DOJ, FTC ask governor to veto limited-service legislation
Tuesday, May 24, 2005
By Glenn Roberts Jr.
Inman News
The U.S. Department of Justice and Federal Trade Commission on Monday
sent a letter to Missouri Gov. Matt Blunt that encourages him to veto
legislation mandating services that real estate brokers must perform for
home buyers and sellers. The federal agencies charge that the bill is
anti-competitive and will likely lead to higher prices for real estate
services.
House Bill 174, which passed the House on March 14 in a 156-0 vote and
passed the Senate on May 5 with a 33-0 vote, provides that all brokers
and agents who enter into a written agreement to exclusively represent a
consumer in a real estate transaction must accept and present all offers
and counteroffers for their clients, assist clients in developing,
communicating, negotiating and presenting offers and counteroffers, and
must answer their clients' questions relating to offers, counteroffers,
notices and contingencies. And the bill specifies all of the scenarios
in which real estate professionals must enter into written agreements
with their clients.
"The proposed legislation, if enacted, is likely to reduce competition
and harm Missouri consumers in two significant ways," the federal
agencies state in their letter to the governor. "First, consumers who
want to perform for themselves some steps involved in negotiating home
sales in Missouri will pay real estate professionals more than they do
today. Second, House Bill 174 is likely to increase the price that some
consumers who prefer full-service brokerage pay for real estate
services."
The letter also states that the Missouri legislation "limits competition
far more than could possibly be necessary to address any plausible
consumer protection concerns" and "there is no justification for
excluding fee-for-service brokerage options from the marketplace."
Sam Licklider, senior vice president of government affairs for the
Missouri Association of Realtors, said, "I am to a degree astounded that
(the federal agencies) would do this." Licklider said he believed that
the requirement of the proposed minimum-service law was "so minimal"
that it would not draw a response from the Justice Department.
While federal agencies have asked lawmakers and regulators in several
other states to reject laws and rules mandating a list of real estate
services that brokers and agents must perform for clients, Licklider
said the Missouri legislation would only apply to transactions in which
consumers have entered into an exclusive agreement with a real estate
professional.
To date, the Justice Department and Federal Trade Commission have also
separately or together filed letters with regulators or lawmakers in
Texas, Oklahoma and Alabama opposing proposals that would heighten real
estate service requirements.
Over one dozen states have proposed or passed similar minimum-service
measures, which typically require that brokers accept and present all
offers and counteroffers on behalf of their clients. The law and rule
changes typically prevent companies from offering bare-bones services,
such as listing a property in a local multiple-listing service for a
flat fee without performing any other services for clients.
Backers of such measures have claimed that they are working to protect
consumers from those companies that offer less services than they need
to complete a real estate transaction, while opponents say that such
measures can restrict consumer choice and force consumers to buy
services that they may not want or need. State Realtor associations
supporting the measures have said that agents at full-service real
estate brokerages can feel obligated to perform services for consumers
whom they do not directly represent when those consumers are working
with a limited-service company.
Licklider said that despite the federal agencies' opposition, the
association will encourage the governor to pass House Bill 174. The
Justice Department is acting as "an interested special interest group,"
he said. "They have a position, we have a different position." He
contacted the Missouri Association of Realtors today to notify the
association about the federal agencies' letter, and he also spoke with
the governor's office.
"Really, it's too early to tell what's going to happen," he said, adding
that he plans to submit some information to the governor's office and
will encourage the governor to sign the bill.
The governor has 45 days from receiving the bill to consider whether to
approve or veto the legislation, said Jessica Robinson, a spokeswoman
for the governor. "The governor is reviewing the letter as well as the
related bill," she said.
While the 1-million-member National Association of Realtors has not
formally endorsed these efforts by state Realtor associations to pass
similar minimum-service laws, the association has provided legal advice
about such laws and has not discouraged the associations from pursuing
the laws.
Laurie Janik, general counsel for the National Association of Realtors,
said in an April 22 letter to state Realtor association executives that
they should not give too much weight to Justice Department and Federal
Trade Commission comments on minimum-service measures.
"The views submitted by the DOJ or FTC should be evaluated on their
merits and should not be afforded undue weight based on a mistaken
belief that state legislatures or real estate commissions must acquiesce
to (their) views or face the prospect of defending their actions in
court," she wrote. "Nor should Realtor associations be deterred from
expressing the views of their members to legislators and regulators."
Janik also noted that Realtors and Realtor associations "have the right
to lobby for legislative and regulators action they support – even if
the effect of such action would be anticompetitive. In making this
statement, we do not mean to suggest that laws and regulations imposing
minimum duties on licensees are anticompetitive. To the contrary, they
are intended to assure that the market for the sale of real estate
functions efficiently and in the interests of buyers and sellers. But
even if they DOJ or FTC believes that these government actions suppress
competition, the right to petition for such actions should be
unquestioned."
The Justice Department is also investigating other aspects of the real
estate industry. Justice Department officials have been investigating a
National Association of Realtors' policy for Internet property listings
for about two years, and the association is negotiating with agency
officials and pursuing changes to its online listings policy in an
effort to find a compromise. Also, the Justice Department's Antitrust
Division filed a lawsuit against the Kentucky Real Estate Commission in
March, charging that the state's anti-rebate law limits competition
among real estate brokers.
Steve Brobeck, executive director for the Consumer Federation of
America, a pro-consumer group that represents about 300 nonprofit
organizations, said that he has heard complaints from real estate
discounters for years about "the subtle and not-so-subtle ways that they
are discriminated against," and he said that the National Association of
Realtors still appears "committed to helping to preserve the price
structure." He added, "I think many consumers are surprised that there
are not more pricing options (in real estate). "
Chris Nye, broker and founder of MLS4Owners.com, a real estate
advertising company that offers flat-fee property listings in
Washington, said that he would like to see the National Association of
Realtors conduct a survey of its members on the topic of
minimum-services legislation.
"I would be willing to bet that a majority of Realtors don't like these
actions taken by state associations. I would be willing to bet that many
Realtors are not aware of it," said Nye, who also said he has personally
been in contact with the Justice Department.
Nye said that the minimum-service efforts across the country appear to
be "a cartel protecting its turf," and he believes that the Justice
Department has reason to take an interest in antitrust issues relating
to minimum-service laws. "(DOJ investigators) are busy people – for them
to make the statements they're making, to jump into this argument the
way they did – they obviously feel there's some meat to chew on here."
Craig Cheatham, executive vice president for the Association of Real
Estate License Law Officials, a nonprofit group that links real estate
regulators, said that his group is compiling a list of states that are
considering or have passed real estate minimum-service measures. The
association's board requested a status report on each jurisdiction's
status on the minimum-service issue as of June 30.
"The study will analyze the rationale and goals of each initiative and
will compare and contrast the most significant points in each law, each
regulation or each proposal." Cheatham said the group's board members
will study that document to determine what guidance the group could or
should give to its member agencies.
"Although the mission of 'consumer protection' is often being invoked in
the recent crop of proposals relating to 'minimum service,' few, if any,
appear to have been initiated from consumer-protection agencies – the
licensing and enforcement bodies that have protecting the public as
their primary mission," Cheatham said. Also, he said that "at first
glance, it appears that most 'limited-service' arrangements are not
hindered" by the laws.
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