The Team Lead, the Unlicensed Host, and the $8,500 Check
Broker Kim's team, Summit Home Group, runs Facebook ads reading 'Summit Home Group - call Tyler for a free market analysis.' No brokerage name appears. Tyler is unlicensed; he wears a team shirt, hosts Sunday open houses alone, quotes the list price, tells prospects 'the seller will look at anything over $340k,' and says 'we can get you 3% toward closing.' Kim pays Tyler $75 per open house out of the commission when a deal closes. On Saturday a buyer writes an $8,500 earnest money check payable to 'Summit Home Group.' Tyler deposits it into the team's operating account and tells Kim he will square it up Monday after it clears. The brokerage has no written trust-account procedures; the transaction file contains only the contract.
1. Identify the license-law and Commission-rule problems in this fact pattern.
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Multiple, and they compound.
- Unlicensed brokerage activity. Quoting terms, discussing seller motivation, and promising closing-cost credits are acts requiring a license. Hosting an open house is not automatically unlawful for an unlicensed assistant, but it is only defensible when limited to clerical and security functions with no discussion of price, terms, financing, or negotiation.
- Compensation. Paying an unlicensed person out of commission for conduct that requires a license is prohibited; the fact that it is characterized as per-open-house pay does not cure it.
- Advertising. Team advertising must identify the brokerage; 'call Tyler' with no brokerage name and an unlicensed person as the contact misleads the public about who is providing brokerage services. The broker is responsible for team advertising.
- Trust funds. Earnest money is trust money, not team revenue. Deposit into the broker's trust account must be prompt under Commission rules; putting it in an operating account is commingling at best and conversion at worst.
- Supervision and records. No written trust-account procedures and a file with only the contract shows a supervision and recordkeeping failure, which is the broker's responsibility.
2. What must happen with the $8,500 check right now?
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Treat it as trust funds and correct the handling immediately.
- The check belongs in the broker's trust account, not the team's operating account. If it has already been deposited elsewhere, the funds must be moved promptly and the transaction documented; do not wait for it to clear and do not use it for team expenses.
- A check payable to a team name is a red flag: the buyer's intent was earnest money under the contract. Endorse and deposit to the brokerage trust account, and confirm the contract's earnest money paragraph names the correct payee and holder.
- Notify the broker-in-charge and the parties as needed, keep a ledger entry for the buyer, and reconcile. If the funds were at any point unavailable, that is a reportable problem.
- Going forward: written trust-account procedures, dual signatures or broker control, monthly reconciliation, and records retained for the period Commission rules require.
Exposure: commingling and conversion allegations, plus failure to supervise, are among the fastest routes to discipline.
3. What supervisory and corrective steps should Kim take, and who bears the risk?
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Kim bears the risk as the broker, and the fix is structural.
- Adopt written office policy covering trust accounts, advertising approval, team names, and unlicensed assistant duties with a written job description listing prohibited tasks.
- Require all advertising to include the brokerage name and be reviewed before it runs; pull the current ads.
- Put every team member's license status in the file and train unlicensed staff: no pricing, no terms, no financing talk, no negotiation, no independent open houses without a licensee present or available.
- Stop the per-open-house payments to Tyler for any licensed activity.
- Institute file checklists so a transaction file contains the agency disclosure, contract, earnest money receipt, trust ledger, and disclosures.
- Anticipate a Commission inquiry; cooperation, remediation, and accurate records mitigate but do not erase the violations.
Bottom line: the team name is a marketing device; the license, the trust account, and the supervisory duty sit with the broker.