Understanding Real Estate Broker Competency Requirements

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What does it mean for a real estate broker to be competent in the practice of real estate? A real estate broker must have the competency to properly advise and guide their client in order to protect the client’s interests.
In general, competency is the ability to do something successfully or efficiently, and the capability to apply or use one’s knowledge, abilities and skills to perform certain functions. Competency is achieved by understanding the facts and principles that one obtains from formal training and experience.
Guidance for the real estate broker on this issue comes from Rule 6.2 of the Colorado Real Estate Commission (Commission) rules, State of Colorado Statute §12-10-217(1)(q) and from commission position 41 of the Commission.

Rule 6.2

In order to conduct Real Estate Brokerage Services, a Broker must possess the necessary experience, training, and knowledge to provide Real Estate Brokerage Services and maintain compliance with the applicable federal, state and local laws, rules, regulations and ordinances.

If a Broker does not have the necessary experience, training, and knowledge, the Broker must:

  • Decline to provide Real Estate Brokerage Services;
  • Obtain the necessary experience, training, and knowledge;
  • Obtain the assistance of their Employing Broker, Supervisory Broker, a Broker who meets the requirements as set forth in subsection A of this Rule, or legal counsel that is competent in the matter; or
  • Co-list with another Broker who meets the requirements.
Colorado Statute §12-10-217(1)(q)

§12-10-217(1)(q), C.R.S., states that it is a violation of the license law if a licensee demonstrates unworthiness or incompetency to act as a real estate broker by conducting business in such a manner as to endanger the interest of the public.

Commission Position Statement CP-41 on Broker Competency

Prior to performing any acts that require a real estate broker’s license, a broker should determine whether he or she possesses the knowledge, experience, and/or training necessary to perform the terms of the transaction and maintain compliance with the applicable federal, state or local laws, rules, regulations, or ordinances.

If the broker does not have the requisite knowledge, experience and/or training necessary to consummate the terms of the agreement, the broker should either decline to provide brokerage services or seek the assistance of another real estate broker who does have the necessary experience, training, and/or knowledge

Grounds for Discipline

The Commission will have grounds to discipline a broker’s license if a broker fails to take the measures necessary to gain competence and violations of the license law are substantiated.

Examples of Broker Competency Violations
  • Taking on something without proper knowledge or experience.
  • Thinking that one can take on any type of transaction - anywhere.
  • Taking a listing with a type of property that you are unfamiliar with.
  • Taking a listing with some unique aspects.
  • Taking a listing with some geographical uniqueness.
  • Taking a listing with other uncommon issues.
Questions to ask Yourself to Ensure Competency
  • Are you familiar with the type of transaction, the applicable contracts and disclosures, and the property location?
  • Do you understand the geographical area?
  • Do you have expertise/training in:
    • The needs and concerns of a typical buyer for this type of property?
    • Reviewing market reports for the type of property, area and industry if commercial?
  • On General Knowledge, are you competent:
    • With Title issues and Title Commitments?
    • Understanding easements and property lines?
    • Understanding related financial documents?
    • Knowing when to recommend experts such as attorneys, CPAs, and other experts?
Ways to Gain Competency as a Broker
  • Classes 
  • Training
  • Certifications and Designations
  • Working with another agent through several deals until you have complete understanding of the transaction. 
Resources of Broker Competency
  • Employing broker
  • Managing broker
  • Another broker that is experienced in the area you are needing assistance.
  • Co-list with a broker with expertise in the particular kind of property.
  • Hire a competent attorney to advise and work with you through the transaction.
Best Practices to Maintain Competency
  • Know the activities, new developments, services, amenities, and special districts of the areas in which you are working.
  • Read and send out market reports.
  • Stay informed on what’s happening – go to public meetings.
  • When starting out or attempting a new type of transaction always get assistance from a knowledgeable broker and your supervising broker.
  • Working or seeking mentoring with another agent through several deals until complete understanding.
  • Take classes, training, and obtain certifications to expand your knowledge and competency.
  • Advise your clients to seek expert advice such as their attorney, CPAs, and other professionals and experts.
  • Do not take on anything - anywhere, without knowing or getting assistance.
  • Don’t just “wing it.”