We are very pleased that the Justice
department and the FTC warned the Texas Real Estate Commission to reject
their minimum level of service regulation, which, as their letter to
TREC aptly points out would "harm Texas consumers by reducing their
choices (in brokerage representation) and likely raising prices without
any countervailing benefits." President Bush's regulators are defending
the rights of the nation's homeowners by warning TREC not to restrict
competition in the name of consumer protection.
There is no reason that consumers should be forced to pay for services
they neither want nor need. Indeed the dual agency provisions in many
real estate listing agreements allow real estate brokers to abrogate
their fiduciary duty to represent a home seller in negotiations if the
buyer is represented by the agent in the same firm. Unlike a listing
agreement with a discount broker, where the commission savings are
defined at the outset, dual agency clauses in most cases do not provide
consumers commission reductions, rebates, or other fee reductions when
dual agency clauses are exercised by the broker.
Certainly many consumers have had problems with the exercise of dual
agency clauses, and consumers have not infrequently had other problems
with full service real estate brokers. We are aware of no clear evidence
that rapid increase in the use of discount brokers by home sellers is
causing any greater level of problem for consumers than other aspects of
their relationships with real estate brokers.Clearly home sellers are
flocking to the discount broker model. If this business model is as
flawed as the Texas Real Estate Commission appears to believe it is very
doubtful that it would be continuing its rapid growth in the
marketplace.
What's the solution? The first step is to find out if consumers are
having more problems with discount brokers than they have with dual
agency clauses,or other types of issues with full service real estate
brokers. The Texas Real Estate Commission should step back from the
draconian approach of outlawing an entire business model and first do
some quantitative research before proceeding. If consumers are facing
problems as a result of the discount broker model there are probably far
less damaging alternatives. For example the Texas Real Estate Commission
could require discount brokers to provide more clear disclosure of the
responsibilities they must assume and could also require traditional
brokers to provide more clear disclosure of the risks and loss of
fiduciary services that result when dual agency clauses are exercised.
This would be a far more reasonable and less competitive alternative
than the proposal under consideration by the Texas Real Estate
Commission.
Chris Christensen
Vice President, Public Affairs
American Homeowners Grassroots Alliance
Serving the interests of the nation's 70 million homeowners and future
homeowners since 1984. Visit our web site http://www.americanhomeowners.org.
Contact us at: 6776 Little Falls Road, Arlington, VA 22213-1213. Phone
703-536-7776 Fax: 703-536-7079.
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