Executive Director
Arkansas Real Estate Commission
Gary.Isom@Arkansas.Gov
Lately, the news has been full of stories about hundreds of thousands of foreclosures being delayed because of robo-signatures. The legality of many individual foreclosure proceedings are being challenged based upon the claim that the person who gave the final stamp of approval to move forward with the foreclosure action did not actually have knowledge of important facts of the case. That claim, if proven, could allegedly convert the authority’s “signature” into a “robo-signature”, thereby calling into question the validity of the foreclosure proceeding.
Fortunately, that rationale does not apply to the supervising broker’s signature on a real estate contract. Otherwise, we might have parties to real estate transactions claiming that their sales contracts were not valid because the supervising broker signed the document without reviewing and having knowledge of all the facts of the transaction. However, let’s ask ourselves this question: if the contract could be declared void because the supervising broker did not know all the facts of the transaction, would we have a lot of voidable contracts in the real estate business? Unfortunately, I’m concerned that we would.
Arkansas Real Estate Commission Regulation 10.4(d)(1) states:
“The preparation of instruments in connection with a real estate rental or sale and the closing of a sale by a licensee must be performed by or under the specific supervision of the principal broker.”
Arkansas Real Estate Commission Regulation 10.12(b) states:
“ (b) Every offer received must be signed by the licensee who receives it and by that licensee's supervising broker. Every acceptance must be signed by the listing licensee and that licensee’s supervising broker . (It is desirable for the supervising brokers of the selling licensee and listing licensee to review and sign each real estate contract before it is submitted to the seller, although that is not always possible. However, such supervising brokers shall review and sign the real estate contract as soon as possible after it is received, and, in all cases, prior to closing.)”
As for Timing for Supervising Broker Signatures, the Sooner the Better
There are often questions about when a supervising broker should sign the sales contract. The above regulation addresses that issue somewhat by stating that the brokers should always review and sign the contract prior to closing. However, the sooner a supervising broker signs a contract, the more apparent it becomes that the broker was involved in the transaction, thereby fulfilling his or her supervisory responsibilities. If a contract negotiation goes through several stages and parties are left holding multiple versions of the contract that do not include the supervising broker’s signature, it can appear that the broker is not supervising his or her agents. While it may not always be practical for the supervising broker to sign at each stage, as a matter of practice, a supervising broker should attempt to establish that he or she was supervising at the earliest stage possible. The broker’s signature does just that. Parties should be given copies of contracts as they sign them. If parties are left holding multiple copies of the contracts that are not signed by the broker, those copies will most assuredly be submitted to the Commission if the party files a complaint. It certainly looks better if those copies are signed by the supervising broker.
To sum it up, principal brokers and supervising executive brokers are responsible for knowing the facts of the sales contracts that are brokered by agents licensed with their firm.
When a commission investigator visits an office to review files, the supervising broker’s signature must appear on all sales contracts for closed transactions. The supervising broker’s signature should also appear on pending sales contracts, unless there is a good reason that the supervising broker has not had the opportunity to review and sign. The supervising broker’s signature establishes that the broker reviewed the document and was knowledgeable of the facts of the transaction. The concept of a robo-signature is simply not an acceptable option for supervising brokers in a real estate firm. The language of a formal ORDER OF NOTICE to appear before the commission would read something like “The supervising broker knew or should have known the facts of the real estate transaction”.
Always remember Commission Regulation 10.4(a)(1) which states:
“A principal broker is generally responsible for all business conducted by the broker’s firm and for all of the real estate activities of all of those licensed under or associated with the principal broker…”
NOTE: For purposes of this article, the term “principal broker” should be interpreted to include designated executive brokers of branch offices and the term “supervising broker” includes principal brokers, designated executive brokers of branch offices, and executive brokers who are assigned supervisory responsible over licensees in the firm.
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