The Principal Broker of any Real Estate Firm is responsible for the actions of EVERY one of the member agents.
In the eyes of The Tennessee Real Estate Commission (TREC), when an agent misbehaves resulting in a complaint by a member of the public or another Real Estate Licensee, and TREC finds the agent guilty as charged, they then turn their focus on the agent’s Principal Broker to determine if this agent’s bad behavior was a by-product of a lack of adequate Broker Supervision.
My observation is that most all recent cases have resulted in punishment administered to the Principal Broker . . . almost seeming as a rubber stamp decision. The logic is that the Broker is responsible for the agent, and the agent misbehaved, therefore the Broker failed to properly oversee/manage said agent.
I am certain there are ample cases in which this is, indeed, the case . . . but certainly not always.
This does raise an interesting line of thinking that is worth pursuing, and I am thankful to TREC for recognizing this and addressing it.
This begins with the question:
“What IS adequate Broker Supervision?”
How do we know if a Broker has failed in this regard if we don’t have a clear definition of what it is? TREC “gets this” and is devoting time in the next public meeting for discussion around this.
We Principal Brokers will be glad to have some clarity, because the current way has HUGE and unnecessary liability for all us. After all, any Principal Broker could be sanctioned/punished for actions of an agent member that the Broker could not have possibly known.
In Tennessee, Real Estate Sales Professionals are Independent Contractors. This means they are operating their OWN businesses, but TREC requires them to affiliate with a Principal Broker to be in business. They are not employees, and the Principal Broker is legally limited as to the scope of requirements she can require. The Broker cannot mandate attendance to meetings or working hours etc. Of course, every firm can have rules, but those rules cannot cross the line of looking like an employer:employee relationship.
A common analogy: The Real Estate Firm is the Mall . . . and each agent is a store in the mall. The manager/landlord can have some rules for the tenants and can have rules to retain the standards of the mall . . . and can prohibit illegal behavior, but cannot “manage” the business affairs of the stores.
Some points that I would hope to hear raised in TREC’s discussion:
- Span of control – How many agents could any single Principal Broker “manage” appropriately? There are some offices in our market with over 500 agents. Is it conceivable that those Principal Brokers have any clue what their agents are out there doing? I once managed 170 agents and consciously decided to open my own smaller firm Pareto Realty in part for this very reason. There were agents in my office I would not recognize in the grocery store . . . very scary stuff . . . Imagine the Broker in a 500+ agent office. What could be done about this?
- The unknowable – How could TREC require EVERY Principal Broker to know EVERYTHING that EVERY agent is doing at ALL TIMES? Even a store owner in a mall could be be using the store as a “front” for an illegal operation in the back.
- Administrative Compliance – Broker responsibilities transcend the management of agents . . . There’s also the monumental task of auditing each and every transaction file to be sure that all forms are properly completed and signed by all required parties . . . along with complete and accurate of escrow money . . . adequate data security measures and safe retention.
- Advertising Compliance – Oh my! The requirement is that all Brokers approve all advertising done by all agents. This one is potentially impossible (especially in an office with lots of agents) because of all of the forms of advertisement out there – Print – TV – Social Media – Websites – Direct mail – Telephone – text and so on and and so on and so on.
- Licensing Compliance – This entails the tracking of all agents’ License expiration dates, Continuing Education Hours, Errors and Omissions Insurance, Association dues, MLS fees. While all of these fees are generally the responsibility of the individual independent contractor agent . . . if the agent fails to pay them, the Broker is held responsible for paying them or releasing the agent.
- Business Compliance – Most Real Estate Firms are incorporated, so there are annual fees and reports to be filed with the State of Tennessee along with a few other pesky “junk fees” like the cherished “Professional Privilege Tax” which is charged to professionals just because the state feels like charging it . . . there is no benefit whatsoever to the professional paying the fee. Ah yes – and the annual excise tax on the VOLUME of sales.
So . . . given all of the above . . . What might you think that TREC will frame in as a great definition of “Broker Supervision” such that they can fairly determine if a Broker were to be derelict in her supervisory role over her agents?
akin to herding kittens . . .
So tell me again . . . Why would ANYONE choose to be a Principal Real Estate Broker?
For me that answer is a simple one: I do all of the above because I must do it all in order to be able to have the privilege of helping the Vital Few agents of Pareto Realty succeed in their Real Estate Sales careers.
Simple as pie, eh?
Hope you have a wonderful and safe Labor Day!