Don’t Let Real Estate Brokers Tell You What to Do

Did you know that in California, a real estate agent may not sell a home without working with a licensed broker? It is unfortunate, but some brokers have used this as leverage to tell agents exactly which client services to use – against the agent’s best interest.

This policy is not only bad business, but it is also against California law and could put the agent at risk professionally, financially, and legally. One example of this bad business is the “rent a desk” policy in which brokers rent space in their office to a service provider at below-market rates and then push business to the service provider, regardless of the quality of their services.

Another example is a broker who mandates that specific settlement service companies be used on the RPA. This endorsement may only mean the broker’s pockets are being lined, but many agents and their clients may falsely believe the services are chosen because they are ‘the best’.

In the event of a claim from a client, who the agent may have represented 10 or more years ago under a different broker, the liability follows the agent for the rest of their professional lives. The broker under whom the agent worked may have sold or closed his doors, or may deny that any influence was used to promote THAT specific provider.

The client may have the right to sue if he/she has recently learned of the problem even though the transaction took place years ago. No matter where the agent goes, he/she is responsible.

Agents must always apply “fiduciary duty to their client” as a self-protection against liability. Avoid breaching the fiduciary duty to your client to please the broker; it will be your liability for years to come.

  • NB

    So what is the answer to this problem? I shut down my independent escrow company in 2009, this was one of the reasons this is nothing new. Brokers have been forcing agents to use the escrow company (I am focused on that provider for my purposes) of their choice for years now even penalizing the agents financially when they didn’t. I started to offer to pay the agent(s) what they would lose just to get the deal, even that didn’t work. The brokers put the fear of God in them if they dare to chose their own or who their client may want to use. What we need is a solution to this problem.

  • Jessie M.

    Is there no way for agents to protect themselves? Any precautions they can take? Or maybe what the industry really needs is for brokers to be more responsible for their actions in some way. That way, when they push the business off to a bad client service rep then they are the ones who are in trouble, not the agents. This is the only solution I see for the agents/for the brokers to take more responsibility. Plus, it might end the rent-a-desk business and curtail some illegal activity.

  • It is amazing what companies get away with when regulations are lax or not enforced!

  • Mike SD

    I am always amused when the agents get their drawers in a twist over such crap.

    the solution to htis is easy…add language to the contract stating that the choice of title and escrow are those of the agent demanding them…AND ADDING A DISCLAIMER AND INDEMNITY FOR THE CHOICE. once the agent that feels so strongly about their preferred escrow and title are made LIABLE for their acts you’ll see them back down at once.

    real estate brokers are REAL GOOD at covering their asses. if they want to force the issue of title and escrow LET THEM BE LIABLE for the acts and omissions of their pals…they’re the ones bringing them to the table. i’ve done this with a giant franchise locally and they immediately stated they would not take responsibility for THEIR OWN IN-HOUSE ESCROW. i let them know that their client could assume full responsibility for the choice and they didn’t want that either. I asked the agent what their commission was on selling title and escrow services and they said they got nothing. i asked her why she was working for nothing and she was silent.

    my house rule for escrows is NO AFFILLIATED ESCROWS. not ever. except for short sales the rule for title is that the buyer can choose whoever they want. i add a phrase to a counter that the choice of title is the buyers solely and that the obligation of the seller is simply to pay for it. In 24 years i’ve had zero title claims.

  • James

    What’s the difference in ‘agents’ stating in their ‘listings’ that the “seller selects services”? The majority of sellers are not that savvy in knowing who the best service providers are in a RE transaction. This is nothing more than the agents why of using their preferred service providers by stating it’s the sellers choice.

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