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In real estate, a "broker of record" refers to a licensed real estate broker who supervises the real estate agents and brokers who work at a real estate company -- such as a sole proprietorship, corporation, partnership, or branch office.
The broker of record is responsible to the state's real estate commission and the public for managing the actions of all licensees (i.e., agents, brokers, and sales associates) in the brokerage, whether they represent buyers or sellers.
Broker of record qualifications
While broker of record qualifications vary by state, there are some standard requirements. In general, a broker of record candidate must:
- Hold an active real estate broker's license in the state where they want to be a broker of record.
- Have been actively engaged in brokerage activities for a minimum period, as defined by the state (e.g., two years of full-time brokerage experience within the preceding five years).
- Fulfill the state's broker of record education requirements, including any mandatory coursework and continuing education credits.
- Submit a broker of record declaration form to the state's real estate commission.
Like all real estate agents and brokers, a broker of record must meet the state's continuing education requirements and renew their real estate license each year.
What does a broker of record do?
A broker of record controls the brokerage's real estate business, including the services and activities performed by licensees on behalf of the brokerage. While the exact duties and responsibilities vary by state, here are some of the functions brokers of record typically perform:
Supervises employees and licensees
The primary function of the broker of record is to ensure employees and licensees act in compliance with the real estate commission's license laws and rules, as well as other applicable laws at the federal, state, county, and city level, such as:
- Antitrust laws
- Do Not Call Implementation Act
- Electronic Communications Privacy Act
- Fair Credit Reporting Act
- Fair Housing Act
- Foreign Investment in Real Property Tax Act (FIRPTA)
- Interstate Land Sales Act (ILS)
- Landlord-tenant laws
- Real Estate Settlement and Procedures Act (RESPA)
- Reporting of cash payments over $10,000
- Sexual harassment laws
- Tax laws
- Truth in Lending Act (TILA)
Real estate trust accounts maintenance
Another critical function of a broker of record is to maintain trust accounts and ensure all associates handle the funds appropriately. A trust account (aka escrow account) holds funds in trust during real estate transactions. Funds include earnest money deposits, down payments, rents, and escrow fees.
Recordkeeping is another essential role for a broker of record. They are obligated to maintain legible records of all transactions, financial records, and other documentation for as long as the state requires -- for example, five years. Additionally, the records must be available for inspection if requested by the state's real estate commission, the parties in a transaction, or as part of a legal proceeding.
The broker of record collects and distributes commissions to licensees, according to the brokerage's compensation schedule and policies, as well as each individual licensee’s commission agreement. This can get complicated when multiple agents/brokers have a role in the same real estate transaction.
Paperwork review and approval
Real estate transactions are built around paperwork. The broker of record reviews and approves all legal documents, including listing agreements, offers, sales contracts, purchase contracts, leases, options, agency agreements, and the like.
There’s a lot of money on the line in real estate, and disputes happen -- between associates at the same office as well as between competing offices (e.g., between a listing broker and a selling broker). The broker of record must follow arbitration policies to investigate disputes and assist with resolutions. At times, that means working with the broker of record at a different office. Commission splits are, not surprisingly, a frequent cause of conflicts in real estate transactions.
It’s the broker of record’s job to provide and arrange training for new employees and licensees along with continuing education for established associates. The broker of record must also notify associates if any laws or licensing requirements have changed, so it’s imperative they stay on top of industry standards.
Office procedures and standards
The broker of record is in charge of making sure the office runs smoothly, efficiently, and legally. It’s their job to develop and implement office procedures to ensure employees and licensees meet standards and legal requirements.
Real estate agents and brokers must comply with legal requirements. However, it's the broker of record who is ultimately responsible for any errors or omissions made by employees and licensees under the broker of record's supervision.
Does every real estate office have a broker of record?
Real estate agents, brokers, and salespeople must work under the umbrella of a broker of record.
The principal office and each branch of a real estate company must have its own broker of record. In general, an individual may serve in this capacity at only one office location -- and each site can have only one broker of record. Depending on the state, a broker of record may also be referred to as broker-in-charge, designated broker, managing broker, qualifying broker, or supervising broker.
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