Minimum-service rules boost home-selling costs
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.
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
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,
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,'"
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.