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Anti-homeowner Legislation Beaten Back
Opponents Included Consumer
Groups, Justice Department, and Realtors
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For Immediate Release, March
16, 2008
For more information contact: Bruce Hahn @ 571-214-1013
The Illinois State Legislature has blocked legislation that would have
prohibited real estate agents from contributing part of their sales
commission towards a home buyer’s down payment. Most mortgage lenders
now require at least a 5% down payment, even from buyers with excellent
credit histories. Many first time, low and moderate income buyers
haven’t saved that much. Real estate agents have been helping many of
those buyers by contributing part of their commission towards the
buyer’s down payment in order to help make the sales possible.
A March 16, 2008 Google search for “Illinois real estate commission
rebates” returned 94,200 results, including thousands of real estate
brokers offering Illinois home buyers rebates of as much as 2% of the
home’s purchase price. For a 5% down payment on a typical $200,000
Illinois home ($10,000), a $4,000 rebate (2%) means the buyer needs only
another $6,000. “By substantially reducing the number of home buyers
entering the market, this legislation could have had a devastating
effect on Illinois home values, which have been dropping even despite
the increased availability of buyer rebates,” said Bruce Hahn, President
of the American Homeowners Grassroots Alliance (AHGA). “Commission
rebates are also having a positive ripple effect. Many of the sellers
are then able to buy a move-up home, which also helps maintain Illinois
home values. In some cases the rebate-enabled sale prevents a
foreclosure, and foreclosures drive down the values of all the other
homes in the neighborhood.”
According to the Illinois Association of Realtors (IAR), the bill is an
initiative of a group called the Homeowners Club of America (HCA). “We
are not familiar with that group” said American Homeowners Grassroots
Alliance President. “It’s hard to understand why a homeowners club would
want to stop its members from receiving rebates that could enable them
to buy a home, so we have to wonder who is providing HCA’s funding. We
very much doubt that it is coming from individual real estate agents or
independent real estate brokers. Very few experienced real estate agents
or independent brokers have any fear of competition from different
business models, and very few of them have the money to fund such
lobbying campaigns anyway. However, given HCA’s opposition to rebates to
home buyers, it’s possible that on this issue HCA may be acting as a
front group for one or more large real estate brokerage companies trying
secretively and independently to get state legislators to save them from
losing business to their competitors who are willing to help
homeowners.”
Both AHGA and the Consumer Federation of America (CFA) urged the
Illinois House Judiciary 1 Committee to oppose the measure. In a letter
to the Committee’s Chairman, the U.S. Department o Justice (DoJ)
observed that the legislation “… would undermine competition and reduce
choice.” DoJ added that “…we have seen no evidence demonstrating that
the harm caused by banning rebates is offset by any benefits to
consumers... proponents of such bills have never provided any convincing
rationale that the bill will benefit consumers.”
The Illinois Association of Realtors also opposed House Bill 4313,
sponsored by State Representative Robert Molaro (D-21, Chicago). Among
the reasons IAR cited for it’s opposition to Molaro’s bill were that
“the bill seeks to prohibit a legitimate marketing tool that Realtors
may wish to use as part of their business plan; the bill gives the
appearance that this is an attempt to stifle competition in the
marketplace, to the detriment of the consumer; and the bill will invite
claims by the U.S. Department of Justice and others that Illinois is
attempting to fix the cooperating broker’s commission and to create a
non-competitive environment”.
The state legislature requires that all bills be passed by committee by
March 14 in order to be considered by the full legislature. This
extremely anticompetitive bill died when the Illinois House Judiciary 1
Committee failed to pass it by then.
Illinois homeowners should be grateful that their state legislators
declined to pass this ill-conceived legislation. All of us should be
especially grateful to IAR, whose lobbying power was undoubtedly key to
killing the bill. IAR’s opposition is particularly noteworthy because it
has typically been state real estate associations that have lead the
charge in other states to pass anti-rebate legislation and other
measures that seek to limit competition in real estate services. IAR can
take comfort from the knowledge that their opposition to this bill is
helping Illinois homeowners and will help bolster their industry’s
reputation.
In siding with American homeowners on this important issue, IAR is also
setting an excellent example for other state real estate associations,
multiple listing services, state real estate commissions, and their
national organization. The anticompetitive and protectionist regulatory
and legislative initiatives of many other real estate organizations have
lead to an ongoing string of exposes’ by 60 Minutes and many other media
sources. The result has been that the reputation of real estate agents
and brokers has reached all time lows. The large companies that appear
to be driving many of those efforts in other organizations apparently
don’t care about homeowners or about the damage such obvious and blatant
protectionist efforts are doing to the real estate industry’s
reputation. IAR’s action will hopefully be the first step in reversing
that trend.
“Efforts to limit consumer choice by other real estate organizations are
very unfair to homeowners and the many experienced real estate agents
and independent brokers,” according to the Grassroots Alliance’s
president. “No matter what business model they choose, the vast majority
provide valuable services that are both appreciated and needed by
American homeowners. If other real estate organizations will follow
IAR’s example and refrain from supporting protectionist efforts in the
future, public faith in the profession will soon be restored.”
The American Homeowners Grassroots Alliance (www.AmericanHomeowners.org)
is a nonprofit consumer advocacy organization dedicated to assisting
homeowners better understand the significant economic issues affecting
their home and their lifestyle, and empowering them to make their voices
heard by state and federal officials.
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