|Minimum-service rules boost home-selling
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
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.