A proposal to require real estate agents and brokers to provide a specific set of services for their clients is moving forward in the Michigan Legislature, despite opposition from the U.S. Department of Justice, the U.S. Federal Trade Commission and a state regulatory agency.
House Bill 4849 and House Bill 4850, companion bills that passed a state Senate committee in a 4-0 vote Wednesday, provide that real estate licensees who enter into service agreements with clients must provide certain services for that client, including acceptance and delivery of offers and counteroffers; assistance in developing, communicating, negotiating and presenting offers, counter-offers and related documents or notices; and furnishing or causing to be furnished a complete and detailed closing statement.
In October 2005, after the Michigan state House of Representatives voted 105-3 to pass the bills, the Federal Trade Commission and Justice Department sent a letter to a state Senate committee chairman and the director of the Michigan Department of Labor and Economic Growth to express opposition, citing concerns about the possible anti-competitive and anti-consumer effects of the legislation.
The language in the bills is similar to other state legislation, sometimes referred to as minimum-service legislation, that has passed in other states despite similar federal objections. The Michigan Association of Realtors is supporting the bills, which could reach the state Senate floor as soon as next week. In other states, too, Realtor trade groups have endorsed the legislation as pro-consumer.
Opponents of minimum-services legislation have said that such efforts could serve to limit consumer choice for real estate services, while supporters have said the legislation ensures that real estate consumers will receive adequate service in real estate transactions.
The federal agencies charged that House Bill 4849 “is likely to increase the price that some consumers who prefer full-service brokerage pay for real estate services,” and “would deprive consumers of the opportunity to purchase their preferred choice (of services).” Also, the letter states, “We recognize that some laws limiting forms of competition may be beneficial when they address specific market failures shown to harm consumers. However, we have seen no evidence that consumers currently are harmed by fee-for-service real estate brokerage.”
Likewise, Tom Martin, of the Michigan state Department of Labor and Economic Growth, said in a May 31 statement to the Senate Economic Development, Small Business and Regulatory Reform Committee that the legislation “unnecessarily limits consumer choice and diminishes the attractiveness of some new business models that show promise of reducing the price of houses for consumers who wish to use these new models.”
He also stated, “If there is a regulatory need to mandate the provision of certain minimum services, the (state) Bureau of Commercial Services has not experienced an increase in complaints that would demonstrate it. (I)t is very important to empower consumer choice. These bills do the opposite. It is equally important in our economy to embrace new technologies and the innovative business models that use them. These bills move Michigan in the opposite direction.”
Martin said today that the department has had “a long history of dialog on these bills” with the Michigan Association of Realtors and the federal agencies. “Basically our feeling is there’s no need for regulation here. The bills reduce customer choice, and though the proponents say that the bills are neutral with respect to alternative business models we do believe that they make some alternative business models less attractive.”
Bill Martin, CEO for the Michigan Association of Realtors, said the association has attempted to work with Justice Department officials to resolve differences over the legislation. “Frankly, it was very frustrating — the exercise that we went through with them. We’re doing this to protect the consumer.”
He noted that Justice Department and Federal Trade Commission officials stated in their letter that many multiple listing services in Michigan bar property listings in which there is no formal exclusive agency relationship between a real estate professional and a client, though he said the proposed legislation “has absolutely zero to do with MLSs.”
Also, he said, the proposed laws allow real estate professionals to avoid the service requirements when they work with clients outside of a formal service agreement. “If (consumers) don’t want those that is fine — go do a different relationship.” The text in HB 4849 provides that “a licensee providing real estate services pursuant to an agreement allowed under law that is not a service provision agreement creating an exclusive agency relationship is not considered in violation” of the minimum-service requirements.
Peter Langley, chief of state for state Sen. Alan Sanborn, R-Richmond Township, who is chairman of the Senate committee that approved the legislation this week, said that representatives for the Michigan Association of Realtors spoke in favor of the legislation during the hearing, and there was also a statement in opposition to the bills from two real estate professionals.
Cheryl Lynch, co-owner of Lake Michigan Realty Center in New Buffalo, Mich., who has opposed the legislation along with her husband and brokerage co-owner Mike, said she did not attend the committee meeting and she was upset to learn that the legislation is moving to the full Senate.
In a written statement to the committee, the Lynches said, “We adamantly remain opposed to any restrictions on the freedom of choice that consumers now enjoy when buying or selling real estate. Consumers are growing angry about the continual destruction of their individual sovereignty by their elected officials.”
She also said she expects the Senate will approve the legislation. “I guess the people are powerless at this point.”
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