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Colorado Real Estate Broker License: Free Study Course

Who needs a license, and who runs the system (Commission, Division, license levels)

Real Estate Law and Real Estate Practice · 3 study hours

Bottom line: In Colorado, anyone who does a brokerage act for pay, or hoping for pay, needs an active broker license unless a listed exemption applies, so an unlicensed person cannot take a referral fee on a house until they are licensed.

Bottom line first. If you help someone buy, sell, rent or lease real estate and you get paid (or expect to be paid) for it, you need a Colorado broker license. A paid referral on a house counts. Until you hold an active license, you should not take a referral fee on a property.

The rule: no license, no brokerage

The law says it is unlawful for any person or company to act as a real estate broker in Colorado without first getting a license from the Real Estate Commission (C.R.S. 12-10-202). A license is the state's permission to do a regulated job. A broker is the licensed person who helps others with real estate deals for pay.

Colorado uses one word, "broker," for everyone who is licensed. There is no separate "salesperson" license. What differs is the level (more on that below).

What counts as brokerage

The statute defines a broker as anyone who, for a fee, commission, salary or "anything of value" (or intending to collect one), does any of these acts, "directly or indirectly," by a continuing course of conduct or by a single act (C.R.S. 12-10-201(6)(a)):

  • selling, exchanging, buying, renting or leasing real estate or an interest in it;
  • offering to do any of those things;
  • negotiating a purchase, sale or exchange;
  • listing (agreeing to market a property for an owner);
  • auctioning;
  • dealing in options, or acting as an "option dealer" (a person who takes an option, which is a paid right to buy later, in order to resell or lease the property to someone else);
  • doing any of the above as an employee of an owner for a salary or fee;
  • negotiating the sale or lease of a business when the deal changes who owns real estate;
  • charging a prospective tenant a fee for information about rentals that are available.

Two phrases matter most. "Anything of value" means money is not required: a free vacation or a gift card paid for a lead counts. "A single act" means you do not have to do it all day; one paid deal is enough.

Who is exempt

The law lists people who are not brokers for these purposes (C.R.S. 12-10-201(6)(b)). In plain words:

  • an attorney-in-fact (a person who signs for an owner under a power of attorney) acting without pay;
  • public officials doing their job;
  • court-appointed or legally authorized helpers such as a receiver, trustee, administrator, conservator, executor or guardian;
  • a person or company acting as a principal (the actual buyer or owner) to acquire an interest in real estate for itself;
  • an attorney while practicing law for a client;
  • oil, gas and pipeline right-of-way dealers working on mineral and pipeline interests for others;
  • a person dealing with property he or she owns or leases, and certain owners of 20 percent or more of a partnership or LLC that owns property; and
  • certain corporations dealing with their own property when the acts are incidental to a non-real-estate business, and builders selling new, never-occupied buildings they built.

The common thread: an owner dealing with his or her own property is not a broker. Someone paid to bring a deal to another person's property is. Several of these exemptions have extra conditions and cross-references, so read the full text before relying on any of them.

What happens if you act without a license

Acting as a broker without a license, or after a license was revoked or during a suspension, is a class 2 misdemeanor (C.R.S. 12-10-223). A misdemeanor is a crime less serious than a felony. The Division can also investigate, and the Commission can seek an injunction (a court order to stop).

Referral fees: the unlicensed-friend question

A referral fee is money paid for sending a client to someone. Colorado law says a licensee may not pay or receive a referral fee except as federal RESPA (the Real Estate Settlement Procedures Act, 12 U.S.C. 2601 et seq.) allows, and only with "reasonable cause": an actual introduction of business, a contractual referral-fee relationship, or a cooperative brokerage relationship (C.R.S. 12-10-304(1)). Also, a broker working under another broker may take pay only from his or her employing broker (C.R.S. 12-10-221). So the clean path is: get licensed, hang the license with an employing broker, and be paid through that broker. Taking a fee for steering a deal to a property you do not own, while unlicensed, risks the misdemeanor above.

Who runs the system

The Real Estate Commission is a five-member board appointed by the governor: three brokers with at least five years of Colorado experience (one with property-management experience) and two members of the public. Terms are three years (C.R.S. 12-10-206(1)). It makes the rules (these are in 4 CCR 725-1), and a license can be denied, suspended or revoked only by a majority vote of the members (C.R.S. 12-10-206(4)).

The Division of Real Estate is the state office with a director and staff. It carries out the work: administering and enforcing the law, auditing licensees' business accounts, and prosecuting violators (C.R.S. 12-10-207). Simple way to remember it: the Commission is the board that decides; the Division is the staff that does.

License levels

  • Associate broker: new license. Works under the supervision of an employing broker (Rules 1.6 and 2.6). Needs approved education, passing the licensing exam, and fingerprints.
  • Independent broker: needs at least two years of active licensure first (Rule 2.7). May work on his or her own without supervision, but does not employ other brokers.
  • Employing broker: also needs two years of active licensure, plus the Brokerage Administration course (Rule 2.8), and may employ or engage other brokers. The statute calls for 24 clock hours of brokerage administration instruction before a broker employs others (C.R.S. 12-10-203(5)(c)(II)).

An active license is one that is current and allowed to be used. An inactive license may not be used for brokerage work. A brokerage firm is the licensed business (sole proprietor, LLC, corporation and so on) that employs or engages brokers.

Example with real numbers

Maria, an unlicensed friend of yours, introduces a seller to an investor for a $500,000 Boulder County house. The deal closes. The investor offers Maria 1 percent for the introduction.

  1. 1% x $500,000 = $5,000.
  2. Maria is paid for "negotiating" or "offering" a sale of real estate, which is a brokerage act, and she holds no license.
  3. She has committed a class 2 misdemeanor risk under C.R.S. 12-10-223, and a licensed broker who paid her could be disciplined.
  4. Had Maria been licensed and paid through her employing broker, the $5,000 would have been lawful.

The $5,000 turns on the license. That is the whole point of this lesson.

Law cited

Key terms

License
The state's permission to do a regulated job. A broker license comes from the Real Estate Commission.
Broker
In Colorado, any person licensed to do brokerage acts for pay. One word covers all license levels.
Real Estate Commission
The five-member board, appointed by the governor, that makes the rules and decides on licenses.
Division of Real Estate
The state office, headed by a director, that carries out and enforces the law and audits licensees.
Associate broker
Entry level. Works under an employing broker's supervision.
Independent broker
Level that needs two years of active licensure. Works without supervision, does not employ others.
Employing broker
Level that may employ or engage other brokers. Needs two years active plus Brokerage Administration.
Brokerage firm
The licensed business (sole proprietor, LLC, corporation) that employs or engages brokers.
Option dealer
A person who takes a paid right to buy (an option) in order to resell or lease the property to someone else.
Principal
The real party in the deal: the person buying or owning for himself or herself.
Attorney-in-fact
A person authorized by a power of attorney to sign for an owner.
Referral fee
Money paid for sending a client or business to someone else.
Misdemeanor
A crime less serious than a felony. Acting as a broker without a license is a class 2 misdemeanor.
Active license
A license in good standing that may be used for brokerage work.

Flashcards

Who must hold a Colorado broker license?

Anyone who does a brokerage act for pay, or hoping for pay, unless an exemption applies (C.R.S. 12-10-201(6), 12-10-202).

How many acts make someone a broker?

One. The law covers a 'single act or transaction' as well as a continuing course of conduct.

What counts as pay?

Fee, commission, salary, or anything of value, or the intent to collect one.

Penalty for acting without a license?

Class 2 misdemeanor (C.R.S. 12-10-223).

Commission makeup?

Five members: three brokers (5+ years in Colorado) and two public members; three-year terms.

Commission vs. Division?

Commission = the board that decides and makes rules. Division = the staff that administers, audits and enforces.

Years of active licensure for independent or employing broker?

Two years (Rules 2.7 and 2.8).

Extra course for an employing broker?

Brokerage Administration (24 clock hours in the statute).

Who may a broker working under another broker take pay from?

Only the employing broker (C.R.S. 12-10-221).

Is an owner selling his own house a broker?

No. A person dealing with property he or she owns is exempt (C.R.S. 12-10-201(6)(b)).

Quiz: 10 questions

Tap an answer. It shows right or wrong and opens the reason. Your score is saved in this browser and counts in the study app.

  1. Under Colorado law, which of these is enough to make a person a broker who needs a license?

    1. A Only doing brokerage work full time for years
    2. B One paid act, such as negotiating the sale of someone else's house
    3. C Only holding a business card that says 'real estate'
    4. D Only collecting money in the form of cash
    Show answer and why

    Answer: B. One paid act, such as negotiating the sale of someone else's house

    The definition covers a 'single act or transaction' and 'anything of value', so one paid negotiation counts. Full time is not required.

    C.R.S. 12-10-201(6)(a)

  2. Which person is NOT treated as a broker under the exemptions?

    1. A An unlicensed friend paid $3,000 to negotiate a neighbor's sale
    2. B A person paid to list another owner's cabin
    3. C An option dealer reselling options to buyers
    4. D An individual selling a house he personally owns
    Show answer and why

    Answer: D. An individual selling a house he personally owns

    A natural person acting personally on property he owns is exempt. The others are paid to deal with someone else's property or are named brokerage acts.

    C.R.S. 12-10-201(6)(b)

  3. A class 2 misdemeanor is the stated consequence for which act?

    1. A Acting as a broker without a license
    2. B Charging a fee for a home inspection
    3. C Hosting an open house for your own home
    4. D Joining a professional association
    Show answer and why

    Answer: A. Acting as a broker without a license

    C.R.S. 12-10-223 makes unlicensed brokering, or brokering while revoked or suspended, a class 2 misdemeanor.

    C.R.S. 12-10-223

  4. How many members sit on the Real Estate Commission?

    1. A Three
    2. B Seven
    3. C Five
    4. D Nine
    Show answer and why

    Answer: C. Five

    Three brokers plus two public representatives, appointed by the governor.

    C.R.S. 12-10-206(1)

  5. Which describes the Division of Real Estate correctly?

    1. A The five-member board that votes on every license revocation
    2. B A private trade association of brokers
    3. C State staff led by a director who administers and enforces the license law and audits licensees
    4. D The court that hears broker lawsuits
    Show answer and why

    Answer: C. State staff led by a director who administers and enforces the license law and audits licensees

    The Commission is the voting board. The Division is the staffed office doing the day-to-day administration and enforcement.

    C.R.S. 12-10-207

  6. Which license level may employ other brokers?

    1. A Employing broker
    2. B Associate broker
    3. C Independent broker
    4. D Inactive broker
    Show answer and why

    Answer: A. Employing broker

    Only an employing broker may employ or engage other brokers. An independent broker works on his or her own but does not employ others.

    4 CCR 725-1 Rule 2.8

  7. Dana has been an active Colorado broker for 18 months. She wants to apply for an independent broker license. What is the problem?

    1. A She must first become an appraiser
    2. B She must be an attorney
    3. C Nothing; independent level has no experience requirement
    4. D She needs at least two years of active licensure first
    Show answer and why

    Answer: D. She needs at least two years of active licensure first

    Rule 2.7 requires at least two years of active licensure as a broker before applying for independent broker.

    4 CCR 725-1 Rule 2.7

  8. A licensee works under an employing broker. From whom may she accept a commission for brokerage acts?

    1. A Any buyer or seller she helped
    2. B Only her employing broker
    3. C Any other brokerage that offers one
    4. D The Division
    Show answer and why

    Answer: B. Only her employing broker

    It is unlawful for a broker registered as employed by another to accept commission from anyone except the employer.

    C.R.S. 12-10-221

  9. Math: an unlicensed person is offered a referral fee of 0.75 percent on a $400,000 sale for introducing the buyer. What is the fee, and does the license rule change that?

    1. A $300, and no license is needed under $500
    2. B $3,000, and the fee is still a risk without a license
    3. C $3,000, and no license is needed for introductions
    4. D $30,000, and a license is needed only above $1 million
    Show answer and why

    Answer: B. $3,000, and the fee is still a risk without a license

    0.0075 x $400,000 = $3,000. The license rule has no dollar threshold, so the amount does not remove the licensing risk.

    C.R.S. 12-10-202

  10. Which of these is a valid reason for a licensee to pay a referral fee?

    1. A An actual introduction of business was made
    2. B The recipient asked nicely
    3. C The recipient is a close friend
    4. D The fee is smaller than the commission
    Show answer and why

    Answer: A. An actual introduction of business was made

    Reasonable cause means an actual introduction, a contractual referral-fee relationship, or a contractual cooperative brokerage relationship, and it must still follow RESPA.

    C.R.S. 12-10-304(1)

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