Editor's note. This article is Part II in a continuing series about single-level, broker-only licensure.

In 1997, Colorado became the first state to offer single-level, broker-only licensure. By giving already licensed salespeople three years to complete the educational requirements to become a broker, the initiative met with surprisingly little resistance.

Now it is a statute that all real estate licensees can only be licensed when they complete the educational requirements to become a broker associate. To become a managing broker, broker associates must pass the broker's exam.

With other states beginning to follow suit, Colorado real estate commissioner Mike Gorham and deputy director Jeff Foster have been heralded as visionaries among state licensing personnel. Did their vision meet expectations?

To get a sense of how the real estate industry and consumers have been affected over the last five years, Realty Times editor Blanche Evans interviewed Foster for an Agent News exclusive.

B.E.: What made Colorado look at changing the licensing law to broker-level only?

J.F.: Colorado has operated under the same license law since 1926, and we have to question whether the law of common agency reflects what is happening in the industry today. The public expectation for competence and professionalism is not to have representatives of varying levels. Also the traditional office-based setting is not as practical as it once was. With modern technologies, agents almost never have to go into the office, and they aren't being supervised by managing brokers the way they once were.

The Colorado real estate commission appointed a task force to look into questions with the two-tiered system.

B.E.: But 1997 was still very early in the game. Most agents at that time weren't online and they didn't have wireless access to listings.

J.F.: But we did have cell phones and computers, and the Internet did exist. And, there was a lot of independence by salespeople. The managing broker's role was evolving into less of a watchdog to more of a facilitator.

Single licensing was more in line with what met the current practices. Underlying that is individuals are more responsible for their own acts. Someone who has the same education as the managing broker can be held responsible for their own actions unless there is responsibility for the employing broker.

B.E.: So single licensure reduces liability for the managing or employing broker and puts it squarely on the individual. How is the public protected?

J.F.: The individual needs to carry errors and omissions insurance. The public is protected by what gives us authority, and we have a recovery fund for people who are victims of willful misrepresentation. The licensees contribute to the fund. Now it is so large, it lives on its own interest. With over $3 million, and with errors and omissions insurance, this is good public protection.

B.E.: How has employment in the industry been affected over the last five years?

J.F.: None of the single licensing concepts did anything to change current company employment practices, and the employing broker still owns the listings. The task force didn't want to jeopardize the fee settings. Holter VS Moore decided that brokerage companies are single economic entities because of brokers' control of listings and control over licensees. So nothing changed, it is still under employing brokers' control.

B.E.: Can you say for certain that single licensure has lessened employing broker liability?

J.F.B.E.: How does single licensure work with agency relationships? What type of representation relationships are available in your state?

J.F.B.E.: Why should that make more sense to the public?

J.F.: It makes more sense fundamentally because the public does not distinguish between the broker and salespeople, so why not match the laws to perception? We've been unreasonable in perpetuating old notions that brokerage should be a parent/child relationship with the managing broker overseeing a salesperson like a child.

The new system will offer more flexibility with relationships instead of defaulting under complex issue that no one understands anymore, like the notion of imputed knowledge. That suggests that brokers are telepathic and know what everyone is thinking and saying, and they rely on other court decisions to perpetuate the common law of agency. The master/ servant model is simply not a model of today.

People who want advocacy should have that choice and for those who don't want it transaction facilitation should be available. We've also abolished vicarious liability on the part of consumers for the same reason. If you ask them, "Do you want an advocate to develop a strategy for you?," they will say,"Yes," but if you say they are then vicariously liable through their agent, then they don't want agency. So we removed that. If you hire an agent for he or she commits acts you did not authorize you are no longer liable. Making people vicariously liable for things you did is confusing. We are in the business of protecting consumers who confuse transaction brokers with transvestites.

We need to quit pretending we are attorneys who live in the 1600s in England. We don't have to be adversaries in a transaction.

B.E.: Speaking of adversaries, what about banks possibly getting in real estate - how will licensing make it easier or harder for them to do business?

J.F.: Banks getting into anything makes it harder for that industry - once they get a foothold and rely on it as an economic basis. What they will probably start pushing for is uniformity in license laws so they can do business across state borders. If they can't have uniformity they will want license recognition, this is just what we would suspect if what happened in the securities, appraisal and insurance industries is a precursor. Especially with the case of the Texas broker who is claiming infringement on fair trade because he was selling timeshares on the Internet. California and Florida told him he couldn't do that, but he feels that is a restriction on fair trade - independent stand alone license laws are a barrier to free trade.

In ARELLO, a lot of members are recognizing that times are changing, and looking at each other's licensing laws. We all have education, testing, and we have a lot in common, then we should engage in recognizing each other so we aren't viewed as a barrier to free trade.

B.E.: What differences have you noted in the industry lately? Can you unequivocally say that single licensure has been a success?

J.F.: That would be awkward to say because there isn't a statistical measure to claim success. Success is matching the public's perception and expectation. The comments we have anymore is that it is just accepted, and real estate professionals don't view it as an alternative unless they come from another state. They think it is a good idea, it makes sense to because they aren't as closely supervised. Employing brokers like it because it insures their agents will have higher amounts of education.

B.E.: What does it take to be a broker associate in Colorado now?

J.F.: We have close to 196 hours to be broker associate. We sure saw a drop off in our applicants because we did raise the bar and there were less applicants.

B.E.: I see what you mean about uniformity in licensing among states. In Texas, it takes about 900 hours to become a broker. Why should it be that much harder from one border to the next? Something's not right about that…. Well, let's get back to single licensure. Whose idea was it anyway?

J.F.: I don't know, someone had to have come up with it, but a lot of people credit Mike Gorham. Mike has been recognized as somebody who is progressive and doesn't want to get stuck in the box, and working with the industry to meet our common goals.

The impetus behind the bill is the changing paradigms in the industry - the old model of parent/child between employing broker and licensee. The physical proximities don't exist anymore. Licensees don't even visit the home office, and a lot of the industry is changing, including the rise of "teams." Then when you put that together with the public does not having understanding of two-level licenses - that some have less education, are less stringently tested, and have less experience, consumers will say every time that they want the same level of service.

It's incongruent. They should either be informed, or we should find another way to serve them.

B.E.: Do you have statistical evidence of fewer complaints by consumers?

J.F.: When we instituted single licensure in 1997, it would have been nice to have some statistical basis and kept track. We didn't, and there are so many variables to determine if this impacted the industry by having less complaints. That's something that should jump off the page. We have had a robust economy for 10 years and now we have a little decline and that ushers in a few complaints. If they paid more than their house is currently appraised for, then they want to blame someone.

On the logic alone, we went forward and the industry supported us, and it makes so much sense that everyone should have the same testing and education to represent the public's interest. No one stood up and said, 'No that's wrong.'

B.E.: What about experience?

J.F.: There is a glitch - you can't forbid entry in the business. There has to be a provision for entry level so we have to have an entry level position. You are licensing people who have no experience and that is the level of the broker associate. They have to serve under the close supervison of the broker and we address that by rule. Otherwise, they are presumed to have the experience.

Part III: Oregon, South Dakota Prepare For Single-level Licensure