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Minimum-service rules boost home-selling costs

Aaron Farmer wishes he could still charge $495 to help his clients sell their houses. But he can't anymore, because the Texas Association of Realtors persuaded the Legislature to tell him how to do his job.

"Essentially, it's more work for us," says Farmer, owner of Austin-based Texas Discount Realty, a limited-service brokerage. "If we have to do more work, it causes us to spend more time with clients, so we have to charge them more."

Farmer's most popular package of services now costs four times as much as it used to: $1,995.

Middlemen a must in 10 states
Texas is among 10 states to impose minimum-service requirements on real estate brokers. The new rules compel brokers to serve as middlemen, even if their clients want to eliminate the middleman.

"The way they're going about limiting consumers' ability to get reduced fees on real estate transactions is to go state by state to get the regulations changed," says Colby Sambrotto, chief operating officer of ForSaleByOwner.com.

It's all about money, agrees Manuel Iraola, president of Homekeys.net, a Miami-based brokerage: "They are trying to force the people to do something under the banner that they're protecting the interests of the consumers where, in reality, what they're really protecting is the 6 percent commission."

It's unusual for an industry to lobby for stricter regulations on itself. Realtors say they're seeking government intervention to protect consumers.

"We're not saying you have to charge 6 percent," says Stacey Lawson, spokeswoman for the Texas Association of Realtors. "We don't even talk about money. All we're saying is these are minimum services you have to provide."

Consumers too unsophisticated
The new measures require real estate brokers to receive and present offers and counteroffers, offer negotiating advice, complete forms, and answer questions. This often means a buyer's agent can't even send a fax or make a phone call directly to a seller.

Tasks such as these are skilled work that "should not be done by a novice," wrote RE/MAX's chief legal officer, Geoff Lewis, in a letter last year to the Justice Department and Federal Trade Commission. "While some consumers may be sophisticated enough to represent themselves in some or all of the steps of a transaction, most are not."

The Justice Department's antitrust division remains unconvinced, insisting that consumers benefit by having a wide range of choices in the real estate services they get. The division asked six states not to pass minimum-service bills, calling the measures anti-competitive. Five of those six states adopted the rules anyway, and the division hasn't challenged any of the state laws. In all, 10 states have passed laws or regulations since 2004.

The National Association of Realtors' legal counsel, Laurie Janik, reportedly has told the state associations that "statutes enacted by a state Legislature are exempt from scrutiny under the federal antitrust laws." The National Association of Realtors did not respond to an e-mail requesting comment.

In the months after she rendered that opinion in February 2005, bills were introduced into several state legislatures, pushed by state Realtors' associations.

Next: "Three percent is still quite a bit of money, frankly. ... "
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