Posted by Allen Bailey on March 30, 2008 at 13:17:24:
In Reply to: Self managing-out-of-state property? posted by RevInv on March 28, 2008 at 10:38:55:
A lot of you are recommending that you not hire a real estate agent to manage property. I can agree that a lot of agents are not up to managing property, but there are many property managers that do a good job. One thing that you may have overlooked is that in many states the only people that can legally manage your property are licensed real estate agents.
We operate a property management in Memphis and have encountered many out of state owners that have been fleeced by unlicensed property managers. Here is an article that I wrote regarding this topic last month for my blog:
We have been contacted by a group of family members from California that wanted us to take over management of their properties. They are not happy with their current property manager as the current manager is not forwarding them the rent, maintaining the property or returning their calls. In total they are owed tens of thousands of dollars in collected rent.
It has been several weeks and the family is still unable to get the property manager to call them back and some checks they sent have bounced. I advised them to contact the Tennessee Real Estate Commission and the Memphis Area Association of Realtors to file complaints. Well, when they called to complain they found out from the Real Estate Commission that their management company was unlicensed. Property Managers in Tennessee are required to be licensed Real Estate Brokers per Title 62-13-102 unless they are living in an apartment complex that they manage as a residential manager.
While the unlicensed manager is breaking the law and may be convicted of a class B misdemeanor and have to pay a fine up to 3 times the amount of money they received. The unlicensed manager’s customers do not have the ordinary protections that they would have dealing with a Real Estate Broker. All of the rent and deposits that we collect are held in a Special Property Management Escrow Account for Re/Max at Mallard Creek. It is audited by the Real Estate Commission. What this means is we can’t co-mingle your money with our money.
A licensed agent’s clients would be able to make a claim to the Tennessee Real Estate Education and Recovery Account and/or to the Error and Omissions Policy. Unfortunately the family is not able to do this and is having to file criminal charges with the District Attorney. Preventing problems such as this one is why the state regulates and licenses Real Estate Brokers. Unfortunately in Memphis there are many Property Managers advertising in the newspaper and on the Internet who are unlicensed.
So feel free to work with any Property Manager that you desire, but I recommend that you go the Tennessee Real Estate Commission’s website and verify that the Company and individual Property Manager that you deal with are licensed. Property Management Error & Omission coverage is not universally mandated and is a rider on the policy for the state approved plan. Also inquire to make sure your company’s coverage includes the more expensive property management rider.
Allen Bailey is a licensed real estate agent in TN and MS with Re/Max Mallard Creek. He is also a licensed insurance agent in TN, MS AR and KY and specializes in advising in the Total Management of Investor’s assets. You may contact him at abailey@thememphisteam.com or 901-592-1592 x 5.