Practice of Real Estate
This topic carries the heart of what distinguishes a broker from a salesperson: running a brokerage, supervising licensees, keeping trust accounts, and complying with fair housing and antitrust law. The 2023 national outline folded office operations and brokerage management into this area, so the broker exam tests it heavily.
Brokerage Management and Supervision
Operating a brokerage means establishing written policies and procedures, supervising affiliated licensees, maintaining required records and their retention periods, and ensuring advertising and transactions comply with law. Licensees may be classified as employees or as independent contractors for tax purposes, but a broker must supervise both regardless of that classification. The broker is responsible for training, reviewing files, and correcting violations; failure to supervise is itself a common ground for discipline against the broker even when the underlying error was an agent's.
Trust Accounts, Commingling, and Conversion
Money belonging to others, such as earnest money deposits and rents, must be kept in a separate trust or escrow account, never in the broker's operating or personal account. Commingling is mixing client funds with the broker's own funds, and conversion is using client funds for the broker's benefit; both are serious violations. A broker must deposit trust funds within the time the state requires, keep accurate ledgers for each beneficiary, reconcile the account regularly, and hold disputed deposits until the parties agree, a court orders release, or another lawful resolution occurs rather than deciding the dispute personally.
Fair Housing, Antitrust, and Risk Management
The federal Fair Housing Act prohibits discrimination based on race, color, religion, sex, national origin, familial status, and disability; prohibited practices include steering, blockbusting, and redlining, and advertising must contain no discriminatory preference. Federal antitrust law forbids competitors from price fixing (agreeing on commission rates), market allocation, group boycotts, and tie-in arrangements; commission rates are always negotiable between broker and client and are never set among competing firms. A broker manages risk through training, complete disclosure, RESPA and TILA compliance, accurate recordkeeping, and often errors-and-omissions coverage.