The California Bureau of Real Estate (CalBRE) will regain its autonomy and return to its former position as the Department of Real Estate (DRE) on July 1, 2018.
But what’s in a name? Well, a lot actually.
This administrative shift to independence increases efficiency, improves transparency and ultimately saves the DRE — read: real estate licensees — more than $4 million a year in unnecessary expenses. This isn’t just a routine shuffling of names or bureaucratic parlor trick — this is a very real victory for California real estate, with emphasis on consumers.
Editor’s note — Though the state entity will not take on the “DRE” name until July, 2018, we’re going to adopt that name in this article in eager anticipation of the DRE’s strategic return to form.
So how did this all come about?
The California legislature recently passed SB 173, which:
- renames the CalBRE the DRE; and (more importantly)
- removes the CalBRE from under the Department of Consumer Affairs (DCA) to classify it as an independent department once again.
Real estate professionals may remember that back in 2013 the DRE was renamed the “Bureau of Real Estate” (or CalBRE) when it was subsumed by the DCA under the Governor’s Reorganization Plan 2 (GRP 2) — a consolidation scheme intended to increase government efficiency and reduce costs. Though the intent was proper, in application it produced the opposite effect: crippling inefficiencies and escalating costs (subsidized by California licensees no less).
SB 173 reverses these errors of unintended consequences, restoring the DRE as a self-sufficient department, no longer the subject of the DCA’s bureaucratic oversight.
Why are we so thrilled about this seemingly procedural and innocuous change? Read on for a study of the burden the DRE’s placement within the DCA caused for licensees, and why the DRE’s newfound independence is something you ought to be thrilled about too.
DRE: DCA piggybank?
To understand why the relationship between the DRE and DCA was so inequitable and unfair, you must first understand how both are structured.
The DCA isn’t real estate specific and therefore doesn’t just administer the DRE. Instead, it has a wide assortment of boards and bureaus it is tasked with administering — not directly but only by oversight.
These boards and bureaus cover a diverse array of disciplines, including:
- the Acupuncture Board;
- the Board of Barbering and Cosmetology;
- Cemetery and Funeral Bureau;
- Dental Hygiene Committee of California;
- Guide Dogs for the Blind;
- the Bureau of Real Estate Appraisers; and
- Speech-Language Pathology and Audiology and Hearing Aid Dispensers Board.
Under the reorganization, all bureaus and boards pay a “pro rata” charge to the DCA to cover DCA administrative functions. Initially, the pro rata charge paid by the DRE was $1.8 million. However, according to bill analysis, this amount has grown substantially each year to a projected $5.2 million in 2017-18.
With the DRE paying out $5.2 million to the DCA, surely the value of the administrative services provided by the DCA to the DRE are roughly proportional, right?
Not so fast. The bill analysis reveals the DCA’s budgeted cost to operate the DRE in 2017-18 is only $1.01 million.
This provides the DCA a sizeable windfall of more than $4 million — all conveniently funded through fees paid by real estate licensees — you brokers and agents.
So, while the DCA’s oversight and expenditures for the mostly self-sufficient DRE remain low, the DCA has continued to use the DRE as its personal ATM, sucking from the large population of California real estate licensees who diligently pay their licensing dues. Simply, the working relationship between the DRE and DCA was not symbiotic — it was parasitic.
As the DCA’s budgeted costs to operate the DRE indicate no additional services or benefits were provided to the DRE in any of the years during oversight, one is left to wonder where these funds were going.
The bulk of this rapidly inflating pro rata charge was likely being used by the DCA to develop a new information technology system called BreEze. BreEze was to be communally used by the less tech-savvy government boards and bureaus under the DCA.
However, the DRE’s existing information system, which itself is continually being upgraded, is more robust and functional then DCA’s costly BreEze. Thus, the DRE was never going to adopt the obsolete-on-delivery information system real estate licensees were paying for through the ever increasing DCA pro rata charges.
In addition to these financial burdens, the bill analysis reports the DRE has experienced a slew of DCA oversight deficiencies. Specifically, the DCA has failed to provide adequate employee support or process important DRE service requests, such as IT orders, purchase orders, contract payments and employee reimbursements — mismanagement that undermines the DRE’s operations and employee productivity.
Further, the DCA’s ineptitude at making consistent, timely utility payments has hindered the DRE’s administration of the state licensing exam. In 2015, for example, the electricity for a state exam facility in San Diego was shut off, preventing the DRE’s use of the facility — a significant setback that directly impacts real estate applicants and obstructs the licensing process.
The benefits you can expect from an independent DRE
With the DCA soon to be out of the picture, the DRE’s efficiency as a consumer protection and licensee administrative agency will increase.
The DRE — no longer giving up a large chunk of its revenue to the DCA like a bureaucratic sacrificial offering — will have the ability and resources to redirect the fees paid by brokers and agents to more useful purposes.
The agency may now increase its expenditures on new employees to provide better phone support to real estate licensees — a decision that will likely directly benefit licensees who now often experience difficulties when contacting the DRE for assistance.
Editor’s note — Have you ever tried calling the DRE? Many calls received at the first tuesday office are from students with procedural questions intended for the state who have been unable to get through to the DRE.
The elimination of bureaucratic confusion and inadequate support from the DCA will also free up the DRE to improve its processing of real estate licensing and renewal applications. One possible improvement could be the implementation of an automated system that allows real estate education providers — real estate schools — to report licensee continuing education (CE) course completions directly to the DRE, finally bringing it on par with agencies like the Department of Motor Vehicles (DMV) which is able to receive smog check certifications from testing providers.
This modification would significantly expedite renewal processing and make license renewals easier (and more pleasant) for real estate licensees.
An open letter to the Real Estate Commissioner: time to step up guidance and communication
Perhaps the most significant change we will see from the DRE is clearer and more meaningful communication as an agency.
Currently, the DCA acts much like the DRE’s public face speaking on behalf of an underling, the real estate agency. The DCA’s communication has often been lackluster, untimely and overly generic at best. This lack of deep familiarity with the workings of the real estate industry makes it next to impossible for real estate licensees — and those of us inquiring on behalf of licensees — to obtain the information needed to perfect their business practice.
With the DRE in full control of the transmission of important information about its operations and activities, it will be better positioned to provide detailed and sincere responses to public inquiries.
Further, the DRE’s regained autonomy will better allow the Real Estate Commissioner, Wayne Bell, to deliver clearer guidance on critical consumer protection issues and directly implement public policy set by the legislature.
The DRE and the Real Estate Commissioner, personally, may now take a more direct stance on disclosure requirements for commercial properties by reiterating the legislative intent for sellers to disclose agency relationships and property defects as soon as practicable, as has existed on the residential side of the spectrum for decades.
The DRE can also reestablish the 1979-1996 Ethics and Professional Conduct Code.
Real estate agents are the gatekeepers of the industry. Access to properties by members of the public — buyers and sellers — is almost always through a licensed broker or agent. Because licensees are in a position necessitating public trust, they are by legislation held to high ethical standards and need a clear set of conduct guidelines to follow.
In 1979, under Real Estate Commissioner David Fox, the DRE adopted DRE Regulation 2785, the Ethics and Professional Conduct Code. These rules of licensee conduct were grounded in already-existing case law and Business and Professions Code §§ 10176 and 10177, a code of ethics comprised of three sections:
- Unlawful Conduct;
- Unethical Conduct; and
- Beneficial Conduct.
The code was revised in 1983 and again in 1990, before being finally repealed under Governor Pete Wilson’s Regulatory Reform Project in November, 1996.
It’s way past time to bring it back.
The key to holding public trust, as real estate agents aspire to do, is their collective honesty, transparency and public awareness of those attributes. Detractors from the DRE’s former regulation argue that everything it contained is already covered by stilted legal language in Calif. B & P Codes.
This is true. But how many licensees, buyers or sellers research arcane statutes to glean intended agent conduct — something that judges have to do — prior to signing a listing agreement? Today’s agents need public guidance in plain understandable language from the DRE in the form of a concise, accessible code of ethics for the industry.
Since licensees profess to be held to the highest standards, then they and their clients need to know exactly what those standards are. Without it, the industry is left only with the trade union code of ethics, which is only a generic good-in-any-state set of golden rules that any industry might well adopt.
Further, the DRE needs to actively maintain a healthy and independent real estate market by fostering a diversity of education.
A licensee’s ability to represent the needs of their client to the fullest extent possible is reliant on the licensee’s level of training and education.
To this end, the DRE has been fairly absent in this arena while under the DCA. However, what is needed from the Commissioner is a proactive role in the real estate education industry to ensure that high standards are met, and the unique characteristics and practices of the California real estate market are reflected.
Thus far, the Commissioner has yet to make use of his bully pulpit to frequently counsel licensees on real estate practice and consumer protection issues — but this time of change presents the perfect opportunity for him to step up and do so.
With the DRE no longer dependent on the DCA’s legislative analysis services, it will be easier for the DRE to pursue useful legislation independently and more aggressively — an endeavor that will necessitate much-needed public involvement and discussion by the Commissioner. This will also provide licensees with repetitive and continuing guidance about proper individual behavior and industry-wide public policy standards, ultimately helping to protect the public from misconduct and other mischief.
Adapting to the DRE’s name change will once again be burdensome for many real estate brokers and agents. In the short-term they will need to update business cards, stationery and other promotional materials. However, in the long-term, the administrative changes implemented by SB 173 will put the DRE on track to becoming a more efficient, helpful government agency — which all real estate licensees can appreciate.