This licensee must also be under the supervision of the designated broker for the firm and in some cases is also the designated broker of the firm.
Managing broker responsibilities include, but are not limited to:
(1) Assuring all real estate brokerage services in which he/she participated are in accordance with chapters 18.85, 18.86, 18.235 RCW and the rules promulgated thereunder.
(2) Cooperating with the department in an investigation, audit or licensing matter.
(3) Being knowledgeable of chapters 18.85, 18.86, and 18.235 RCW and their related rules.
(4) Keeping the real estate program informed of his or her current mailing address.
(5) Following the designated broker's written policy on referral of home inspectors.
(6) Being appropriately licensed.
(7) Delivering transaction documents and brokerage service contracts to designated broker or delegated managing broker within two business days of mutual acceptance.
(8) Following licensing laws and rules regarding:
(a) Safe handling of customer/client funds and property.
(b) Timely delivery of customer/client funds or property.
(c) Proper and legal advertising.
(d) Modifying or terminating brokerage service contract on behalf of the firm.
Training Supervisor - Some major firms will actually put a managing broker on salary to do nothing but train and supervise new brokers. Some firms have educational directors who are in charge of training programs and who do not supervise sales activities. The problem is that it is a thin line regarding interpretation of supervising and training. This is especially true when under investigation by the DOL and licensing procedures. The State has the interpretive power regarding any supervisory activities and its rulings are binding on the firm. Therefore, it is best that the educational director holds a managing broker's license.
Selling and Supervising - Most firms allow their managing brokers to sell as well as to supervise assigned training activities. The sales by a managing broker are basically in the same category as a broker in that of managing broker is an agent of the firm and the designated broker.
Branch Manager - As stated earlier, any branch manager appointed by a firm must hold a managing broker's license. The firm must notify the Department of Licensing regarding which managing broker is in charge of a specific branch. Any changes in status of the branch manager must be immediately communicated to the Department.
Display of Licenses - Each branch office that is established by a firm must have the licenses of all the affiliates including the branch manager's managing brokers license posted to public view. Any movement by affiliates from one branch to another must cause immediate notification to the Department of Licensing. Appropriate changes to licenses must be accomplished in an expedient manner.
Mailed In - Any affiliate that leaves a firm requires the firm to mail in that affiliate licensees license to the Department of Licensing (DOL). This is required because the DOL doesn't want a licensee to be practicing without any supervision from the designated broker for the firm.
Fiduciary Capacity: The relationship of utmost good faith and loyalty that an agent owes to their principal.
This definition is rather simplistic in nature but this is a definition that the State follows in applying actions of some agents towards their principal. Don't forget, in regulating actions of brokers the State interprets what is considered loyalty and good faith towards a client.
Golden Rule - -Do unto others as you would have others do unto you-. Basically speaking, the actions that you take on behalf of a client should be the same actions you would expect if you were a principal in a real estate transaction.
State Action - If an investigator for the Department of Licensing says that your actions were not in your client's best interest, but in your best interest, disciplinary action shall be taken by the DOL. This could be pursued under the 'loyalty' statutory rule by the State. This regulation established by the State under RCWs (State Laws/Statutes) is somewhat vague regarding the interpretation. This is purposefully so because the State has the power to interpret on a case-by-case basis.
Appeal a Ruling - If an investigator makes an interpretation that is against your interests, you do have the right to appeal to the Director regarding the investigator's decision. But in the meantime, you are guilty until proven innocent. Therefore, it is best to take actions that are in your client's best interest and to document your actions on a regular basis.
Running a Brokerage
In running a brokerage firm, there are numerous regulations and requirements by the State that must be met. The first concept we are going to delve into are the requirements of the State regarding the services that your office staff can provide the general public. This sounds rather innocuous, but there have been a number of situations involving a firm and the actions of their UNLICENSED staff that were not in compliance with State regulations. So, we will begin with the definitions of personnel/staff and their function.
Office Personnel/Staff - The UNLICENSED staff that you hire to do the general office work for your firm has to be well trained regarding their responsibilities and the requirements of the State of Washington. The main requirement of staff is that they do not practice any form of brokerage services. Only brokers registered with the State are allowed to perform brokerage services.
Staff cannot work with the public such as giving the public information over the phone and one the firm's listings. For this reason some firms require their staff to obtain a real estate license if they deal with the public.
License Required for Brokerage Services - To clarify regarding brokerage services let's look at the State RCWs regarding what is considered brokerage services. As we go over these definitions, please remember that staff and personnel cannot perform ANY of these services unless there are properly licensed. The following text materials are the actual State Statutes regarding what ARE brokerage services.
"Real estate brokerage services" means any of the following services offered or rendered directly or indirectly to another, or on behalf of another for compensation or the promise or expectation of compensation, or on the broker's behalf.
The following activities are considered to be real estate brokerage services and requires the individuals and firm to be licensed properly with the Department of Licensing (DOL) - Business Division - Real Estate Division:
Further Brokerage Services Requiring a License - Negotiating or offering to negotiate, either directly or indirectly, the purchase, sale, exchange, lease, or rental of real estate, or any real property interest therein; or any interest in a cooperative.
Any form of negotiations involving real property or a cooperative requires a license.
Listing, selling, purchasing, exchanging, optioning, leasing, renting, or negotiating the purchase, sale, lease, or exchange of a manufactured or mobile home in conjunction with the purchase, sale, lease, exchange, or rental of the land upon which the manufactured or mobile home is or will be located;
Mobile home sales do not require a real estate license UNLESS land is part of the sale.
However, the Department of Licensing will require a mobile home dealer's license if mobile homes are being sold without the land.
Real Estate Brokerage Advertising
Further Actions Requiring a License - Advertising or holding oneself out to the public by any solicitation or representation that one is engaged in real estate brokerage services;
Responsibilities of Designated Brokers
Firm Designates a Designated Broker - Each firm must have a natural individual that is designated by the firm to be its designated broker. This person must be licensed as a managing broker with the Department. The appropiate forms must be utilized by the firm in appointing the designated broker. The license for this person will be acknowledged by the Department as the designated broker for the firm.
Requirements of the Designated Broker - When a person that holds a managing broker's license becomes the designated broker of a firm, large amount of responsibilities exist. The next couple of pages will highlight these reponsibilities. These include:
Real Estate Brokerage Relationships
Agency relationship means the agency relationship created under this chapter or by written agreement between a real estate firm and a buyer and/or seller relating to the performance of real estate brokerage services.
Agent means a broker who has entered into an agency relationship with a buyer or seller.
Broker means broker, managing broker, and designated broker, collectively, unless the context requires the terms to be considered separately.
Business opportunity means and includes a business, business opportunity, and goodwill of an existing business, or any one or combination thereof when the transaction or business includes an interest in real property.
Buyer means an actual or prospective purchaser in a real estate transaction, or an actual or prospective tenant in a real estate rental or lease transaction, as applicable.
Buyer's agent means a broker who has entered into an agency relationship with only the buyer in a real estate transaction, and includes subagents engaged by a buyer's agent.
Seller means an actual or prospective seller in a real estate transaction, or an actual or prospective landlord in a real estate rental or lease transaction, as applicable.
Seller's agent means a broker who has entered into an agency relationship with only the seller in a real estate transaction, and includes subagents engaged by a seller's agent.
Dual agent means a broker who has entered into an agency relationship with both the buyer and seller in the same transaction.
Subagent means a broker who is engaged to act on behalf of a principal by the principal's agent where the principal has authorized the broker in writing to appoint subagents.
Confidential information means information from or concerning a principal of a broker that:
(a) Was acquired by the broker during the course of an agency relationship with the principal;
(b) The principal reasonably expects to be kept confidential;
(c) The principal has not disclosed or authorized to be disclosed to third parties;
(d) Would, if disclosed, operate to the detriment of the principal; and
(e) The principal personally would not be obligated to disclose to the other party.
Material fact means information that substantially adversely affects the value of the property or a party's ability to perform its obligations in a real estate transaction, or operates to materially impair or defeat the purpose of the transaction. The fact or suspicion that the property, or any neighboring property, is or was the site of a murder, suicide or other death, rape or other sex crime, assault or other violent crime, robbery or burglary, illegal drug activity, gang-related activity, political or religious activity, or other act, occurrence, or use not adversely affecting the physical condition of or title to the property is not a material fact.
Principal means a buyer or a seller who has entered into an agency relationship with a broker.
Real estate brokerage services means the rendering of services for which a real estate license is required under chapter 18.85 RCW.
Real estate firm or "firm" have the same meaning as defined in chapter 18.85 RCW.
Real estate transaction or "transaction" means an actual or prospective transaction involving a purchase, sale, option, or exchange of any interest in real property or a business opportunity, or a lease or rental of real property. For purposes of this chapter, a prospective transaction does not exist until a written offer has been signed by at least one of the parties.
Your Market Area
Develop Your Market - The new real estate broker must concentrate on developing new business.
Develop Your "Farm" - The listing farm takes time but produces results faster than waiting for the phone to ring. The listing farm is a select neighborhood in which the broker actively solicits business. Concentrating on a homogeneous neighborhood with rising property values will be more productive than an older neighborhood undergoing an economic decline. Statistics can be obtained from the local MLS as to the number of sales or property turnovers in particular areas. Look for a minimum rate of eight turnovers in the past year as an ideal area to start farming. The first tool an broker will need is a good quality map of the neighborhood, area, or subdivision. This map may be obtained from the County courthouse or local title company. Become familiar with the area. Know the streets, parks, schools, shopping areas by name, municipal offices, and organization buildings. Begin keeping an ownership record of properties in the area. Sources for ownership can be from title company records, city directories, reverse telephone directories, property tax files, and from several electronic locator software programs.
Time Pattern - Avoid night calls if possible unless a firm appointment has been established and confirmed prior to the appointment. This is for consideration of the owner and for the safety of the salesperson.
Weekends - Reserve the weekend to allow time to work with new buyers and to show listed property to them.
There are aspects of marketing that are not fun, but must be done in order to be successful.
Working With FSBOs - For Sale By Owners (FSBO) is one of the challenges a real estate licensee deals with routinely. Many people feel they have the expertise to sell their own property without the assistance of a broker. Many simply don't know a broker or they may know too many brokers and do not want to alienate any of them by listing with any particular one. Remember they want to sell their property or it would not be for sale. Calling the owner and obtaining an appointment to inspect the property is the first step. During the inspection take notes and make favorable comments to the owner. Describe the service you and your company offer sellers and offer to compile a comparative market analysis for the owner. Asking some technical questions will help to determine the seller's ability to handle the sale of their property. Ask about their buyer qualification questions, about financing, appraisal, and title information. The answers to these questions should help determine if the seller is qualified to handle a sale of the property or if they are in need of a broker's assistance. Ask for the listing if brokers assistance is apparent.
Canvassing - Telephone canvassing can be an effective tool for obtaining listing appointments. Usually it requires about twenty-five calls to obtain one listing appointment. Be prepared before starting on a telephone campaign. At least be familiar with the property values in the area you will be making call to. Also, beware of the Federal Do Not Call List.
Every licensed broker must have and maintain an office accessible to the general public. The broker must meet the following regulation requirements:
Resident Records - Brokers who do not reside in Washington must keep their Washington records and client trust accounts in Washington with a Washington licensed broker, escrow agent, attorney, or title company.
Records 3 years - Brokers are required to keep real estate transaction records for three years. They are to keep at least copies of earnest money contracts, listings, receipts, and disbursements of all closed real estate transactions of their brokerage.
Office Zoning - A broker's office must comply with zoning regulations and any business ordinances even if their office is located in their residence.
Separate Records - A brokerage firm may be located in an office where the broker conducts a separate, compatible business, such as a construction, land development, or other type business. The real estate business activities and real estate brokerage records must be maintained separately and apart from the other personal or business records.
Common Facilities - Two or more brokerage firms may conduct real estate business at one location with a common entrance and address. A real estate brokerage office must be identified by a sign at the office entrance that is visible to public. Each firm must be physically separated. Each brokerage must maintain their separate accounts and required real estate records separate from each other.
Separated From Living Quarters - A real estate office may be in a broker's home if the office is separate from the living quarters. There must be a sign at the office entrance visible to public and the entrance may not be through the living quarters. Local city zoning must allow in-home business and there must be an address that can be located. Out-of-state brokers may not have an in-home office; they must maintain an in State office.
Signage - A sign that shows the name of the brokerage firm must be visible to the public. The name must be the same as the name on the license. The brokerage must be located at the address as shown on the real estate brokerage license. The name of the individual designated broker in charge is not required.
Display License - All real estate licenses must be available in the office at the address on the license and the licensee must work out of that location.
No Misleading Name - A brokerage name cannot be misleading or similar enough to another brokerage firm to be misleading to the general public.
Branch Offices - Branch offices have specific requirements as well:
Files And Records
DOL Rules - The DOL and Real Estate Department have specific rules regarding documentation. The following procedures apply:
Listing Agreements - All listing agreements must be in writing according to the Statute of Fraud in Washington.
P/S Agreements - All Purchase and Sale agreements must be in a written form. They must show the amount and the form of earnest money deposit.
Non-Cash Disclosure - The failure of a salesperson to advise a seller that the deposit is other than cash or its equivalent is a violation of license law.
Trust Account - Brokers must deposit all funds into their firm-s trust bank account the next banking day following receipt of the funds unless the purchase and sale agreement provides for deferred deposit or delivery. In that event, the broker must promptly deposit or deliver funds in accordance with the terms of the purchase and sale agreement.
Check Can Be Held - A check may be held for a specified time if the buyer requests it in writing on the purchase and sale agreement. Don't forget, the seller must agree with this procedure by signing an acceptance of the written request. Cash can never be held. The cash must be deposited by the end of the first banking day after it is received.
Demand Notes - Promissory notes used for earnest money should be "demand notes," payable upon acceptance of the offer or payable on a specified date. The broker is responsible to demand payment when the promissory note becomes due. The broker is required to inform the seller if payment is not made as agreed. Failure to inform the seller could lead to a lawsuit, suspension, or revocation of the broker's license.
Separate Transaction Folders - Transaction files are to be in their own individual folders and filed in a systematic sequence. Each transaction folder should include all agreements, contracts, documents, leases, closing statements, and any correspondence regarding the transaction.
Trust Account(s) - A brokerage firm must have a separated trust account from its business account. When starting a trust account, it will have a zero balance. Each time earnest money is taken on behalf of buyer/client; it must be placed in this trust account or sent direct to the client's escrow company.
Bank Notification - The chosen bank for the trust account must be informed of the "trust funds" nature of the account. The real estate division must be notified of the location of the trust account.
No Account Fees - No bank account fees are to come out of the trust account. Any involved fees should be taken from the firm's business account.
Monthly Reconciliation - The broker is required to reconcile (balance) all trust account statements monthly and to retain in sequential order all canceled checks of those trust accounts.
Business Accounts - NO Reconciliation - The business account of the firm is not subject to State regulations. This is the general business account of the firm. This is the account that pays your commission, salaries of office staff, and the bills of the firm.
Trust Account - Reconciliation Monthly - Only client moneys go into this account. No commissions, salaries, or bills can be paid out of this account. The client moneys that go in must be paid back to the client or forwarded on to escrow for closing.
Records Available for Inspection - All of the real estate broker records must be kept for three years and be available for inspection and audit by the Director or their representatives. Most wise brokers keep their records for more than the required three years.
The study of system of rules which a particular country or community recognizes as regulating the actions of its members and which it may enforce by the imposition of penalties.