December 10, 2018
We were halfway through the last real estate licensing class in Cherry Hill when one of the aspiring Realtors® told the class a story. “My friend just changed from xxx Realty to yyy Realtors®,” she said, and after she told them she was leaving, the brokerage wouldn’t let her take her listings with her. That’s so unfair! She called me last night to tell me that [xxx] had stolen her four listings.” One of the students turned to me and asked, “They can’t do that, can they?”
Real Estate Agency Law
We had not yet covered the topic of Agency Law, so it was a good opportunity to prepare them for what is, in my opinion, one of the most important areas in the entire 75-hour New Jersey real estate licensing course.
The truth is, we all work under the authority of the broker who is responsible for each real estate agency. Many people assume that because the vast majority of real estate agents are independent contractors, that the sellers and buyers they enlist belong to them.
“THE” Broker rules!
While many real estate professionals go on to earn the designation “Broker-Salesperson” or “Broker Associate,” they are not the broker. There is only one “THE” broker: the Broker of Record, who is responsible to both the agency’s clients for customer service and to the New Jersey Real Estate Commission for compliance with the plethora of rules and regulations that govern our profession.
The broker authorizes each licensed salesperson and broker-salesperson on the agency’s roster to act on his or her behalf when dealing with clients. So while one of those superstar real estate agents may go out and sign up 20 listings and then show 20 buyers homes that they love and go under contract to purchase, every one of those transactions actually belongs not to Superstar Salesperson Sally, but to Broker Ben!
That could mean that if Sally were to leave Ben’s brokerage for another company while she had her daughter under contract to buy a new home, and had her mother’s home listed for sale, if Broker Ben wanted to, he could insist that those clients belonged to him. I’m not suggesting that Ben would be doing anything wrong; that is the way “agency” works in our business.
The Independent Contractor Agreement
As independent contractors, when we join a real estate firm, we are given an independent contractor agreement and the company’s policies and procedures manual, which will outline such policies as what will happen if we leave that company and still have clients in the pipeline. Those items can also be negotiable—especially at the time when that new broker is trying to recruit you to switch to his or her firm.
So as I advised those students in our pre-licensing class, “The time to think of these things is at the time you are interviewing brokers—not when you are leaving them and are in a very weak position.”
David C. Forward is a licensed real estate broker and instructor and was first licensed as a Realtor® 30 years ago. He is School Director of Garden Real Estate Academy, has won numerous awards for real estate sales, is a much-requested public speaker who has addressed audiences on six continents and is the author of 13 books. David can be reached at David@GSREacademy.com