The Virginia Association of Realtors is pushing for new legislation that would change real estate law to provide for a special disclosure statement when consumers choose to work with a limited-service real estate agent.
The Virginia Association of Realtors is pushing for new legislation that would change real estate law to provide for a special disclosure statement when consumers choose to work with a limited-service real estate agent. The legislative proposal, now in draft form, would also allow full-service real estate agents to supply information to consumers who are working with a limited-service agent on the other side of a real estate transaction.
While current real estate law in Virginia bars real estate agents from engaging in an agency relationship with a client unless the agent performs a specific minimum set of duties for that client, the proposal would create a new category of agency relationship called “limited service agency.”
Limited-service brokers and agents typically offer consumers the option of selecting a reduced range of services in a real estate transaction in exchange for a lower cost of service – a limited-service broker may offer to list a client’s property in an MLS for a flat-fee while performing no other services, for example.
Existing law allows real estate agents to offer fewer services through non-agency agreements, which are now referred to as “independent contractor” relationships with real estate consumers. Agency agreements create a legal relationship between an agent and a client that is authorized by the client.
While some so-called “minimum-service” restrictions approved or considered in several other states have been opposed by federal agencies, including the U.S. Department of Justice and U.S. Federal Trade Commission, the legislation that the Virginia Realtors group is seeking should actually assist companies that provide limited-service offerings to real estate consumers, said R. Scott Brunner, CEO for the Virginia Association of Realtors.
Federal officials had opposed a handful of states’ new real estate restrictions in a handful of states that they said would limit consumer choice and potentially lead to higher real estate prices and less competition in the real estate marketplace.
Realtor associations in those states have stated that the minimum-service measures were intended to ensure that consumers receive an adequate level of service in real estate transactions, and to eliminate confusion when a limited-service company does not participate in aspects of the real estate transaction that are typically handled by a full-service real estate company.
The Virginia association’s proposal, meanwhile, “absolutely legitimizes the discount brokerage model that has taken such flack in other states, and gives standing to different business models under Virginia law,” Brunner said.
“The whole idea of this is to make sure that consumers understand what they’re getting. We believe that consumers can contract for whatever service they want to,” Brunner said, and to ensure that consumers know exactly what services they will receive and won’t receive in a real estate transaction.
The preliminary proposed text for the legislation states that a real estate licensee “may act as a limited service agent or representative only with the written consent of the agent’s or representative’s clients to the transaction.”
Also included in the preliminary bill text is a “Disclosure of Limited Service Agency or Representation” statement. The proposed statement would allow a real estate client to sign off on whether to waive services that the agent will perform. Among these services that can be waived: “seeking a property or lease at a price and with terms acceptable to the client,” “presenting in a timely manner all written offers or counteroffers,” “providing reasonable assistance to the client in (facilitating) settlement of a purchase contract or finalizing a lease agreement,” and “disclosing to the client material facts related to the property or the transaction of which the licensee has actual knowledge.”
Among the other services that consumers can choose not to receive: “accounting for in a timely manner all money and property received in which the client has or may have an interest,” “maintaining confidentiality of all personal and financial information received from the client during the brokerage relationship,” “provide the client copies of any and all disclosures required by state or federal law, or local disclosures expressly authorized by state law,” and “comply with all applicable fair housing statutes and regulations.”
The disclosure statement also provides that those who sign the form also acknowledge that the real estate licensee representing the other party in the real estate transaction is not legally obligated to assist with any of the duties that the consumer chooses to waive.
Brunner said that a working group of association members was formed earlier this year to recommend changes to the state’s agency law, and the association included representatives from several different types of real estate companies and was led by Melanie Thompson, the association’s president-elect.
Also, the association’s lawyer, risk management specialist and lobbyist were involved in the process. The association has discussed plans for the law change with the chairperson of the state’s Real Estate Board, Brunner said, though the board has not yet seen the bill in the form in which it will be introduced.
Existing real estate agency law in Virginia provides that agents representing sellers, for example, must present all written offers or counteroffers to and from the seller, even when the property is already subject to a contract of sale; account for, in a timely manner, all money and property received in which the seller has or may have an interest; exercise ordinary care; and seek a sale at the price and terms agreed upon in the brokerage relationship or at a price and terms acceptable to the seller, among other duties.
The preliminary bill text provides for another provision to this requirement: “Providing reasonable assistance to the seller to facilitate settlement of the purchase contract,” and this requirement can be waived under the proposed limited-service agency agreement.
Brunner said that the proposed legislation is expected to be introduced this week.
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