Texas real estate brokers who charge a flat fee for a range of real estate services say that a new state law, which sets a minimum level of required services for all brokers, has led them to raise prices and tweak their business models.
Senate Bill 810, signed by Texas Gov. Rick Perry in June and enacted Sept. 1, requires brokers to answer their clients’ questions; present any offer to or from their clients; and pass along information relevant to their clients’ real estate transactions.
It is one of several controversial state laws, backed by Realtor trade groups, that establish new service requirements for all real estate professionals.
U.S. Justice Department and Federal Trade Commission officials protested the passage of the Texas law and similar minimum-service laws in three other states, but legislators and governors passed the laws despite this opposition. Federal officials had charged that the laws could restrict consumer choice and raise the cost of real estate services.
A number of other states, too, have passed or proposed minimum-service measures.
Realtor groups and legislators, meanwhile, have argued that the laws protect consumers by ensuring they receive an adequate level of service in all real estate transactions and would prevent situations in which full-service real estate agents felt obligated to perform more work by assisting consumers on the other side of a real estate transaction who were not fully represented by a real estate agent.
Lee Thurburn, president of NetOffer, a flat-fee real estate company in Richardson, Texas, said that since the new law passed in Texas, “We’ve changed the product and pricing mix a little bit. If it takes more time it costs us more.” The company still offers to list a for-sale property in a multiple listing service for $99 as it did before, though the company has reduced the length of the MLS listing period from 45 days to 21 days.
The company also offers 30 minutes of consulting time for free with this basic package, and charges more money for additional consulting. The company also offers packages ranging from $199 to $399 that feature a longer MLS listing period and additional consultation time.
NetOffer has been offering flat-fee property listing services since October 2004, Thurburn said. In addition to changing its pricing structure, Thurburn said the company now offers a comparative market analysis for its clients. “We decided that would allow us to state that we’ve protected our client’s interest,” he said. The company also maintains an “audit trail” for client communications so it can track how much time has been spent in client consultation, Thurburn said.
One of the biggest problems with the new law is that some real estate agents don’t seem to understand its provisions, said Thurburn and other discount real estate brokers in the state, and there is misinformation circulating in the real estate marketplace about the effects of the law.
“Either there are a lot of misinformed people out there or misinformation is being spread,” he said. Some of his company’s clients have said that agents from other companies have told them that the new law bans flat-fee companies – and that is not true, he said. When he explains the new law to clients, they seem more receptive to his business model, Thurburn said. He said he explains to clients, “You can thank your state Legislature and state association of Realtors for thinking you’re not capable to manage your own affairs.”
Loretta DeHay, general counsel for the Texas Real Estate Commission, said today that she is not aware of any complaints that have been filed against real estate professionals for alleged violations of the new minimum-service law.
Aaron Farmer, owner/broker of Texas Discount Realty, another flat-fee real estate company, said he raised the price of his basic, limited-service property listing package from $495 to $595. Farmer, who aggressively opposed efforts by the Texas Real Estate Commission and state Legislature to enact minimum-service requirements, said, “Time is money.”
His company’s bare-bones property listing service has fallen out of favor somewhat with consumers he said, and the company’s upgraded service — which features a $495 up-front listing fee and $1,500 at the time of closing — is now more popular. The company also offers a full-service package of real estate services. Texas Discount Realty requests that all clients who select the limited-service option communicate by fax or e-mail with the company’s agents.
Business hasn’t dropped off as a result of the new law, Farmer said. “We didn’t anticipate it affecting us as much as it affects other brokers.”
Jack Mclemore, broker for BrokerDirectMLSTexas.com, also a flat-fee real estate company, said his company has dumped its cheapest package, which was $299, in response to the law change. The company offers a $499 flat-fee package, he said. “We’re basically a full-service Realtor for $499. We just don’t go out to the house.” Company representatives speak with clients on the telephone, he said, and process offers by fax and e-mail.
Mclemore said, “(The law) has, of course, created more work. We knew that was going to happen. Ultimately, it’s no big deal.” But, he said, such laws do raise questions about industry groups’ influence on the political process.
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