The U.S. Justice Department and Federal Trade Commission, in a Friday letter to Michigan state officials, restated opposition to legislation that would require real estate agents and brokers to perform certain services for clients when they enter into a formal service agreement with those clients.

The letter, sent to Michigan state Lt. Gov. John D. Cherry and state Sen. Patricia L. Birkholz, R-Saugatuck Township, encourages the Senate to reject House Bill 4849, which could go up for a vote next week. The federal agencies also sent copies of the June 2 letter to Tom Martin, director of the Office of Policy and Legislative Affairs for the Michigan Department of Labor and Economic Growth; and to Michelle Rick, a lawyer for Michigan Attorney General Mike Cox.

Earlier this week, a Senate committee approved the legislation in a 4-0 vote.

Similar legislation, backed by state Realtor trade groups, has been proposed and approved in other states, too, in some cases despite federal objections. Because the bills seek to increase service requirements, at least under some circumstances of a real estate transaction process, they are sometimes referred to as “minimum-service” measures.

Some proponents of discount and limited-service companies have charged that the legislation is unfair because it targets companies that cater to consumers who do not want or need a full range of real estate services, while backers of the legislation have said that the service requirements are intended to ensure that consumers receive adequate representation in real estate transactions.

“Our analysis showed that the requirements in HB 4849 would make it more difficult for real estate professionals to provide Michigan consumers with customized real estate brokerage services, and likely would decrease competition among real estate professionals,” the letter states.

“We concluded that with less competition, Michigan consumers will have fewer options for real estate services, likely causing some home sellers and home buyers to pay thousands of dollars more in commissions to real estate brokers. We also noted that we were not aware of any evidence of consumer harm from allowing fee-for-service brokers to operate in Michigan.”

In October, the federal agencies submitted a letter to the director of a Michigan state regulatory agency and a Senate committee chairman to protest the legislation, which is linked to a separate piece of legislation, House Bill 4850. The state agency, which is the Department of Labor and Economic Growth, opposes the legislation and has noted that there are not enough consumer complaints to justify the bills.

While several state Realtor trade groups have lobbied to pass various forms of legislation that establishes service requirements for real estate professionals, the National Association of Realtors has not taken a formal position on the measures. But the association has offered legal advice to state associations backing such state legislation and regulations, and the association has not encouraged state trade groups to avoid pursuit of the measures.

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