Editor's note: This article is Part I in a continuing series about broker-only state licensure.

When Colorado instituted single-level (broker-only) licensure for real estate practitioners in 1997, it was the only state to do away with licensing at the salesperson level.

To practice real estate in Colorado, an applicant must take the educational requirements to become an associate broker. To become a managing broker, the licensee must pass the broker's exam. To transition salespeople who were already licensed, the state gave them up to three years to complete the new educational requirements. Surprisingly, the mandate passed with little or no grousing from salespeople, brokers or associations. In fact, the Colorado Association of Realtors helped get the statute passed.

The other states watched Colorado in amazement, report commissioners, but did little more than debate the merits of single-level licensure and watch Colorado for results.

"There used to be a lot of talk about single licensure, but I don't think there has been much action," says Craig Cheatham, spokesperson for ARELLO, a nonprofit association for real estate licensing officials.

But with rising complaints against salespeople, confusion about real estate agency on the part of consumers, and increased mobility among all practitioners, state licensing officials are debating whether educational standards should be raised to democratize the qualifications among real estate professionals.

While debate continues, lack of action may be due to several reasons. Changing the licensing requirements of real estate professionals requires a statute, which means that not only must the licensing officials get legislative support, but they must be backed by state and local real estate associations. Some brokers, nervous about losing salespeople near retirement age who don't want to take additional educational requirements, may weigh in against such statutes.

Yet, the idea is beginning to find support. Oregon and South Dakota real estate and licensing organizations have been able to get broker-level single licensure legislation passed, while legislation stalled recently in New Mexico. Oregon's single-level licensure goes into effect in July, 2002, and South Dakota's on January 1, 2003.

The sudden adoption of broker-level licensing for all real estate professionals in two states and the attempted adoption by a third state may signal a possible growing trend.

One reason may be that licensing officials are aware of rising consumer complaints against real estate practitioners. The majority of the complaints are against salespeople, who don't have the training or experience brokers have.

"90 percent of the complaints we get are against salespeople, and salespeople make up 83 percent of real estate licensees," says Scott Taylor, commissioner for the Oregon Real Estate Agency.

Consumers are not able to distinguish between licensees, and fail to understand that salespeople are agents of managing brokers. Consumer expectations are that anyone helping them buy or sell or home is fully qualified to do so.

"The parent-child business model of broker supervision is out of date," says Jeff Foster, deputy director of the Colorado Division Of Real Estate. "Agents are so mobile - how could a broker possibly know what every agent is doing every minute of the day? If all licensees receive the same education, then they are more responsible for their own actions."

Says Larry Lynstead, real estate commissioner for the State of South Dakota, "This is an attempt to raise the bar - to create more of a one-level license even though there is an additional requirement (passing the broker's exam) if they are going to supervise associates, everyone will have the same basic education."

What's further interesting about all-broker licensing is that at first blush it appears counter to the trend of transactional brokerage, when it actually works hand in hand.

Designed to reduce liability for managing brokers, transactional brokerage has the same in common with all-broker licensing. If all associates have the same educational requirements, then liability could be lessened for the managing broker, while increasing responsibility, and therefore liability, on the part of the broker associate. For example, in Colorado, all broker associates are required to carry individual errors and omissions insurance.

Colorado is again at the head of the curve by getting legislation passed (the bill is now before the Senate, and has already passed the House of Representatives) that will allow brokers to operate either as agents or transactional brokers, giving consumers a wider range of choice in the type of representation available from the real estate brokerage community. The statute will do away with all forms of sub-agency and dual agency, allowing consumers to choose the extent of representation they want from their brokers.

See Part II - Colorado Looks Back On Five Years Of Single-level Licensure

Published: May 9, 2002

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