The Idaho Real Estate Commission is considering a legislative proposal that would set a new level of required services for real estate brokers and could expose the state to an antitrust lawsuit.
The draft legislation, if approved, would require all real estate brokerages in the state to prepare, receive and present and write all written offers and counteroffers for their customers, and to answer customers’ questions relating to offers and counteroffers received or presented in the transaction.
According to language in the proposal, “antitrust litigation could result” and “legal costs cannot be predicted.”
Kimberly Costers, legal counsel to the Idaho Real Estate Commission, said the commission has not yet formally introduced the legislation. The commission has submitted a copy of the proposal to the U.S. Department of Justice to review, as the federal agency has objected to similar legislation in other states.
While the Justice Department has not threatened a lawsuit, Costers said the commission believes it should inform state lawmakers that “anything can happen” with the legislative proposal.
The commission’s draft bill is based on the recommendations of a task force formed by the Idaho Association of Realtors, Costers said.
Alex LaBeau, CEO for the Idaho Association of Realtors trade group, which supports the proposal, said he expects that the U.S. Department of Justice will comment on the measure.
U.S. Justice Department and Federal Trade Commission officials have opposed similar measures in other states, often referred to as “minimum-service” legislation, charging that such measures could eliminate some real estate business models and limit consumer choices for real estate services. Justice Department officials were not immediately available for comment Tuesday about the Idaho proposal.
State Realtor associations have typically lobbied for these minimum-service legislative proposals, and some state real estate commissions have also endorsed the proposals. Several states have passed minimum-service legislation despite objections from federal officials, and federal agencies in most cases cannot file antitrust lawsuits over approved legislation, even if that legislation is deemed to violate federal antitrust laws.
A law change is needed in Idaho because buyer’s agents sometimes find themselves in an awkward position when they seek to participate in transactions with sellers who work with agents that do not assist the sellers in all aspects of the real estate transaction, LaBeau said.
A change in the law would ban real estate business models that offer to place a for-sale property listing in a multiple listing service for a fee while offering no other services to assist a real estate transaction, for example.
“As a buyer’s agent, you have this legal quagmire. It’s a significant liability issue when you have a requirement for a buyer’s representative to find a house that the buyer wants and do everything that they can possibly do to get that house for them — then you have a situation where a seller’s agents says, ‘I’ll just stick it in the MLS service and then I’ll just walk away.’ Buyer’s agents are picking up the slack and hanging their necks out there,” LaBeau said.
“We want to make sure that there’s a legal, level playing field for buyers and sellers, so nobody is left ultimately holding the bag.”
He added, “I look forward to the Department of Justice’s comments. I hold out hope that (the department) will look at the way it is crafted and realize this isn’t about compensation — this is just simply a licensing issue and nothing more than that.”
Costers said “there are consumer concerns that we are trying to respond to and also the needs of the industry that we are trying to respond to” in the legislative proposal.
The proposed Idaho law would mandate the new minimum services for all customers who enter into a customer service agreement or compensation agreement with a real estate brokerage, and provides that “duties set forth … are mandatory and may not be waived or abrogated.” Also, the legislation provides that brokerages may choose to charge a separate fee or commission for each of the services that they provide to customers in a transaction.
State law already provides that brokerages must account for money or property placed in the care of the brokerage, and must disclose to buyers and sellers all adverse material facts about a property that are known or should have been known by the real estate licensee.
Donald Plunkett, broker and president of Congress Realty, a real estate company that offers flat-fee real estate services in Idaho and other states, said he questions the motives for the proposed law in Idaho. “Legislation like this is going to definitely impact my business. There’s no doubt about that,” adding that companies that offer limited-service options to consumers pose “a major threat to their existing business model” for full-service real estate companies.
Real estate agents representing buyers should know how to work directly with sellers in cases of for-sale-by-owner properties, he said, and they should also know how to work with sellers who have contracted with limited-service companies. “All you need is a simple disclosure form” rather than legislation to clearly state what duties sellers will receive in a real estate transaction, he said.
Congress Realty also offers a discount, full-service option for consumers, and this will become the company’s only service offering in Idaho if the legislation passes, he said. “The more that these associations lobby for these laws to make alternative business models illegal, at some point they’re going to go over the line.”
LaBeau said the state Realtor association formed a task force that met over the summer to consider whether changes were needed in the state’s minimum-service requirements. “We work very closely with our real estate commission,” he said, adding that a representative from the commission participated in the association’s task force and the commission “made significant revisions” to language proposed by the association’s task force.
The task force included representatives from a range of brokerage types, LaBeau also said. “We had representation from full-service (companies) to those brokerages that had components of what you would call limited services — they all were a part of our task force.”
Plunkett said his company did not have representation on the task force, and he learned about the legislation through a real estate commission newsletter that he saw last week. Plunkett also said he spoke last week with Justice Department officials about the Idaho legislation.
Costers said that until the legislation is formally introduced in the legislation, the commission could choose to amend or rescind its proposal.
The state Legislature convenes Jan. 9 and the commission’s next scheduled meeting is Jan. 19, she said. “The bill is poised to move forward … commissioners can decide at any time to not support (the proposal) or give it its full support.”
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