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2016 Sunset Review | Summary & Key Recommendations

A sunset review is a periodic assessment of state boards, programs, and functions to determine whether they should be continued by the legislature. Sunset reviews focus on creating the least restrictive form of regulation consistent with protecting the public. In formulating recommendations, sunset reviews consider the public's right to consistent, high quality professional or occupational services and the ability of businesses to exist and thrive in a competitive market, free from unnecessary regulation.

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Summary

What Is Regulated?

There are two occupational pursuits covered in this sunset review: real estate brokers and subdivision developers.

A real estate broker assists with the sale, exchange, purchase, renting, or leasing of real property. Most often brokers enlist sellers who want to sell and/or buyers who want to buy properties. In exchange for his or her expertise, the broker typically receives a commission for his or her role in the transaction.

A subdivision developer is an individual, corporation, government or governmental subdivision or agency, business trust, estate, trust, limited liability company, partnership, association, or other legal entity which participates as owner, promoter, or sales agent in the promotion, sale, or lease of a subdivision.

Why Is It Regulated?

Considering the complexities involved in even a simple a real estate transaction and the degree of financial risk involved with the purchase of real estate, a broker or subdivision developer should possess minimal qualifications. A real estate transaction gone awry could cause severe financial hardship for consumers.

How Is It Regulated?

Real estate brokers must complete required education hours, acquire specified experience, pass two examinations (one national and one state), satisfactorily complete a criminal history check, acquire error and omissions insurance, and pay a fee to obtain a license. Once licensed, a broker must serve a two-year associate-level apprenticeship under a “high level of supervision” by an employing broker.

To be a registered subdivision developer, an entity must supply the names and addresses of the principals, criminal records (if any), and the property location, among other things.

What Does It Cost?

During fiscal year 14-15, the Colorado Division of Real Estate (Division) allotted 33.35 full-time equivalent employees and expended $4,188,221 administering Colorado Real Estate Commission (Commission) activities, including the two programs under sunset review.

What Disciplinary Activity Is There?

During fiscal year 14-15, the Division received 1,180 complaints concerning real estate brokers and no complaints regarding subdivision developers. The complaints levied against brokers resulted in 623 disciplinary actions including 284 fines amounting to $323,443.

Key Recommendations 

Continue Parts 1, 2, and 4, of Article 61, Title 12, Colorado Revised Statutes, for nine years until 2026.

When making a purchase or sale as major as buying or selling a home or other piece of real estate, most consumers enlist experts to protect them; 87 percent of all buyers nationwide use a real estate agent or broker. Because the risk of incurring harm during real estate transactions is prevalent and the results can be serious, the General Assembly should continue the regulation of real estate brokers and subdivision developers, and continue the Commission and the Division as the entities that administer regulation.

Create a property manager endorsement that requires prescribed education and financial surety as conditions for the endorsement.

If a person or business acts as a leasing agent for a landlord, he or she must be a licensed real estate broker. Property owners likely believe that because the broker is licensed, he or she has some requisite knowledge and experience. This is not necessarily the case. Property managers have the potential to cause great financial harm if they are incompetent or dishonest. Therefore, the General Assembly should create a property manager endorsement for those brokers who act as professional property managers.

Strengthen the requirements to become an employing broker by directing the Commission to establish, by rule, the number of transactions that must be completed in order to become an employing broker.

An employing broker is responsible for supervising all brokers in his or her employ, including a high level of supervision for new licensees. Currently, as soon as a broker is finished with his or her supervised, two-year apprenticeship, he or she can take a few classes and employ other brokers. At that point, he or she is responsible for all business undertakings and mentoring. The lack of experience has led to a number of complaints. The solution to this problem is to require that an employing broker have more experience.

Methodology

As part of this review, Colorado Office of Policy, Research and Regulatory Reform staff attended meetings of the Commission, the Commission’s forms subcommittee, and the education task force; interviewed individual Commissioners, the Commission’s counsel, the Director of the Division and staff; interviewed representatives of state professional associations, a Colorado-based consumer advocacy group, individual licensees, licensed mortgage loan originators, licensed appraisers, title insurers, and consumers; surveyed licensed real brokers; and reviewed program records, Colorado statutes and rules, and the laws of other states. 

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Sunset Reviews are prepared by:
Colorado Department of Regulatory Agencies
Colorado Office of Policy, Research and Regulatory Reform
1560 Broadway, Suite 1550, Denver, CO 80202
www.dora.state.co.us/opr