One of the primary ways we identify emerging practice concerns is through the submission of consumer complaints to our boards. For the real estate brokers, we have growing concerns about how brokers are managing their licensed duties, particularly brokerage relationships, in the virtual environment. The practice act requires a broker to exercise reasonable skill and care on behalf of the party to whom the broker has established a brokerage relationship. This includes advising the party (or parties) about the transaction and directing them to obtain expert advice on matters that are beyond the broker’s expertise. We receive a lot of complaints where brokers don’t review the contracts with the consumers they represent. Instead, we see instances where brokers email, or provide electronic access to, a copy of a contract document to the consumer. The broker provides no explanation to the consumer about what the document is or does, or what terms or conditions it may impose. The consumer is left to decipher the document and sign a contract that he doesn’t fully understand. Questions aren’t asked and answers aren’t given. Ultimately, the lack of broker advisement on contracts manifests itself into complaints to the Real Estate Commission about property incorrectly being included or excluded from a transaction, missed contract deadlines, lost earnest money, and misunderstandings regarding property repairs and condition, just to name a few. Since errors and oversights made in real estate transactions can be financially devastating, the Real Estate Commission does evaluate both actual and potential consumer harm when considering how to address a broker’s failure to advise and inform the consumer about the transaction. In addition to potential license discipline, the broker can face insurance claims and civil litigation. All of which could have been avoided if the broker would have just taken the time to explain the documents to the consumer, answer the questions that the broker can, and guide the consumer to an expert on those issues or questions that the broker can’t explain.
With the real estate appraisers, we are receiving a growing number of complaints about appraisers not meeting the contract deadlines. The Board of Real Estate Appraisers (“BOREA”) is typically not going to have any jurisdiction over appraisal timeliness issues unless the appraiser has been paid to perform the appraisal and does not deliver a report to the client. Conversely, we have been receiving a lot of complaints about appraisers rushing to meet deadlines, but they deliver appraisal reports that are riddled with errors. This category of complaint does fall squarely within the Board’s jurisdiction. When appraisal reports are rushed, we see boilerplate or “cloned” language appear in the report that does not pertain to the subject property, assignment conditions are missed, property characteristics are incorrect or misstated, comparable properties are not located with the neighborhood boundaries, dissimilar properties are used as comparables, and the zoning classification is wrongly identified. The errors created by rushing to finish the appraisal usually results in a value opinion that the borrower disputes, which then triggers a request for a reconsideration of value (“ROV”). The ROV creates additional work for the appraiser and results in transactional delays for all parties involved. BOREA has seen several complaints where it has taken an appraiser three to four iterations of a report before the assignment conditions are met and the errors have been fixed. The time that it takes to focus on the assignment the first time around is far less than the time it takes to issue multiple reports for the same subject property. This issue has become so prevalent that BOREA intends to discuss it at the November 4, 2021, meeting.
The preventable complaints received by the Board of Mortgage Loan Originators (“BMLO”) are largely centered on poor communication between the mortgage loan originator (“MLO”) and the borrower. We regularly hear from complainants that a borrower believes that their loan has been approved, based on conversations with the MLO. Once the loan termination deadline has passed, the borrower learns that they are not approved, will not be getting a loan, and their earnest money has been forfeited. We have received complaints where the MLO has told a borrower that they offer a specific type of loan product that the borrower is seeking. The borrower goes through the entire loan approval process only to learn that the loan product is not available, and that the loan product for which they are qualified has less desirable rates and terms. We receive complaints about MLOs that initiate the loan application process, lock borrowers into rates and then disappear before the loan closes. Typically, the borrower ends up losing their loan lock, and depending on the circumstances, we hear that they incur additional costs on a different loan or they lose out on the purchase of a property. Clear and timely communication upfront would have prevented most, if not all, of these issues. Unlike the Real Estate Commission and the Board of Real Estate Appraisers, BMLO has the authority to order payment of restitution by an MLO. The types of cases previously described can be prime candidates for payment of restitution.
Each of the Division’s licensing programs have instances of practice violations that are completely avoidable if skill and care is taken upfront. Taking the time to inform a consumer of a transaction, communicating clearly about the process, and focusing on the task at hand saves everyone time and stress in the end.
Director Marcia Waters
About the Director
Marcia Waters has been with the Colorado Division of Real Estate since August 2005. Marcia started with the Division as a Criminal Investigator for the Real Estate Commission and was promoted to Chief Investigator in 2006. In 2007, she was promoted to the position of Investigations and Compliance Director. In that capacity, she managed the investigatory and settlement programs for the Division. On October 15, 2010, she was promoted to the position of Division Director. The Division of Real Estate licenses and regulates approximately 50,000 real estate professionals. Ms. Waters serves as the administrator for the Real Estate Commission, the Board of Real Estate Appraisers, the Board of Mortgage Loan Originators, the Community Association Manager Program and the HOA Information and Resource Center. Ms. Waters manages the Division’s $6.5 million budget, oversees a staff of approximately 57 full-time employees, and establishes the direction of Division programs based on market and industry trends.