Brokerage Relationships Dos and Don'ts

Here are two scenarios, based on actual cases, that are violations of the Brokerage Relationships in Real Estate Transactions Act (BRRETA) and have caused disciplinary actions to be taken against the licensee.

SCENARIO ONE
Floyd Slawson is the supervising broker of Kelsey's Realty. He has four agents working in his firm. Floyd has decided to set policy in his firm to offer only designated agency agreements. One of Floyd's agents, Howard, has provided the brokerage relationships brochure to Helen, a potential buyer. Helen has decided that she would like representation, and on behalf of his Broker, Howard signs her up to a designated buyer's agency agreement, wherein he is named the designated agent.

Floyd has a good friend, Otis, who needs to sell his house. Floyd takes the listing as a designated seller's agent, naming himself as the designated agent. Helen gets a showing of Otis' house, and writes an offer. Another of Floyd's agents, associate broker Bernard, tells Floyd that he will need a signed TBA-DA since an in-house transaction is occurring. The TBA-DA is executed, the contract is executed, and they close.

Upon later examination of the broker's records, what did the auditor find?

A review of the transaction file reflects the supervising broker named himself as a designated agent. K.S.A. 58-30,109(b)(4) reflects that whenever a designated agent is named, the supervising broker becomes a transaction broker by default. It is therefore not possible for the supervising broker to ever take an agency agreement as a designated agent.

Bernard gave Floyd bad advice. A TBA-DA would only be used on an in-house transaction, when the same person has both a designated agency agreement with the seller, and a designated agency agreement with the buyer.
The auditor found a violation of K.A.R. 86-3-27, improper use of a TBA form.

What should Floyd have done to stay in compliance with the BRRETA?
Floyd has several options.

1. He could have refused to allow designated agency in his firm, in which case, he would have taken a seller's agency agreement, and Howard would have taken a buyer's agency agreement with Helen, on behalf of his Broker, Floyd. When Helen wanted to purchase Otis' property, a TBA-RES (Transaction Broker Addendum-Residential) would have been used to step down from the agency relationship to transaction brokerage.

2. He could have allowed his agents to practice designated agency, while he chose to:
A.) Not actively list and/or sell
B.) Take listings as a transaction broker or work with buyers as a
transaction broker.

3. He could have decided that everyone in his firm must practice transaction brokerage.

One of the main things the broker must consider is that although he or she can decide company policy concerning what the firm will offer, the decision is not chiseled in stone. The policy should be flexible to appropriately address different circumstances. Licensees will have to consider every scenario on an individual transaction basis. Licensees should consult with their Broker for help and advice. The broker may want to consider what happens when the firm offers only transaction brokerage, and a licensee in the firm wants to buy or sell through the firm. Or, what happens if a family member or business associate is the buyer or seller? What happens if you decide on practicing agency, and a buyer and seller come to you already having their deal worked out and are seeking only help with the paperwork? If an agency agreement exists, the licensee must perform the functions required of an agent. The broker should also understand the ramifications if he or she practices both agency and designated agency, as opposed to practicing only buyer agency and seller agency or only designated agency.