By Andrew VanSlyke, Esq.
Here at DeLeon Realty, we pride ourselves on innovating and changing the way that Realtors® do business. A prime example is how we provide a comprehensive and integrated team to assist clients in a multitude of aspects of the home buying and selling process. We do this to not only provide the utmost service to our clients, but to also follow the legal requirements and standards of practice for all agents and brokerages in California. Unfortunately, more and more agents are bypassing these rules through questionable business models that may lead consumers to reach the wrong conclusions.
Realtors® are divided into Brokers and Salespersons. In order to ensure that all real estate Salespersons are adequately supervised, each Salesperson must be affiliated with
a licensed Broker. Brokers are agents who have completed additional courses, passed a rigorous licensing examination, and have worked as Salespersons for at least 2 years. A brokerage is legally required to supervise each Salesperson, ensure legal compliance, and provide guidance and management to each agent, as well as exercise reasonable supervision over the activities of its Salespersons. The Salesperson must display their Broker’s name prominently to the public.
Such requirements exist in order to remedy the relatively low bar to entry that exists in the real estate world; namely, that anyone with a GED or a high school diploma can become a Realtor® after passing a short exam and joining the Realtor® Association. The industry therefore needs brokerages and responsible brokers to supervise agents and prevent ethical violations. However, some Brokers in the area have begun to “rent out” their licenses to agents, camouflaged the name of the true employing broker, and structure their businesses in such a way that makes it easy for Brokers and agents alike to escape the required Broker supervision.
Some of these Brokers create a number of fictitious business names that typically bear no relation to the brokerage, and then proceed to “rent out” these names to either an agent or a team of agents. This allows the agent to operate and market themselves as an independent business under a wholly different name. The Broker creates hundreds of fictitious business names and rents them to agents spread across the state. In practice, this could lead to a lack of agent supervision and at best minimal compliance with regulations meant to protect the public.
The California Association of Realtors® has warned against this exact practice in their publications, cautioning Brokers against creating fictitious business names that lead the public to believe the Salesperson is a Broker. Despite these warnings, it is this exact system that we are seeing on the rise today. We therefore must alert potential buyers and sellers to proceed with caution, as an agent may not be quite what they seem.
One brokerage that we have seen operating in a fashion similar to the above has, at the time of this publishing, 197 different fictitious business names. These fictitious business names are used by agents for their domain name, website, and marketing materials, possibly leading consumers to believe that each is its own independently operated brokerage. They operate under different names in a geographic area as broad as Napa, San Francisco, Los Angeles and Menlo Park, all of which represent themselves in independent marketing. Moreover, this “Brokerage” currently has 54 California-based branch offices registered with the DRE. These offices extend from southern California all the way to the Bay Area, with over 400 agents. While theoretically it may be possible for a Broker to b
e in full compliance with all DRE rules despite having hundreds of agents spread across a vast geographic area, it would be wise for a potential client to ask detailed questions about exactly how this works.
Unlike these other brokerages, DeLeon Realty is a registered brokerage with an integrated team of people, the DeLeon Team. One reason for this is so that we can supervise, train, and assist all the agents working under our license to ensure that the client receives the highest standard of service.