New Mexico is pursuing policies that could choke consumer choice and competition in real estate services, the U.S. Justice Department charges in a letter to the New Mexico Real Estate Commission.
J. Bruce McDonald, deputy assistant attorney general for the Justice Department’s Antitrust Division, states in a Wednesday letter to members of the New Mexico state Real Estate Commission that the commission should reject proposed amendments to the state’s real estate regulations.
The Justice Department, acting alone or in collaboration with the U.S. Federal Trade Commission, this year has written other letters opposing similar measures proposed in other states. These measures, which typically are backed by state-level Realtor trade groups, specify a range of services that all real estate professionals must provide to consumers — whether or not consumers request such services.
The proposed rules “are likely to reduce consumer choice, increase real estate services prices and undercut incentives to innovate,” the letter states. “As we have encouraged other state commissions and legislatures, we encourage you to reject rules that could harm New Mexico home sellers and home buyers.”
McDonald also stated in an announcement, “The proposed amendments stifle competition at the expense of home buyers and sellers in New Mexico. Consumer choice should not be restricted by a ‘one size fits all’ regulation.”
Representatives for the New Mexico Real Estate Commission were not available for comment early today because the commission is meeting today to discuss the rule amendments, according to a spokesperson. The language of the proposed rule changes was also unavailable.
In other states, too, controversy has surrounded the establishment of so-called minimum-service requirements for real estate professionals. Opponents have claimed the laws are unnecessary and can prevent consumers from selecting which services they want to receive in a real estate transaction, while proponents have said the measures can protect consumers by ensuring they receive adequate levels of service and can guard against situations in which an agent serving a consumer on one side of a transaction may feel obligated to provide service to a consumer on the other side of the transaction who is not fully represented by a real estate professional.
The Association of Real Estate License Law Officials, a nonprofit group for real estate regulators, conducted a study that found that Alabama, Illinois, Iowa, Missouri, Oklahoma, Texas and Utah are among the states that have enacted some form of minimum-service legislation within the past couple of years, and Ohio, Michigan and Wisconsin are among the states that are also considering laws relating to minimum-service standards. Some states have adopted or are considering measures that allow consumers to waive certain real estate services.
Federal officials have expressed opposition to law proposals in Alabama, Michigan, Missouri, Oklahoma and Texas, and the measures have so far passed in four of those states despite federal objections.
Craig Cheatham, executive vice president for the Association of Real Estate License Law Officials, said that members of the group are divided on the minimum-service issue. “We have opinions on all sides of the issue,” he said. “(Our organization) decided not to take a position one way or another, just to facilitate discussion. We haven’t given any guidance at all.”
The National Association of Realtors trade group has not stated a formal position on whether it approves of efforts by the state Realtor associations to support minimum-service measures, though officials at the national association have offered legal advice to state Realtor associations related to minimum-service measures and have not publicly expressed opposition to the measures.
While existing law in New Mexico provides that real estate professionals must provide certain services to consumers, such as “the presentation of all offers or counter-offers in a timely manner” and “assistance in complying with the terms and conditions of the contract and with the closing of the transaction,” consumers can choose to waive these requirements.
The Justice Department said in an announcement, “The proposed amendment would remove this waiver provision so that consumers would not longer have control over which services they receive and pay for.”
Also, the letter calls attention to another proposed amendment, which the department states would “define Virtual Office Web sites (VOWs) as advertising.” The department charges that “VOWs themselves are not advertising,” as these sites allow a broker’s customer to access information at the sites “only after establishing a customer relationships with a broker.”
The display and sharing of online property listings information is a topic that the Justice Department has been investigating for several years, and in September the Justice Department filed a lawsuit against the National Association of Realtors related to the group’s adoption of controversial VOW rules. The trade group has since introduced a modified policy for online property listings, and the Justice Department amended its original complaint to state its opposition to this modified policy, too.
Representatives for the New Mexico Association of Realtors were not immediately available for comment about the proposed regulatory amendments that are under consideration.
Von Sutten, founder and president of Texas-based discount brokerage Ready Real Estate, which has an office in Albuquerque, N.M., said that though his company offers a full range of services to consumers and is not affected by minimum-service measures, “Our feeling is we’re not in agreement with any kind of minimum-service law. It’s up to the consumer, is how we look at it. We don’t want anyone setting rules we think would restrict competition.”
Gerald Campbell, broker for Century 21 CAMCO Realty in Albuquerque, also said regulators should not attempt to establish minimum-service measures. “My basic feeling is that business is business and everybody has to adjust to changes in the industry. You can’t regulate how people do business. Conceptually, I don’t think you can regulate how people choose to do business or how much you can limit the competition.” While his company and others would benefit from such policies, he said the measures would likely be “forever challenged.”
Lyle Martin, co-owner of Assist-2-Sell, a flat-fee, full-service real estate company, also said that his company stands to gain from statewide minimum-service measures, adding that he doesn’t believe they are necessary.
“From our perspective, we love it when the states pass these rules because they are helping to reduce competition for us. They’re actually doing us a favor,” he said, adding, “The (Justice Department) will eventually prevail and these rules will eventually go away because they are anti-consumer. Real estate professionals need to focus on delivering value for the fees they want and to fight competition fairly instead of trying to change the rules.”
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