State real estate regulatory commissions are largely composed of members who are active real estate professionals, which represents a “blatant conflict of interest,” according to a report by a national consumer group.
The Consumer Federation of America, a national advocacy group with membership from about 300 organizations, issued a report Friday that calls for independent regulation of real estate brokers. About 79 percent of all state real estate commissioners “earn a living through real estate transactions,” with 70 percent working as real estate brokers or salespersons and 9 percent working in real estate-related professions, according to a study that the consumer group conducted.
It’s not the first time that the consumer group has clashed with real estate practices. In June, the federation issued an eight-page report, “How the Real Estate Cartel Harms Consumers and How Consumers Can Protect Themselves,” charging that industry and regulatory practices can stifle competition and do not always serve consumers’ interests. And Stephen Brobeck, executive director for the group, will testify at a congressional hearing tomorrow that will focus on real estate competition and choice.
The consumer group’s study found that real estate law in four states — Idaho, Louisiana, Mississippi and Nevada — requires that all real estate commissioners be real estate brokers or salespeople, Eleven other states “require at least four-fifths of commissioners to hold real estate licensees,” the group announced.
Brobeck said in a statement, “If insurance leaders were to serve as insurance commissioners or utility executives as public service commissioners, newspapers would report these blatant conflicts of interest on page one and editorialize against them. Governors and state legislators should support measures to prohibit practicing real estate brokers from serving as real estate commissioners.”
William “Bill” Bacqué, chairman of the Louisiana Real Estate Commission, confirmed that all of Louisiana’s nine-member real estate commission is composed of industry professionals.
“You certainly leave yourself open to that (conflict of interest) allegation when industry members are part of the regulatory body,” he said. “From my perspective, who better to oversee the industry itself — who’s more capable: Somebody who’s not involved the industry at all or someone who has experience in it?”
He added, “I just can’t see the correlation that just because you’re in the industry itself that that is necessarily bad or intrinsically evil from a regulatory standpoint. Would (the Consumer Federation of America) prefer having college professors or consumer advocates regulating the industry who don’t know anything about it?”
In Louisiana, state law provides that real estate commissioners are appointed by the governor. Three of the commissioners are appointed to two-year terms, three are appointed to four-year terms and three are appointed to six-year terms, said Stephanie Boudreaux, a spokesman for the commission. All commissioners are required to be brokers with at least five years of experience.
The Consumer Federation report states that many states mandate participation in real estate regulatory boards and commissions by real estate professionals. “More than two-thirds (68 percent) of all real estate commissioners are required by statute to be active real estate salespeople, brokers or licensees,” according to the report. “In most states, agent commission members are required to have current licenses.”
California, Illinois and Minnesota are the only states that have full-time professional regulators for the real estate regulatory agencies in those states, the consumer group announced, and the group called for “effective, independent regulation of residential real estate brokerage services.”
Bacqué said his decision to serve on Louisiana Real Estate Commission was selfless — it was not for personal gain. “We’re all volunteers who have agreed to serve primarily because we want to do something positive for an industry that’s been so good to us individually,” he said.
There typically is not public input to the real estate commission, and he said he believes there is not a lot of public participation because the public is largely satisfied with the real estate regulatory framework.
“Typically … at these meetings we generally have representatives from the state Realtor association. Those are the most consistent monitors of what we are doing. And certainly they do give us input and assistance quite often. I think there’s no human cry that’s coming out of the general population that there needs to be any greater oversight of the real estate industry than what is happening now.”
As for the consumer group’s charges that the real estate industry has operated as a “cartel,” Bacqué said, “I don’t know of any other industry segment that is more competitive.”
And while the consumer group has charged that real estate regulatory agencies in several states have passed controversial “minimum-service laws” that ban some forms of real estate business models and have drawn opposition from officials at the U.S. Justice Department and Federal Trade Commission, Bacqué also noted that there are many varieties of real estate business models across the country that offer “all kinds of different options to consumers.”
Representatives for the Idaho, Mississippi and Nevada real estate regulatory agencies did not immediately respond to Inman News’ requests for comment.