A proposal in Michigan to require all real estate agents to perform a minimum set of services for clients when entering into an agency agreement has met opposition from the state’s governor after the U.S. Justice Department and a state regulatory agency announced objections to the legislation.
In a legislative report this month, the Michigan Association of Realtors — which is pushing for the legislation — announced that “as the bills were poised for a vote, the governor has made it clear that she will veto the legislation as written,” and “pressured the Democratic caucus in the Senate to vote ‘no.'”
Liz Boyd, press secretary for Michigan Gov. Jennifer Granholm, said today, “At this point we have concerns about the bills. We have serious concerns — certainly we’re not supporting the bills at this point.”
House Bills 4849 and 4850 would continue to allow real estate licensees in the state to provide lesser service than these mandated services, though only by acting in a non-agent role. Critics have said the legislation could make limited-service offerings less attractive and multiple listing services operating in the state could potentially block the public display of property listings related to these non-agency relationships. Most MLSs in the country are affiliated with Realtor trade groups.
Limited-service real estate offerings can include fee-for-service options that allow consumers to take on some of the responsibilities in a real estate transaction that would typically be handled by an agent. Some companies offer to list properties in an MLS for a flat fee, for example, while providing few or no other services for clients.
Similar legislative measures, sometimes referred to as minimum-services laws, have been proposed and passed in several other states. The measures typically require that real estate licensees perform a specific set of services for clients, at least when entering into specific types of service agreements with those clients. Officials at the Justice Department and Federal Trade Commission have in some cases opposed the measures, charging that the measures could potentially limit consumer choice and that there haven’t been enough consumer complaints to justify the measures.
State Realtor trade groups and supportive state legislators and regulators, meanwhile, have contended that such laws can protect consumers by ensuring they receive a specific level of service in at least some instances and can help to ease confusion by other real estate licensees when limited-service real estate companies are involved in real estate transactions but do not offer full representation to their clients.
Tom Martin, director of the Office of Policy and Legislative Affairs for the Michigan Department of Labor and Economic Growth, said that the legislation appears to be stalled for now. “At this point it’s on hold and I don’t think any movement is imminent,” he said. The Department of Labor and Economic Growth is opposed to the minimum-service legislation in its current form.
“We suggested to the Realtors that we’d prefer an approach such as they one they took in Ohio. From our perspective that maintains consumer choice and allows certain services to be waived,” Martin said. In Ohio, the state Realtor trade group promoted a waiver of agency duties that allows sellers to waive some real estate duties while specifying which duties their clients will receive.
Bill Martin, CEO for the Michigan Association of Realtors, said today that a meeting held earlier this month with Gov. Granholm’s office and a state regulatory agency representative was “extremely positive,” adding, “It really was a good discussion on the substance of the legislation, the status of agency. I didn’t find anything in the meeting that indicated anything other than that they were certainly open to discussion and finding resolutions.”
Martin said he expects continued discussions on the legislation.
He also said that there has been a slant in the news media against the proposed bills, and that there seems to be a widespread misunderstanding about their actual language and effect.
Michigan’s agency laws are intended to provide standards that real estate licensees are held to, he said. “We have agency for a reason. The other option is to just get rid of agency — then you have no fiduciary (duties) to the client, nothing is confidential and it’s the old Wild West,” he said. “For those that find comfort in confidentiality and comfort in fiduciaries then I think (agency) needs to be protected.”
Real estate licensees in Michigan can now legally provide a range of limited services under agency agreements that would only be allowed as non-agency services if the bills passed.
The legislation provides that all real estate brokers, when acting under an exclusive agency agreement with clients, must accept and present all offers and counteroffers on behalf of their clients, “assist in developing, communicating, negotiating and presenting offers, counteroffers and related documents or notices until a purchase or lease agreement is executed,” and assist in providing a complete and detailed closing statement, among other duties.
Licensees who do not offer these services can act as a “transaction coordinator,” which is a licensee who does not act as the agent of either the buyer or the seller in a transaction.
Martin said that the Realtor association is open to discussions with the Justice Department on the proposed legislation. “If they wanted a frank discussion about the language, we’re available anytime. They’re not able to offer any criticism of the language of the actual legislation,” he said. “It’s very difficult to deal with legislation people are opposing but can’t tell you why. It’s very frustrating to us.”
Federal officials said in an October statement that the proposed legislation could prevent some property listings from being posted in those MLSs that require exclusive brokerage agreements. “In Michigan, home sellers currently have the option to purchase the service of listing their property on the local (MLS) separately without also having to purchase the broker’s negotiation service,” the agencies stated.
“If House Bill 4849 is enacted, however, real estate professionals entering into exclusive service provision agreements with their clients would have to provide a state-mandated minimum service package that includes many duties associated with negotiating a property sales contract. Because many (MLSs) in Michigan require brokers to offer only exclusive brokerage agreements before real estate professionals may list properties, Michigan consumers in those areas will be adversely affected by this proposed change in the law.”
Robert Campau, the vice president of public policy and legal affairs for the Michigan Association of Realtors, stated in a report to members this month that “there remained a deep and unrelenting suspicion about these bills” and “an unyielding skepticism about the value that traditional brokerage models actually provide” by some state officials.
He charged that the Justice Department and Consumer Federation of America share blame for “rancor and erroneous charges leveled at this legislation.”
Campau stated, “Our association’s interest … is only to ensure that consumers understand what they are getting. This legislation aims to provide … protections to all individuals who enter into exclusive agency relationships while allowing wide statutory authority for future business models.”
Cheryl Lynch, co-owner of Lake Michigan Realty in New Buffalo, Mich., and an opponent of the legislative proposal, has contacted the state Attorney General’s Office, charging that the state Realtor association violated the state’s Consumer Protection Act in promoting the minimum-services legislation to lawmakers.
“The legislation, if passed, will cause many consumers to pay more money when selling or purchasing real estate,” she charges in the letter, while causing the property listings of non-traditional brokerages to be “treated with prejudice by MLS boards.” Lynch has also opposed local MLS rules that require MLS subscribers to be members of Realtor associations.
The state Attorney General’s Office has not taken a formal position on the minimum-service legislation.
Bill Martin of the Michigan Association of Realtors said that the state’s Consumer Protection Act does not apply to real estate licensees in Michigan because they are regulated by real estate licensing law — “it only applies in instances in commerce where there isn’t a regulatory framework.”
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