Legislation pending in California that would up the requirements to obtain a real estate license is a good step in the right direction, but neither the status quo nor the legislation sets the bar high enough to protect home buyers and sellers from the potential adverse financial and emotional consequences of a botched real estate deal. The state should make the requirements much more difficult and should eliminate the “conditional” license, which allows new salespeople to take one class, enter the business and then complete the other requirements within 18 months.
California doesn’t need more real estate licensees. The state already has more than 481,000 of them among a total population of some 35 million people, one quarter of whom are children and teenagers. That’s one real estate licensee for every 54 adults. What’s needed, on the contrary, is fewer licensees who don’t have the necessary skills, training and experience to do the job.
Eighty-five percent of California’s new 100,000 licensees in the last three years entered the business with a conditional, or so-called “quickie,” license in hand. That means as many as 85,000 people may be selling real estate in California today without having completed the basic requirements to obtain an unconditional four-year license. How many of these ill-prepared “quickies” will survive their first 18 months in the business, and how many costly mistakes will they make before they complete the education that’s supposedly required to obtain a license?
The “quickie” license isn’t good public policy for the industry or for home buyers and sellers because a license that doesn’t require adequate knowledge and expertise to perform the job for which it has been granted is simply a deception, a piece of paper that signifies nothing much. Home buyers and sellers shouldn’t be expected to research and understand the difference between a conditional and unconditional license, and no disclosure requirement alerts them to the fact that these “quickie” licensees haven’t met all the basic requirements.
Critics of licensing might argue that government shouldn’t erect barriers against new entrants or more competition in a given line of business. That’s a reasonable argument, yet good public policy supports minimum requirements to enter all sorts of commercial activities in California from performing surgery and practicing law to cutting hair, training guide dogs and building swimming pools.
No one wants to suffer a bad haircut, an unsafe swimming pool or a real estate deal gone awry. Newbie real estate salespeople who don’t have the basic knowledge to guide buyers and sellers through the typical home sale transaction shouldn’t be allowed into the business with so little in the way of qualifications.
Critics also may argue that licensing laws shouldn’t be promulgated by trade groups that represent the business activities those laws are intended to govern. In this instance, the California Association of Realtors is behind the legislation that’s pending in California. That’s also a reasonable argument, yet trade groups can be in a good position to recognize problems in their own industry that stricter governance could alleviate. The support of a trade group doesn’t necessarily mean the legislation is faulty, but rather suggests the underlying issues warrant more governmental attention.
The courses required to obtain a real estate license should be rigorous, not just nap time or a chance to read the newspaper in the back of the room like the good old days of California traffic school. License requirements should be both tough and meaningful, and they should strongly signal that selling real estate is not a get-rich-quick scheme, but rather is a serious business that demands knowledge and expertise.
One of the bills pending in California wouldn’t be implemented until 2010, which is too long of a delay. Stiffer requirements should be effective sooner than almost four years from now, and they should apply not only to first-time licensees, but also to recent newcomers and veterans in the business. And either way, the “quickie” license should be deep-sixed immediately, though with some limited provision made for existing “quickie” licensees to complete the full requirements.
Home sellers can choose to hire whomever they want to sell their home, and in theory, they can negotiate any rate of payment for those services that is acceptable to them. Yet when a commission of, say, 5 percent on the sale of, say, a $500,000 starter house amounts to a whopping $25,000, home sellers should be guaranteed the very best professional expertise that such large sums command in other sectors of the economy. An individual who has completed but one course in real estate to obtain a “conditional” license shouldn’t command that same fee for his or her services even when that sum is shared with the brokerage company and the buyer’s agent.
Marcie Geffner is a real estate reporter in Los Angeles.