A real estate broker is often a vital part of the real estate process. Brokers will have to undergo an education program and take a test to get a state license. The license will allow brokers to perform more technical and complicated real estate tasks.
Each state will require its own real estate broker license. For example, if a real estate broker is licensed in New York they will not be able to perform broker functions for a real estate transaction taking place in Illinois. Brokers can represent buyers, sellers, or both in a transaction.
It is important to understand that real estate brokers are not the same as real estate agents, although they do have some overlapping roles and both get paid a commission from a sale. Both play an integral part of the real estate process and strive to make sure everything goes smoothly. Agents generally bring the parties together for the sale by listing and showing houses.
Brokers on the other hand employ agents in addition to handling solo transactions. They usually have more experience, education, and training than an agent. While a broker may also perform tasks like showing property to prospective buyers, they also handle more complicated parts of the sale like negotiations and document preparation.
Real estate professionals, prospective buyers, and sellers should get a good grasp on the real estate process and understand potential liabilities. Brokers can risk suspension or even lose their licenses if they are found liable for a breach of duty to their clients.
What Is a Real Estate Broker’s Role?
As noted above, brokers are licensed real estate professionals that can wear many hats during the real estate process. They can work alone or have a staff of other brokers and agents working on their behalf. As such, a broker’s roles can be administrative, supervisory, and technical. They can also represent either party during a transaction.
If a real estate broker represents a seller, some important roles may include:
- Listing the property for sale on several platforms in accordance with current market values;
- Maintaining the listings;
- Being the intermediary between the seller and prospective buyers;
- Drafting sale documents; and
- Negotiations during the offer process.
If a real estate broker represents a buyer, some important roles may include:
- Finding potential properties to tour and purchase;
- Setting up walk-throughs at a property;
- Drafting and transmitting offers;
- Handling any disputes that arise from sale to closing date; and
Remember that a broker often has agents working for them and will delegate or share some of the tasks listed above. The broker will also have to oversee and review the agent’s work. Some states also require a lawyer to be involved in the closing process, so the broker may be required to work with them as well to carry out the sale.
What Actions Can a Real Estate Broker Have Liability For During a Transaction?
A broker will be expected to uphold several ethical and legal duties during a real estate transaction. This is true no matter which party the broker represents. This is often referred to as the broker’s fiduciary duties to the client. These duties generally include the following:
- Keeping client matters confidential, such as the lowest offer their client will take during negotiations (unless the client authorizes disclosure);
- Remaining loyal to the client, such as avoiding conflicts of interest;
- Disclose all things relevant, like any factor that would affect the property value;
- Act with care during the transaction, like performing a diligent investigation about defects with the property;
- Safeguard any money or other valuable documents the broker comes into possession of during the transaction; and
- Fulfilling the terms of the broker agreement or any other contract with the client.
These may not be the only duties a broker needs to fulfill, as state law or the licensing board may require additional obligations. These are just common examples of how a broker may face liability during a real estate transaction.
Failure to maintain the duties above could lead to a breach of contract action or other civil lawsuit. The broker may be required to compensate a client or opposing party if an action caused damages. Breach of fiduciary duties could even lead to license suspension or termination, as well as loss of their brokerage firm.
Do I Need to Contact a Lawyer?
If you are a party to a transaction and have an issue with yours or the other party’s broker, you should contact a local real estate lawyer to discuss your rights. A lawyer can review your case and determine if any legal remedies may be available.
If you are a broker, it is of the utmost importance to know your duties imposed by the law. Failure to do so can result in liabilities and severe consequences. It is also important to keep up to date on any licensing changes and all ethical obligations. Lastly, brokers should maintain appropriate business insurance to assist with any claims brought against the brokerage.