March 2025
Professional real estate activity covers a wide spectrum of services and specialty areas. Under current Oregon law, it is the broker's or principal broker's responsibility to seek the additional training, education, or mentoring required to succeed in their desired area of expertise.
This month I am outlining some observations we are making at the Oregon Real Estate Agency, along with feedback I have received during my stakeholder engagement throughout the state. The market has seen dramatic change over the past few years, and every indication is that this evolution will continue for the foreseeable future.
We want all licensees to succeed to the best of their ability, and one of the strengths of this industry is the entrepreneurial approach most take to establish and grow their business in the most productive and rewarding manner possible.
I'd like to share how the Agency's regulatory role may come into play with respect to your personal business plans. First, it's important to note that the occupational license exam you passed to obtain a license initially is intended to demonstrate minimal competency to
enter the profession. Moreover, a pre-licensing exam cannot prepare a candidate to immediately engage in business in all potential areas of real estate activity—from residential transactions, to commercial activity, to industrial development, to farmland, to timber land—the list goes on and on. There is a presumption—and expectation—that a new broker's principal broker will take a more active role in coaching and training that broker to grow their business and ensure compliance.
There is also an expectation that a licensee seeks additional education or training specific to a particular business niche and has the express approval of their supervising principal broker when entering more complex areas of professional real estate. This correlates with why new brokers must have three years of experience before being able to obtain a principal broker's license and work without additional supervision. And unlike some jurisdictions, in Oregon there is no fully prescribed continuing education (C.E.) curriculum beyond the first renewal, offering you significant latitude in choosing C.E. that best supports your specific training and development needs.
So how does this relate to our enforcement role at the Agency, since a license gives the authority to engage in many areas of real estate that are outside purview of the pre-licensing exam? Good starting points are the Oregon Revised Statutes concerning Grounds for Discipline and Duties of an Agent.
Most relevant here include the following reasons for which a licensee may be sanctioned:
- Demonstrated incompetence or untrustworthiness in performing any act for which the real estate licensee is required to hold a license.
ORS 696.301(12)
- Engaged in any conduct that is below the standard of care for the practice of professional real estate activity in Oregon as established by the community of individuals engaged in the practice of professional real estate activity in Oregon.
ORS 696.301(15)
- A failure to advise the client to seek expert advice on matters related to the transaction that are beyond the agent's expertise.
ORS 696.805(3)(e) & 696.810(3)(e)
Put into the simplest terms, statute expects licensees to only conduct business in areas for which they are competent. And, when appropriate, advise the client to obtain outside advice. For a new licensee, or an established licensee looking to branch out into a new specialty, that may be partnering with a more experienced agent, seeking additional mentorship from a principal broker, referring the business to a different broker, taking additional coursework to obtain professional credentials, or any combination of the above.
I entitled this article Lane Departure Warning as a metaphor. When driving a car, you may get an alert if you accidentally begin to wander out of your lane. But if you ignore the alert and drive off the road, you can't blame the car.
With respect to business practices, we have observed that brokers and principal brokers who have been focusing on residential sales are expanding their services. One area includes property management and the other includes various forms of commercial real estate. This is all permissible under current licensing law. The key to your success—and for proper consumer protection—is to fully understand the nuances or special skill sets necessary to fulfill your duties as an agent should you decide to take on new responsibilities.
Property management
Principal brokers who expand their services to include property management can sometimes underestimate the scope of this new work. We talk with licensees who took on property management duties at the request of former clients as a way of maintaining an excellent business relationship. But while relationship building and customer service may have been that licensee's strengths in a sales transaction, an understanding of necessary accounting principles was not. During clients' trust account reviews of licensees engaged in property management, some of the issues we encounter—and for you to consider:
- If hiring a property manager, have you documented proper intracompany supervision and control?
- Have you established a proper accounting system, including the maintenance of individual owners and tenant ledgers?
- Are you able to complete monthly reconciliations timely?
- Are security deposits held separately from owners' funds, with the bank accounts registered with the Agency?
- Are only licensed individuals entering into property management agreements with owners?
- Has proper supervision been established for both licensed and unlicensed staff?
Commercial real estate
Licensees who work exclusively in commercial real estate have reached out to me expressing concern about brokers who have specialized in residential transactions entering new business areas. This evolution, just as with the trend in property management, is natural. A residential broker may be contacted by a past client and asked to represent them in a commercial transaction. Or, as the market for residential real estate fluctuates, a broker may simply wish to pursue new business they deem as more profitable or challenging.
Before doing so, it is important for residential brokers to ensure they can meet their statutory obligations to remain competent and fulfill all their duties as an agent.
First and foremost, consult with your supervising principal broker. Your company may have policies concerning this. Then, consider some other significant differences:
- If your company carries Errors and Omissions insurance, are you covered?
- Do you understand the differences in zoning compared to residential transactions?
- Local jurisdictions differ in the typical time to obtain business approvals. Are you able to advise your client properly?
- Do you understand permitted uses for a specific property and will they work for your client?
- Can you properly qualify your client, compared to a residential transaction?
- Are you well-versed in the investment and financial analysis that is often part of a commercial transaction?
- Do you understand the difference in compensation agreements between residential and commercial?
- Are you informed about any other nuances in various business specialties, and how they may affect the real estate transaction?
This is by no means an exhaustive list of considerations, but rather a few to get you started thinking.
Just as with licensees looking to branch out into property management, avail yourself of as much mentoring and education as possible so that you are not on the wrong side of a complaint with the Agency, or worse, litigation.
So, while you are always free to change lanes, signal properly - and don't speed and get ahead of yourself.