To: Members of the Kentucky Real
Estate Commission:
Lois Ann Disponett, Arvel "Jerry" McMahan, Delbert "Ken" Perry, Michael E.
Plummer, Ron Smith
From: Bruce N. Hahn CAE, President
Subject: Provisions in KY Senate Bill 43 relating minimum services
Date: February 3, 2006
By email, care of Norman Brown – Executive Director, Kentucky Real Estate
Commission (Norman.Brown@ky.gov)
C: The Honorable Charlie Borders
C: Lee Harris – General Counsel, Kentucky Real Estate Commission (Lee.Harris@ky.gov)
We are contacting you to urge that the Kentucky Real Estate Commission
request that Senator Charlie Borders withdraw from consideration Senate Bill
43 or delete from that legislation provisions relating to minimum levels of
service in real estate. We are a national consumer advocacy organization
serving the nation’s 75 million homeowners. We have members in every state
including Kentucky. We are asking Senator Borders directly to withdraw from
consideration Senate Bill 43 or delete from that legislation provisions
relating to minimum levels of service in real estate.
The language in SB 43 we oppose would “…amend KRS 324.160 to require a
licensee to meet a specified level of minimum services after entering into a
written listing or brokerage agreement, to be defined by the commission
through administrative regulations; declare that failing to provide minimum
services constitutes gross negligence subject to discipline…”
We believe that consumers should be allowed to make their own choices in
real estate services, and that outlawing certain business models is
inappropriate absent compelling evidence of consumer injury. Real estate
services are admittedly complex undertakings, and many states have
appropriately mandated real estate broker disclosures to consumers in areas
such as dual or designated agency where there is a substantial legal record
of consumer problems.
We strongly support consumer disclosure. Although we are not aware of
significant problems in minimum services, we would support similar mandated
disclosures to consumers regarding minimum services. This is the approach on
minimum services currently under consideration by the Virginia legislature.
The Virginia bill makes a good start in this area and we commend that
legislation to you as a point of departure for Kentucky.
Such an approach would also afford Kentucky the opportunity to address other
far more serious problems in real estate disclosure. We believe that a far
greater problem is the declining level of compliance with existing real
estate disclosure requirements across the country. The growing problem is
described by the General Counsel of the National Association of Realtors in
the article pasted below. A new law or regulation setting our reasonable
disclosure requirements for limited service brokers should also consider the
creation of fines or other sanctions against real estate professionals who
fail to meet their consumer disclosure requirements in all areas of real
estate where disclosure is required. We would be happy to suggest more
specifics for such a law or regulation.
We appreciate you consideration.
Bruce Hahn
President
American Homeowners Grassroots Alliance
Serving the interests of the nation's 75 million homeowners and future
homeowners since 1984.
The American Homeowners Grassroots Alliance is a nonpartisan consumer
advocacy organization dedicated to assisting the nation's 75 million
homeowners understand significant policy issues affecting homeowners and
homeownership, and empowering homeowners to make their voices heard by state
and federal officials.
Visit our web site http://www.americanhomeowners.org. Contact us at: 6776
Little Falls Road, Arlington, VA 22213-1213. Direct Dial: 571-214-1013;
Headquarters: 703-536-7776 Fax: 703-536-7079.
January 24, 2006
Agent Disclosure Worse Than Ever
by Blanche Evan
Although agency disclosure is required by state law that homebuyers are told
the role of their real estate agent in the sales process, and most
importantly, whom the agent represents, less than one-third of real estate
agents comply, according to the National Association of Realtors' 2005
Profile of Home Buyers and Sellers.
Agency disclosure compliance has been on a downward trend since 2000, when
38 percent of homebuyers were disclosed at first meeting, 28 percent when
the contract was written, and nineteen percent weren't disclosed at all.
One out of five buyers weren't sure whether they had been disclosed or not.
By 2002, compliance was worse. According to the National Association of
Realtors Profile Of Home Buyers And Sellers in 2002, the NAR found that 35
percent of all buyers were disclosed at first meeting, 26 percent when the
contract for purchase was written, and 18 percent weren't disclosed at all.
Twenty-one percent were unsure whether or not they had been disclosed.
At the time, NAR general counsel Laurie Janik told Realty Times, "Disclosed
dual agency is probably the most difficult form of representation to perform
properly," says Janik. "These statistics say that people are being sloppy.
They need to take agency disclosure requirements seriously; it is a critical
element of consumer protection. I don't think it is good for practitioners
or consumers that the trend line is going down. We aren't going in the right
direction -- compliance is worsening."
Fast-forward to the 2005 Profile of Home Buyers & Sellers when the NAR found
that only 30 percent of homebuyers were disclosed at first meeting; 28
percent when the contract was written; 22 percent weren't disclosed at all,
and one in five were uncertain if they were disclosed at all.
A shockingly low number of first-time buyers were disclosed at first meeting
-- only 23 percent, while repeat buyers were more readily disclosed (35
percent.)
That is a precipitous drop from 2004, when 37 percent of first-time buyers
were disclosed at first meeting, but an improvement for repeat buyers. In
2004, only 23 percent were disclosed at first meeting.
According to the 2005 report, "Homebuyers should understand the role of
their real estate agent in the sales transaction and who their agents
represent. Agents usually require that a disclosure agreement be signed that
describes who the agent represents in the transaction - buyer or seller."
What the reasons are for the deteriorating disclosures aren't clear, but
there are a couple of factors that may be driving poor disclosures.
Since 2000, the population of real estate professionals has doubled, with
NAR memberships bursting from approximately 750,000 in 2001 to nearly 1.5
million by the end of 2005. It's possible that there hasn't been enough
training of these new licencees.
Second, the NAR points out that disclosure laws by the states are "all over
the place."
Iverson Moore, senior associate in public affairs for the NAR says, "There
are a lot of newcomers, and in most cases they should be trained to disclose
as early as possible, but not all state laws require it."
For example, in Alabama, disclosures are to take place "as soon as
reasonably possible and before a licensee discloses any confidential
information the licensee must provide a written disclosure, to be signed by
the consumer, that describes the alternative types of brokerage services
available ... ."
But in Arizona, disclosure isn't required until much later in the
transaction. "Before closing, a real estate broker must disclose in writing
to all parties the name of each employing broker who represents a party to
the transaction, and who will receive compensation from the transaction."
Arkansas' policy doesn't have a date when disclosures are required. All the
statute says is that "a licensee must clearly disclose to all parties to a
real estate transaction or their agents which party the licensee is
representing, as required by the commission."
Comments Laurie Janik, general counsel for the NAR, "Almost all states
require disclosure of agency relationships.
These statistics are truly disappointing to me. I would have thought the
numbers on compliance with agency disclosures would be increasing year by
year as agents become accustomed to making them on a regular basis."
She advises, "I think greater emphasis in agent training on the benefits of
agency disclosure might help to boost these numbers. Agency disclosure
benefits everyone. It helps avoid any confusion among buyers and sellers as
to whom the agent represents. It also helps the agents avoid creating
unintended agency relationships with consumers."
|