Realtor associations in Wisconsin and Ohio are pushing for laws that establish new service requirements for real estate professionals while making room for real estate companies that offer a lesser range of services for lower fees.
In several other states, Realtor-backed efforts to establish a mandatory range of services for all real estate professionals – effectively banning some limited forms of real estate services – have drawn sharp criticism from antitrust officials at the U.S. Justice Department and Federal Trade Commission.
But the Realtor groups in Wisconsin and Ohio say their proposals recognize and provide some protections for real estate business models that offer fewer services than traditional firms. In both of these states, Realtor associations formed task forces to study the law changes, with representation from limited-service real estate companies.
The Association of Real Estate License Law Officials, a group for real estate regulators, conducted a study that found that Alabama, Illinois, Iowa, Missouri, Oklahoma, Texas and Utah have enacted some form of minimum-service legislation within the past couple of years. And other states, too, have earlier approved or are now pursuing minimum-service measures.
Federal officials opposed the Realtor-backed measures in Alabama, Missouri, Oklahoma and Texas, charging that the legislation was anticompetitive and anti-consumer. But legislators and governors in all four states passed the measures despite these objections.
State Realtor associations have been driving the support for these law changes, stating that the laws aim to protect consumers from receiving less services than they expect in a real estate transaction while also preventing situations in which full-service real estate professionals may feel obligated to assist consumers on the other side of a real estate deal who are working with limited-service real estate companies.
But opponents of the measures say that consumers should be able to choose which real estate services they receive in a real estate transaction, and there are not enough complaints against limited-service companies to justify the law changes.
The Ohio Association of Realtors formed a Task Force on Minimum Services for Listings to study possible changes to state law, and the group prepared a report and recommendations. This work did not go unnoticed.
Don Freels, CEO for the state association, said, “It is interesting that the U.S. Department of Justice was very much aware of our progress in developing our report, and I have sent it to them for review.” Freels said he hasn’t yet received a formal response from the Justice Department on the law changes that the association is seeking, though he doesn’t expect any objections.
“I’m extremely pleased with the work product we produced. I think it’s going to be very salable to the Ohio Legislature and the Real Estate (Commission) here in Ohio,” he said. “Our task force included brokers who offer minimum services. We made a very conscious effort to include representatives of all business models.”
Sharon Jebavy, an Ohio Realtor who offers flat-fee property listing services, served on the task force. Jebavy said she would prefer there be no new minimum-services law in the state, though she does not object to the recommendations. “I think we’ve come up with a real workable plan. I don’t really see a need for it, but if you have to have it I think this is a good bill,” she said.
Among the task force’s findings: “Consumers should have the right to select the level of service they want from a real estate licensee. Regardless of the level of service the consumer chooses, however, there are certain basic fiduciary duties a licensee must always perform to assure the consumer is protected in their real estate transaction. The license law should assure that consumers are making an informed decision regarding the level of service they receive…(and) should not unreasonably restrict or limit emerging business models.”
The group’s recommendations include a sample “Waiver of Agency Duties” form that allows sellers to waive some of their real estate representative’s duties while specifying which duties are required. Among the required list of duties: exercising reasonable skill and care in representing the client; performing the terms of any written agency agreement; following any lawful instructions of the client; being loyal to the interest of the client; advising the client to obtain expert advice related to material matters when necessary or appropriate; and accounting in a timely manner for all moneys and property received in which the client has or may have an interest.
Sellers also can specify which of the following duties they allow their representative to waive: Seek a purchase offer at a price and with terms acceptable to the client; accept delivery of and present any purchase offer to the client in a timely manner; answer the client’s questions and provide information to the client regarding any offers and/or counteroffers; assist the client in developing, communicating, negotiating and presenting offers and/or counteroffers; and inform the client of the steps the client must take to fulfill the terms of the contract.
The Ohio Realtor group’s board of directors approved the task force report and recommendations this week, and Freels said he anticipated passage of legislation early next year. The proposed legislation will represent the most significant changes that the group has proposed to real estate law since the mid-1990s, Freels added.
Meanwhile, the Wisconsin Realtors Association has found a sponsor for its version of minimum-service legislation, and Rick Staff, senior staff attorney for the group, said he expects a final draft of the legislation within a couple of weeks.
The Wisconsin proposal is “the product of years of discussion and input,” Staff said. “We have every confidence that it will go forward. Our approach on limited service has gotten a number of peoples’ attention because we took a fairly unique perspective. We don’t think that limited-service brokerage constitutes a risk to consumers such that it needs to be banned under the state’s law.”
The legislation will be the culmination of the work of a Wisconsin Realtors Association License Law Task Force, formed in 2002. The legislation will create “a duty to provide, upon the client’s request, certain types of information and advice and a duty to negotiate on behalf of a client,” according to a preliminary draft. “Under the bill, a client may waive the broker’s duty to negotiate, but only in writing.”
A broker disclosure statement in the preliminary draft of the bill notes that brokers owe certain duties to all parties in a transaction, including: the duty to provide brokerage services fairly and honestly; the duty to exercise reasonable skill and care in providing brokerage services; and the duty to provide accurate information about market conditions within a reasonable time if requested, unless disclosure of the information is prohibited by law, among others.
And when consumers enter into an agency agreement with a broker, “a broker owes additional duties to a client,” the preliminary bill states. “The broker will provide, at your request, information and advice on real estate matters that affect your transaction. The broker must provide you with all material facts affecting the transaction. The broker will negotiate for you, unless you release the broker from this duty. The broker will not, unless required by law, give information or advice to other persons who are not the broker’s clients, if giving the information or advice is contrary to your interests.”
Staff said that essentially the Wisconsin proposal seeks to allow consumers to opt out from receiving negotiation services from a real estate professional, while guaranteeing that they will receive certain services. The legislation defines negotiation as “acting as an intermediary by facilitating or participating in communications between parties related to the parties’ interests in a transaction,” and “presenting to a party the proposals of other parties to the transaction and giving the party a general explanation of the provisions of the proposal.”
The State Bar of Wisconsin had opposed language in the Wisconsin Realtor Association’s License Law Task Force report relating to the proposed law changes, as it “would allow brokers, who are not licensed to practice law by the Wisconsin Supreme Court, to provide legal advice (including enhanced abilities to negotiate and draft contracts and explain the consequences of actions taken during transactions,” though the lawyers’ group has not yet reviewed the preliminary bill text.
Statements in the preliminary bill text note that a “broker or salesperson can answer your questions about brokerage services, but if you need legal advice, tax advice, or a professional home inspection, contact an attorney, tax advisor, or home inspector.”
Corey Scholtka, owner of BuyHomes.com, a flat-fee brokerage based in Delafield, Wis., said he is optimistic about the legislative proposal. Scholtka, who was invited to give input to the task force, has been an outspoken advocate of new real estate business models, including limited-service real estate companies.
Scholtka said that there is an important distinction in Wisconsin’s minimum-service proposal compared to other states, because Wisconsin allows choices in services rather than mandating a long list of services that real estate professionals must perform.
“I’ve been assured that it’s not going to change my business model,” he said. “I’m for choices – this seems to promote choices.”
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