Education: why it matters
Your success as an agent or broker licensed by the Department of Real Estate (DRE) depends on two critical and very personal activities:
- education; and
- experience.
Formal education nurtures an agent’s practical experience, and thus is the primary step towards refining knowledge and acquiring new skills. This is the reason a real estate education is required to qualify for taking the state licensing exam and becoming licensed.
While experience and training are unquestionably fundamental to success, the purpose of this article is to dig down into the importance of the first half of the equation: real estate education — and why it matters a great deal to your practice.
Editor’s note — The California Bureau of Real Estate (CalBRE) will not be officially rechristened the DRE until July 2018. However, as this article is forward-looking in nature, we’re adopting the name early.
DRE oversight of real estate education
The DRE is tasked with overseeing, regulating, administering and enforcing California real estate law as practiced by licensees. At its core, the DRE ensures that members of the public and real estate licensees who deal with other licensees receive maximum protection from the risks of incompetence and deception. [Calif. Business & Professions Code §10050]
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In service of this goal, a licensee is required to take state-mandated education in two contexts:
- initially, to qualify to take the state agent or broker licensing exam, known as statutory licensing courses [Bus & P C §10153.4]; and
- at a minimum every four years after becoming licensed, to maintain and improve their level of competence, known as continuing education (CE). [Bus & P C §10170.5]
Editor’s note — Full disclosure: first tuesday is a leading provider of both California-specific statutory and CE coursework.
CE will be our focus today.
Fundamentally, the DRE’s objective behind the state-mandated CE requirement is to ensure brokers and their agents are functioning at the highest capacity of professional competency and disciplined honesty in their representation of clients.
Stated more crudely, CE is intended to protect the populace from incompetent and deceitful real estate agents — something near and dear to the integrity of the DRE.
The DRE has recently been vocal about this objective. In the Winter 2015 Real Estate Bulletin, the Real Estate Commissioner laments that numerous licensees and members of the populace have experienced “…frustration with those licensees they identify as ‘unprofessional.’”
The Commissioner goes on to stress the need to expand licensee professionalism and close “…the relevant skills and practice gap.”
But how do the state and educators best fulfill this educational mandate, harness the spirit of CE and address the skills and practice gap in training?
The core of the solution is relatively simple: ensure the California CE market remains robust, innovative and reflective of the unique rules setting the parameters of conduct within California’s real estate marketplace.
Read on for what this actually looks like in practice. But take note, dear reader: we’re going to focus much of this article on the elephant in the room — the education supplied to captive members of the California Association of Realtors® (CAR) by Oregon out-of-state provider OnlineEd.
In support of choice and the open market
All educators and DRE-approved CE offerings are not created equal. Far from it. While they all exist to fulfill the same state requirements, they are not of equal effectiveness.
Just as there are varying degrees of quality and utility provided by varying universities, so too is the field of CE diverse. There are both stellar and — ahem — less than stellar CE options available to licensees.
As of June 30, 2017, licensees were able to choose from 118 CE providers offering 665 DRE-approved courses.
This large quantity of CE providers is critical to the healthy functioning of the real estate market, and the diversity of education about California’s rules of professional conduct in the industry.
Without the competition created when numerous providers innovate to garner greater enrollments, schools lose the creative challenge to improve their materials or perfect the functioning of their courses. As a result, the content grows stagnant for the lack of will to compete. Instead of being truly educational, CE becomes just another chore to work through for renewal.
Monopolies are the antithesis of competition as they serve to limit and eliminate choice. This is no less true in the context of CE. A monopoly in education is bad for licensees — and by extension — deleterious for the buying and selling public.
Monopolies limit the number of educational alternatives available. Without knowledge of the continually evolving California real estate market and the law regulating it, a licensee has no ability to fully represent the needs of their client to the very best of their abilities. And this, of course, is the very purpose of CE — to keep licensees sharp and up to speed. By raising the standard of awareness among them, licensees become more competitive in practice.
A wide variety of CE providers promote diversity of content in the CE market. Fewer providers equal fewer choices and fewer proprietary materials that cater to all the unique specializations in the industry.
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Generic is vanilla – worse, it’s regressive
Just as a diversity of CE course providers is needed to keep services priced competitively, a need also exists for diversity to strengthen course content.
When course providers offer generic multi-state content that does not address the extensive nuances specific to California real estate law and agency, or only provide superficial commentary on general nationwide real estate concepts, the material offers very little practical guidance. Though a one-size-fits–all multi-state approach fulfills the lowest rudimentary spirit of the DRE’s CE requirements, it provides nothing to actually improve the ability of licensees to serve members of the buying and selling public. After all, licensees are the gatekeepers through which nearly all buyers and sellers must pass to do deals in our real estate marketplace.
For an example of generic materials, look no further than the homogenized courses certified by the national Association of Real Estate License Law Officials (ARELLO), in which the California government does not participate as a decades-long matter of public policy.
California, as the world’s sixth largest economy, has developed a very sophisticated set of rules for the conduct of individuals who offer licensed services and thus negotiate and process high-dollar-amount transactions.
Frequently, our California rules for handling transactions are not the rules for real estate in other states, and vice versa. Each state is sovereign for controlling its own real estate activity. Think civil law versus case law, from Florida, to Louisiana, to Texas to California for variations on the real estate theme. Accordingly, the content of real estate forms such as purchase agreements and listing contracts varies extensively by state — as should CE.
With out-of-state and some in-state providers, course content that is nationally available in other states is modified and “standardized” to fit within the ARELLO-approved parameters. This is akin to rounding off the corners of a square peg to get it to fit within a circular hole. Neutering or eliminating state-specific content to fit a universal national structure inherently undermines the quality of the content. It is not instructive in California. Worse, it is dangerously naïve.
This is also the case concerning the offerings of OnlineEd. Much of the CE materials are written similarly to an introductory Real Estate Principles course — good to go in most any state with minor alteration. Here, the primary intent isn’t to inform about changes in the law or innovations of practice, rather to provide a tepid reiteration of the basics.
Editor’s note — And OnlineEd’s courses are only available in the digital format online, to boot. Greater than half of first tuesday’s annual CE enrollees demand a printed book, in the face of an ebook-only enrollment which is available at a lower price.
To provide meaningful education with inherent value sufficient to comply with the DRE and legislative objective behind CE, course content and the broader offerings of a provider need to:
- be inextricably tethered to the unique legal scheme of California, complete with extensive legal citations to back up the case examples and rules of conduct presented;
- be updated regularly to include refinements in law and in practice — like property and agency disclosures mandated to improve consumer protection;
- make content available in a variety of mediums which cater to the wide spectrum of student preferences, such as printed books, digital eBooks, video and live presentation;
- feature a degree of specificity and pragmatic detail with content that rises beyond the level of a simple introductory statutory course offering;
- provide additional education and updates beyond just one core 45-hour course package, written years ago and enrolled in repeatedly every four years; and
- supply practical tools that can be used to perfect the practice of the students, such as marketing materials, FARM letters, and real estate forms consistent with current California rules for use in the student’s professional practice.
Generic courses are also ignorant of the many ways in which real estate practitioners professionally apply their license.
High-functioning agents cultivate a niche or specialty. Thus, a huge variety of topic-specific DRE-approved CE material is needed to service these unique areas of specialization, including:
- property management or commercial leasing [See first tuesday package 602: Landlords, Tenants and Property Management];
- mortgage loan brokerage, either federal consumer mortgages or California-controlled business mortgage originations [See first tuesday package 505: California Mortgage Lending;
- residential or commercial income properties [See first tuesday package 305: Income Property Brokerage];
- California equity-purchase deals [See Buying Homes in Foreclosure contained in first tuesday package 203];
- seller financing arrangements [See Creating Carryback Financing contained in first tuesday packages 203 and 702]; and
- property syndication. [See Forming Real Estate Syndicates contained in first tuesday package 702]
Editor’s note — Agents and brokers enrolled in first tuesday courses have access to the most complete, current collection of all California-specific real estate texts published by Realty Publications, Inc. during the one year of their enrollment. For a list of texts available through enrollment or ordering, visit our Realtipedia page and check out the tables of contents for each.
Declaring an expertise is virtually useless in practice unless the licensee has an academic understanding of that particular niche, as well as personal experience. Together, topic-specific education and experience have a multiplier effect on income potential. Generic materials provide none of this, and are better left for the dilettante with designations. Worse, they lead to professional malpractice – regardless of whether the broker has E&O coverage for such neglect.
Where does the DRE fit into all of this? The DRE needs to step forward to ensure the marketplace for substantive, non-generic education is supported with more than a nudge. An aggressively competitive educational environment equals improved content, which in turn leads to better trained agents and brokers — and ultimately better protected clients, which is the objective of all this. California needs competition in an open market, free of monopolistic bundling.
California education for Californian licensees
Any licensee worth their salt is aware of this famous real estate truism: keep it local.
The meaning of this expression is deceptively simple: a licensee is far better equipped to excel in a locale where they have deep experience and understanding. The same is true of a real estate investor looking for an income-generating property to purchase — stay in the community you know to reduce the risk of loss. A licensee cannot simply jump into an unknown community and make their services competitive against those local licensees who are steeped in the particulars of the area. They need more than a GPS.
Location is also important in the context of DRE-approved CE.
Real estate law and custom as practiced by licensees is inherently local — governed by state codes, applicable case law issued by courts and regulations produced by DRE that apply to conduct in our state.
There is no such thing as a universal national/federal set of real estate laws or rules for practice (though some federal mortgage law has evolved since 1982 and again in recent years under Dodd-Frank). Further, what is good practice in another state may well get you sued in California.
Each state’s unique legal scheme supplies the broad parameters of what is and isn’t acceptable behavior within the borders of the state. Licensing in one state does not let you practice in another state without education, testing and licensing in that state. For California, case law provides living examples of conduct which fills in gaps in application of law, setting the exact parameters around what activity is consistent with the intent behind the public policy set by the legislature. Education devoid of this level of “local” specificity is toothless — able to merely gum an issue in a superficial capacity without digging its teeth in.
Not all players in the California CE market are from California. The industry is flush with out-of-state publishers who produce materials designed to be as equally relevant in any state — or country — as they are in California. In other words, they write to the masses — not the unique practitioners in the California market, steeped in California law, economics, practice, rules, regulations and applications.
Editor’s note — It is particularly galling that CAR — the California Association of Realtors® — chose to partner with a course provider that uses materials published by two brokers licensed in Oregon.
This affinity towards out-of-state players is very familiar to those following CAR’s dealings. Despite pledging allegiance to California, much of CAR’s operations are conducted outside of the Golden State. Joel Singer, CAR’s long-time Chief Executive Officer (CEO), is also president and CEO of zipLogix, a company run by CAR’s for-profit subsidiary Real Estate Business Services, Inc. (REBS). Go figure.
Though the use of zipLogix is cemented firmly in California via CAR’s pervasive actions, zipLogix’s home activity is on more foreign and distant soil – it is a registered Michigan LLC. Click here for their filing.
One might be left to ponder just why CAR has chosen to outsource to other sovereign state locations both its forms and education. Particularly when there are publishers exclusive to California available, such as first tuesday.
Editor’s note — Yes, shameless plug.
Think of your mental health as being equivalent to the health of your body. For the most intellectually nutritious CE offering, shop local and consume what is locally grown — not bloated industrial “fast food” that hails from distant lands and is engineered to provide only the minimal necessary sustenance to keep your business going.
The DRE’s role in maintaining a stable, healthy real estate education market
So how does the DRE ensure the California real estate CE market maintains its strength and properly fulfills its CE policy objectives?
The DRE will soon regain its autonomy from the Department of Consumer Affairs on July 1, 2018. This will not only save licensees over $4 million annually in misappropriated fees, but it will foster a more vocal, more engaged government agency that is able to proactively implement changes to ensure its educational standards are being met.
Related reading:
The DRE reborn — recovering $4 million annually for licensees
All real estate agents and brokers are aware of the extremely modest educational requirements imposed by the DRE and the legislature for obtaining and renewing their licenses. As implemented, CE is not viewed as education by many. Rather, it is seen as an inconvenient sprint to complete in the days just before the four-year renewal finish line to clear the “requirement” at the least cost and least involvement.
Now is time to put some bite back into education.
More rigorous standards are needed to ensure the gatekeepers of the real estate industry are able to fulfil their duty to properly protect the members of the public they represent, such as:
- making the state agent and broker licensing exam more challenging and reactive to conditions experienced in the current real estate market;
- increasing the percentage score needed to pass the exam to 75% for agents and 80% for brokers, ensuring only the most well-prepared are filtered into the industry; and
- increase the total number of required CE hours from 45 to an even 60, or some annual figure.
The DRE needs to step in and ensure an agent’s renewal education is stepped up beyond the present minimal CE requirements. An agent needs to continually upgrade their formal knowledge of the real estate market and industry sectors — it’s a continuous, ongoing process. An agent with no further education is left with insufficient awareness of the application of new legislation, recent case decisions issued weekly and significant news. Eventually, they are left with diminished opportunities, stagnant incomes and a disgruntled public.
To better ensure that education is perpetual, licensees should be encouraged (or required) to stagger their mandated education over the four-year period.
Instead of hurriedly cramming all required hours into the last week before the expiration of a license — which is a condition we’re all too familiar with at first tuesday — students could be required to take a prescribed minimum number of hours each year (say, an even 15 hours or more annually with the completion reported electronically from the school to the DRE).
This keeps education at the forefront of the licensee’s mind, and encourages better retention of the material. Ideas and concepts are always more likely to stick when they are introduced on a routine pace — completing all the education at once on a four-year cycle in a singular Herculean push does not facilitate this.
The DRE has the authority to take measures in their approval and reapproval of courses to ensure the course content is sufficiently anchored to California practice (i.e., not generic and applicable to all states), and routinely updated. This can be quickly determined during a visual review of the book — when the content contains extensive citations of California code and case law, it passes the sniff test.
Further, the DRE can take steps to guarantee that correspondence courses administered exclusively online actually do the job of assuring students spend adequate time reading and engaging with the course materials prior to accessing the final exam. This is accomplished by requiring providers of online courses to implement conventional programming to ensure their students are physically present at their computers actively reading, as is the case with the 8-Hour MLO renewal CE courses approved by the Nationwide Mortgage Licensing System (NMLS) for MLO endorsement on DRE-issued licenses.
Lastly, the state needs to ensure schools don’t engage in anti-competitive behavior. When there is only one provider of education in California with others locked out, this leads directly to a Darwinian reduction of the availability of quality education to all.
This unhealthy funneling of education to one or very few schools interferes with the DRE’s ability to protect the public, and eliminates quality-by-innovation of available study materials. The DRE needs to get aggressive about its advocacy for an open market, not a captive market.
The value of education — more than just CE
Ultimately, a licensee’s expansive knowledge forged by education and experience increases their real estate IQ level and savvy in the eyes of both clients and colleagues — public confidence in real estate services will jump. The amount and type of formal education an agent possesses causes prospective clients to begin the process of bonding with the agent — before the prospective client has an opportunity to observe the agent’s expertise in action.
With proven competency, clients are more willing to trust an agent’s advice regarding the legal, financial, tax and market consequences they can expect from a transaction. These clients are also more likely to recommend the licensee’s services to friends and family — referrals which lead to increased income for an agent’s financial stability and improved living standard.
Also, extensively educated agents are more able to prove their financial worth to other brokers and agents they deal with as they add certainty to transactions while increasing their ability to select the best brokerage situations available.
Fundamentally, education is universally associated with wealth. This perception is held by fellow licensees and by the general public with whom licensees conduct business. When an agent or broker can use experience in addition to factual information to answer questions, clients perceive the licensee as a seasoned, well-informed professional who likely earns a respectable living — a perception upheld by the agent’s degrees and investment in education. This perception causes more clients to willingly retain the agent, increasing the agent’s productivity and income.
CE is not just a chore: it’s fuel for your business and skills — and the DRE needs to protect it.
Editor’s note — Stay tuned to the first tuesday journal for more writings on education and the role of the DRE.
