As is true in many states, real estate brokers in California are required to "exercise reasonable supervision" over the activities of their salespersons. Section 2725 of the Real Estate Commissioner's Regulations spells out that this supervision "includes, as appropriate, the establishment of policies, rules, procedures and systems to review, oversee, inspect and manage" such things as transactions, maintenance of documents, trust fund handling, advertising, and more. The Regulation also notes "The form and extent of such policies, rules, procedures, and systems shall take into consideration the number of salespersons employed and the number and location of branch offices." Also, "A broker may use the services of brokers and salespersons to assist in administering the provisions of this section…"
So how is all this working out? Do California brokers generally exercise reasonable supervision over the activities of their salespeople? On the whole, I think not. (Which is not to imply anything negative about most salespeople. I suspect that most -- certainly not all -- are competent in their craft and decent in their intentions. But I doubt that they are properly supervised.)
My opinions are anecdotal, of course. I have neither the time, the resources, nor the inclination to conduct a statewide analysis of broker supervision. My thoughts expressed here are simply based on observations and interactions accumulated during nearly 40 years of practice in the field of residential real estate.
What I have seen is this: Most brokers -- even those with a detailed set of policies and procedures -- are likely to practice their supervision retroactively. That is, their requirements, at best, are designed to ensure that they have a record of what was done.
Typically, transaction "oversight" consists in requiring that no commission checks will be issued unless there is a file containing a list -- often a substantial list -- of mandatory documents (disclosures, disclaimers and advisories, inspections, addenda and modifications, etc.). It doesn't require approval, or consultation about, these items at or near the time that they were generated, it simply requires that, at the end, they be in the file, signed and dated.
The Oxford dictionaries define supervision as to observe and direct the execution of (a task, project, or activity). It is "to be in charge of somebody/something and make sure that everything is done correctly, safely, etc." Supervising an activity requires observing it as it takes place and, if necessary, becoming involved with it.
The kind of after-closing file review practiced by many real estate companies is not supervision; rather it is, at best, reviewing.It enables one to know what happened. It certainly does nothing to protect the consumer who is presumably meant to be the beneficiary of the regulations.
Not long ago we wrote of a recent California law that mandates a new continuing education course in Management and Supervision for brokers who are renewing their licenses. As the Bureau of Real Estate reviews submitted courses for approval, there is a great opportunity to ensure that brokers will be acquainted with the fact that supervising an agent in a transaction doesn't just mean compiling a record of what they did. It also means at least trying to make sure that everything that is done is done correctly. And that means, keeping an eye on the transaction as it is going along.
Yes, what has been discussed here would surely make broker supervision more labor intensive than it generally is now. No one said this would be easy. Or cheap.