What’s in a Name?

A lot… or maybe not.

EXECUTIVE SUMMARY

In July of 2010, the State of Washington completed the first major revision of Washington real estate law in several decades. As part of that revision, everyone licensed to practice real estate in the state of Washington became a broker.

ARTICLE

Several of my clients have congratulated me on my achieving the “rank” of “broker” within my industry. While I have tried to casually pass it off as “not meaning anything” and the mere side effect of the recent Washington State real estate law changes enacted in July of 2010, the conversation has invariably spun out of control in a tornado of nomenclature and terminology, usually at the point in the conversation where I try to describe “managing brokers” that don’t manage anything.

So, while this will no doubt qualify as THE dullest blog post in the history of blogging on ANY topic, I thought that certainly the best way to clarify what confusing words mean was naturally to throw a whole shovelful of extra words at the them. Yup… that makes sense.

As you may recall (she said casually) not long ago the United States experienced a national mortgage-industry meltdown. A discussion of the depth, breadth, scope, causes, and my opinion about the responsible parties of that staggering disaster is well beyond the scope of this post. What’s important is that governmental instinct kicked in and resulted in legislative and bureaucratic entities at all levels having paroxysms of legislation and rulemaking. Whether or not you think this was an appropriate and efficacious response to the financial disaster is a matter of opinion, but happen it did.

Noting that the Washington State real estate law had not experienced any major revisions for decades, with timing too perfect to be coincidental, it was shortly thereafter decided that Washington real estate law could do with some refurbishment. The primary theme of this refurbishment was to more clearly codify, underscore and emphasize the overall accountability of real estate professionals.

At some point it was decided that it would be desirable to change the nomenclature (the naming conventions or titles) of the various categories of real estate professionals. It was believed that changing their names would heighten/underscore the sense of the higher level of accountability and who was responsible for what. If the names didn’t change, how would people outwardly perceive that the level of accountability had changed?

Okay… now things get complicated. PRIOR to the 2010 changes to the real estate law in Washington State there were, essentially, two levels of real estate licensure (two levels of licensing to practice real estate in Washington): salesperson and broker. What differentiated a salesperson and a broker was at least a couple of years of experience on the job, some extra hours of state-sanctioned education, and passing the state licensing exam.

Brokers, prior to July of 2010, came in two flavors: associate broker and designated broker. Anyone who achieved the broker’s level of licensure was, simply by default, an associate broker. If the real estate brokerage so desired, an associate broker could be specified as “the designated broker”. In other words, in terms of education and licensing level, there was nothing that differentiated an associate broker from a designated broker except that the brokerage specifically specified one of its associate brokers as “the designated broker” and by doing so, that erstwhile associate broker now had designated broker responsibilities and “authority”; there was a state-specified collection of responsibilities that one accepted when one was the designated broker. Effectively, therefore, being the designated broker meant that you agreed to fulfill the collection of responsibilities of the designated broker.

Just to make it clear as mud, there were other terms in use with respect to those in the real estate industry. There was “licensee”, meaning ANYONE acting within any of the above described roles that held a real estate license.

There was also “agent”, which, formally, is a very generic term that simply means someone who has an agency relationship with someone else in a real estate transaction, which, therefore, could ALSO apply to any licensee. (*sigh*)

Then there is “Realtor” which simply and ONLY means that one is a member of the National Association of Realtors, a private, real estate industry and membership-based organization having absolutely nothing to do with state licensing. Most large brokerage chains do require that any licensees affiliated with them also join the Realtor organization, but many licensees that work for boutique brokerages are both fully licensed by the state and are NOT Realtors. In other words, you don’t have to be a Realtor to sell real estate. In practical application, as far as I know, most licensees are Realtors, however. The definition of “most” is up to the reader.

Moving on…

The nomenclature situation AFTER the 2010 changes are as follows (and here I quote portions of the RCW’s themselves): “After July 1, 2010, a salesperson’s license is continued in effect but is recognized by the department as a broker’s license; and associate broker’s, branch manager’s, and designated broker’s licenses are continued in effect but are recognized by the department as managing broker’s licenses.” – RCW 18.85.481 (2). I’m not sure how branch manager can be “continued in effect” when, as far as I know, it didn’t exist prior to the July 2010 changes, but there you are. Maybe there’s something I don’t know there.

So… in short, what we have today are brokers and managing brokers as basic, broad categories. The rest of the plethora of state-sanctioned designations are all variations on a theme of managing broker. Who is responsible for what in terms of the running and responsibilities/operational obligations of a real estate firm have changed fairly drastically even though some of the relevant nomenclature has remained the same. Additionally, educational and ownership requirements have also changed significantly. If this stuff is making you fall asleep, adding THOSE details into this would probably kill you; I’ll leave the title-related job descriptions for another exciting post.

Moving on…

Managing brokers can be:

  1. Managing brokers without additional responsibilities (people who have reached the managing broker level of licensure but who do not perform supervisory functions of a managing broker or responsibilities delegated by a designated broker or branch manager, but who do have the regular managing broker Department of Licensing endorsement). These are roughly equivalent to the associate brokers of yesteryear.
  2. Managing brokers with additional responsibilities (either supervisory or by delegation, but who do not receive additional Department of Licensing endorsement beyond a regular managing broker endorsement). This is simply a matter of the designated broker “delegating” such additional responsibilities in writing to some managing broker. [RCW 18.85.275 (3) The designated broker may delegate by written agreement the duties of safe handling of client funds, maintenance of trust accounts, and transaction and trust account records, along with supervision of brokers, to a managing broker licensed to the firm. The designated broker shall maintain a record of the firm’s managing brokers and delegations to managing brokers.]
  3. Branch managers (which requires a specific Department of Licensing endorsement) which are variations on a theme of managing broker.
  4. Designated brokers (which requires a specific Department of Licensing endorsement) which are also variations on a theme of managing broker.

See? All very simple. Not confusing at all.

If you found this just fascinating you can read more in the following sections of the Revised Code of Washington and the Washington Administrative Code: 18.85 RCW, 308-124 WAC, 308-124A WAC, 308-124B WAC, 308-124C WAC, 308-124D WAC, 308-124E WAC, 308-124H WAC, 308-124I WAC, 18.86 RCW, 18.235 RCW.

And I saved the best for last.

Neither brokers nor managing brokers are required to actually use these terms to describe themselves in any of their marketing materials. They are in fact permitted to describe themselves in any way they wish provided the terms that they use are truthful, specifically not fraudulent, deceptive or misleading, nor expressly prohibited by law (such as calling themselves “M.D.” unless they actually are one).

According to an article from the Washington Association of REALTORS “Licensees have never been required to include their licensing status in marketing or on business cards. … Moreover, every licensee, managing brokers and brokers alike, may use any descriptive term to identify him or herself that is not false, deceptive or misleading. Brokers often use descriptions such as ‘relocation specialist’ or ‘waterfront sales’ or ‘condominium expert.’ So long as the description used is not false, deceptive or misleading, the description can be used.” (Reprinted with permission from the Washington REALTORS).

At this point, if you’re paying attention, you understand why so many real estate agents… I mean brokers… have all of that alphabet soup behind their names. Because they can. Heck, I even have some of that soup myself. But that’s a topic for another post.

And there you have it.