By Alysha Webb, Editor and Publisher
Tim Lamb Group has done hundreds of dealership buy sell transactions. The fact that he holds a real estate license doesn’t make any deal easier or smoother, says Bob Morris, director of southeast region at Tim Lamb. But he wouldn’t do business without a license.
“You are dealing in multimillion dollar dealership properties that obviously fall into the area of commercial real estate, and in many states is it is a felony to engage in these kind of transaction without a license,” says Morris.
Do you ever ask your lawyer if he is licensed? How about your doctor? Probably not. You just assume they have the proper certification to be doing their jobs. The same holds for dealership buy sell brokers. Dealers assume they have the proper licenses to do their job.
Often, brokers do hold real estate licenses, but not always. You should ask a broker if he or she is licensed before you enlist their services. The license is both proof a company is qualified and a shield against potential legal troubles.
“If you have someone representing you who is unlicensed, it puts the deal in jeopardy because the buyer could make a claim against you, the seller, for not following the law if your broker misrepresented something,” says Mark Johnson, president of MD Johnson Inc.
In most states, anyone acting as a broker in a dealership buy sell is legally required to be a licensed real estate agent. But the law is not always proactively enforced. In California, for example, a real estate license is required if someone acts on someone else’s behalf in expectation of compensation, including the listing and selling of property, or a business, and the goodwill, says Tom Poole, the assistant commissioner in charge of licensing at the California Bureau of Real Estate.
Brokering dealerships falls into that category, says Poole. But given the Bureau’s small staff, investigating if dealership brokers are licensed when there is not a complaint doesn’t usually happen.
“Our main focus is consumer protection,” says Poole. “In these kinds of transactions, where you’re dealing with a sophisticated buyer, (investigations) just aren’t our priority.”
There are other good reasons for being licensed. Nancy Phillips Associates, Inc. holds a real estate license in five states, and she and her staff spend up to a month every two years attending classes and passing exams to keep those licenses current, says Nancy Phillips.
“The knowledge and contacts that come with operating a real estate brokerage firm provide expertise and information regarding appropriate dealership appraisals, environmental requirements, and alternative uses for dealership properties,” says Phillips.
The license also provides important protection in case of a lawsuit. A real estate license allows a broker to buy real estate errors and omission insurance, which is liability coverage if a misrepresentation, or perceived misrepresentation, occurs in the course of the buy sell, points out Johnson.
For Johnson, who owns a real estate company as well as his buy sell advisory firm, the bottom line is that licensing is protecting the seller from unqualified brokers.
“The reason the licensing department exists is to keep people who get in trouble from going back and doing the same thing” again when a wrong is committed, he says.
