Brokerage

Key Takeaways

• Brokerage names two things at once: the activity of providing real estate services for another person in return for compensation, and the company through which licensed people provide them.
• Under RCW 18.85.011, real estate brokerage services are offered or rendered for compensation or the promise or expectation of compensation, so no closing and no payment is needed for the activity to count.
• In Washington the company is licensed as a real estate firm, defined by RCW 18.85.011 as a sole proprietorship, partnership, limited liability partnership, corporation, limited liability company, or other legally recognized business entity conducting real estate brokerage services in this state.
• RCW 18.85.331 makes it unlawful to act as a real estate broker, managing broker, or real estate firm without first obtaining a license, and bars any suit to collect compensation without alleging and proving licensure.

What It Means

Brokerage carries two meanings that students routinely blur together. The first is an activity: bringing parties together and handling the work of a sale, lease, or exchange of real property for somebody else, in return for compensation. The second is an entity: the company through which licensed people carry that activity out. Both are correct, and context tells you which one a sentence means.

The activity meaning is the one the statute cares about, because it is what triggers the licensing requirement. RCW 18.85.011 builds the phrase real estate brokerage services as a list rather than a slogan. Among the services it names: listing, selling, purchasing, exchanging, optioning, leasing, or renting real estate or an interest in it; negotiating or offering to negotiate any of those; advertising or holding oneself out to the public as engaged in brokerage; advising, counseling, or consulting a buyer, seller, landlord, or tenant in connection with a real estate transaction; issuing a Broker Price Opinion; and performing property management services such as marketing, leasing, and the physical, administrative, or financial maintenance of real property.

Notice what the list does not require. There is no need for a sale to close, for a listing to be signed, or for money to change hands. Services offered or rendered for compensation, or for the promise or expectation of compensation, are enough to put the activity inside the definition.

How It Works in Washington

In Washington the vocabulary is specific, and the exam tests the words as much as the ideas. The company is a firm. RCW 18.85.011 defines a real estate firm as a sole proprietorship, partnership, limited liability partnership, corporation, limited liability company, or other legally recognized business entity conducting real estate brokerage services in this state. The same section defines a broker as a natural person acting on behalf of a real estate firm under the supervision of a designated broker or Managing Broker, which is why a broker's work is always the firm's work.

A firm holds a license in its own right. RCW 18.85.091 sets the minimum requirements. The firm designates a managing broker as the Designated Broker with authority to act for the firm; no person with a controlling interest may be the subject of a final departmental order suspending or revoking a real estate license; and the firm may not adopt a name that is the same as or similar to a currently issued license, or that implies the firm is a nonprofit or research organization, a public bureau, or a group. The application supplies the firm name, unified business identifier number, Washington business addresses, contact information, and the fee.

Skipping any of this has teeth. Under RCW 18.85.331 it is unlawful for any person to act as a real estate broker, managing broker, or real estate firm without first obtaining a license, and no suit may be brought to collect compensation as a broker, firm, managing broker, or designated broker without alleging and proving that the plaintiff was duly licensed before offering to perform the transaction or procuring the promise of payment. An unlicensed person who brings a buyer and a seller together in Washington is not only exposed to enforcement. They cannot sue for the fee. Our guide to becoming a Washington managing broker covers the license level a firm must have on hand to name a designated broker at all.

Example

Dana and Priyanka form Sound and Cedar Realty LLC in Tacoma and plan to open on March 1. Dana holds a managing broker license; Priyanka holds a broker license. Before a single listing is taken, the LLC applies for its own firm license and designates Dana as the designated broker with authority to act for the firm, satisfying RCW 18.85.091. Priyanka then works under that supervision, and every service she renders is rendered on behalf of the firm.

In April the firm lists a house at $480,000 and closes it at $472,000, with the seller compensating Sound and Cedar at 2.75 percent, which comes to $12,980. The compensation is earned by and paid to the firm, because the firm is the licensed entity that provided the brokerage services. What Priyanka takes home is a matter between her and the firm, not between her and the seller.

Now suppose an unlicensed friend of Dana's had introduced the buyer to the property early on and later sued the firm for a $5,000 finder's fee. RCW 18.85.331 answers it directly. No suit may be brought to collect compensation as a broker or firm without alleging and proving licensure before the services were offered, and the friend cannot make that showing. Introducing a buyer to a seller for an expected payment is exactly the activity RCW 18.85.011 places inside real estate brokerage services, which is what makes the missing license fatal to the claim.

Common Mistakes and Exam Traps

• Washington licenses brokers and managing brokers and licenses the company as a real estate firm. There is no salesperson license in Washington, so an answer using that title is describing another state.
• Real estate brokerage services under RCW 18.85.011 include advising or consulting and issuing a broker's price opinion, so activity well short of listing or selling can still require a license.
• A firm's license is separate from the licenses of the people inside it, and RCW 18.85.091 requires the firm to designate a managing broker as its designated broker.
• RCW 18.85.331 blocks a suit for compensation without proof of licensure, so an unlicensed finder recovers nothing even when the deal closed and everyone agrees the introduction was useful.