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Minimum-service rules boost home-selling costs
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First in Florida
Florida started the ball rolling with a law in 2004, a number of states followed in 2005, and Indiana is the latest to do it, passing a minimum-services law in March of this year.

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Brokers in these states have to provide the services whether or not the customer wants them. Customers have to pay for the services even if they would rather perform the duties themselves.

The new limited-service rules run counter to the do-it-yourself culture exemplified by the growing popularity of "for sale by owner" transactions. Brokers such as Texas Discount Realty identified and served a new breed of customer: those who don't want to sell their homes all by themselves, but who don't want to pay for a full suite of services, either.

Limited service, lower price
Before September 2005, Farmer's Texas Discount Realty would charge $495 to add a house to the Multiple Listing Service and provide a lockbox and a yard sign. That was it. Sellers had to buy their own newspaper advertisements and hold their own open houses. They had to conduct their own negotiations and deal with title agencies on their own, or hire attorneys to help. Most sellers offered 3 percent commissions to buyer's agents.

Farmer says limited-service brokers captured a sliver of the market -- about 2 percent or 3 percent of sellers in Austin and maybe 5 percent of sellers in Houston. Then, he says, the Texas Association of Realtors stepped in last year and persuaded the Legislature "to protect the two-agent system" -- two agents and two commissions of 2 percent to 3 percent each.

Lawson, of the Texas Association of Realtors, disputes Farmer's assertion. The law isn't about protecting the two-agent system, she says: It's about preventing poor service, eliminating conflicts of interest and conforming with Texas' legal definition of an agent.

Faxing a fax for a fee
"Not communicating offers -- that's pretty poor service," Lawson says. Under the new law, listing brokers are required to field offers and present counteroffers, even if that means merely receiving a fax from a buyer's agent and faxing it to the seller. Allowing sellers to communicate directly with buyers' agents invites conflicts of interest, Lawson says, because the sellers often ask the buyers' agents for advice.

That brings up another objection: Full-service agents complain that limited-service agents create more work for them. "One agent agrees to work for half the commission assuming the other side will do their job," RE/MAX's Lewis told the Justice Department and FTC. "If the other side does not do its job, the first agent should not have to perform increased work without being paid more."

Sambrotto says the overwork issue "is not a complaint that we hear very often. But I think if that's the case, don't show that home. Three percent is still quite a bit of money, frankly."

Farmer doesn't have much sympathy for buyer's agents, either. If a seller asks a question that the buyer's agent doesn't want to answer, "All you have to do is say, 'Hey, I can't help you with that. You need to contact your broker or contact your attorney,'" he says.

The way Farmer looks at it, he pays his dues to the National Association of Realtors, "and they're using that money against me. It's something that has bothered me." He plans to start a group that will lobby the Texas Legislature on behalf of homeowners.

Bankrate.com's corrections policy -- Posted: April 6, 2005
 
 
More stories by Holden Lewis
Page | 1 | 2 |
 
 RESOURCES
States with minimum-service rules
Bankrate's 2006 real estate guide
Free weekly mortgage newsletter
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