The Illinois Association of Realtors is opposing state legislation that seeks to restrict cash rebates and other rewards offered by real estate professionals to unlicensed persons who engage in real estate transactions.
The U.S. Department of Justice has taken legal action in other states to undo similar restrictions that prevent real estate agents and brokers from rebating a portion of the money they receive in a home sale to consumers, and the department is aware of the proposed Illinois legislation, a spokeswoman said Tuesday.
House Bill 4313, proposed by Illinois state Rep. Robert S. Molaro, D-Chicago, seeks to amend the state’s Real Estate License Law Act of 2000 to state that “no licensee shall give or pay cash rebates, cash gifts or cash prizes to an unlicensed person who is a party to a contract to buy or sell real estate.” The legislation would allow licensees to offer compensation “including prizes, merchandise, services, rebates, discounts or other consideration to an unlicensed person who is a party to the least of real estate,” as long as that offer complies with other provision of the existing act, according to the bill text.
Steve Bochenek, legal counsel for the Illinois Association of Realtors, said the association’s executive committee took a vote to formally oppose the legislation. The association’s opposition to the bill has been communicated to members, he also said, and to the bill’s sponsor.
“We think it may put some of our members at a disadvantage because it only applies to licensees,” he said, as it would allow builders and developers to offer rebates and other cash rewards to consumers that Realtors, as real estate licensees, could not offer.
Also, there are situations in which a home buyer may need some assistance to complete a sale transaction, he said. “Sometimes licensees kick in a little bit” to complete deals, he said, and “this would preclude them from doing that.”
Molaro, a lawyer by trade, could not be reached for comment Tuesday.
Bochenek said that a lobbyist who has been working to pass HB 4313 referred to a group called “Homeowners Club of America,” and the group has distributed information in support of the bill that suggest that “West Coast brokers are coming into Illinois and skimming off buyers and taking that money out of state.”
Inman News contacted a Chicago-based group called “Homeowners Club of America,” which has a Web site at www.hca-il.com, though a representative was not immediately available for comment. That Web site states that the club is “a value added program for home sellers and purchasers that facilitates ‘one-stop shopping’ for closing related services, and participating professionals include real estate lawyers, “experienced local Realtors,” and “reputable mortgage lenders,” according to the Web site, and the club has strategic alliances with Realtors representing national franchises including Re/MAX, Coldwell Banker, GMAC, among others..
To his knowledge, Bochenek said that none of the local Realtor associations have taken a position on the legislation that is counter to the state Realtor group’s position. He said that based on the Justice Department antitrust officials’ reaction to real estate rebate restrictions in other states, “we fully anticipate that they would take a position contrary to (the bill) in this state as well,” though he said that is not the basis for the Realtor group’s opposition.
The American Real Estate Broker Alliance, a national alliance of flat-fee real estate brokers, “is opposed to all government actions to limit competition in real estate services, whether they be minimum-service laws or rebate prohibitions, which effectively prohibit buyers from receiving or brokers from offering a discount,” said Albert Hepp, owner of Minneapolis-based BuySelf Realty and president of AREBA. Hepp is also a licensed broker in Illinois.
Bill Brynelsen, an agent for New Market Realty Inc. in Spring Grove, Ill., who offers rebates to buyers, said he is perplexed by the proposed legislation, which he learned about through a phone call by a Justice Department official.
“I’ve called my elected officials … to find out why was it introduced, what purpose is it going to serve. I get nothing out of anyone,” he said. Brynelsen said he has offered rebates to buyers for about four years. “I think (rebates are) a good thing. I’m not looking to hurt anyone.”
He said he expects that consumers would be outraged by the proposed legislation if they fully understood its impacts. “This is going to hurt a lot of people,” he said, and he would be forced to change his business model.
“Some of the people who I’ve done business with — they absolutely could not have bought a house had it (not) been for the rebate that I offer,” he said, adding that the timing of the legislation is horrible given the slowdown in the residential real estate market. “To take it away in this market … could they do anything more to destroy this market? It really is tragic.”
Glenn Kelman, CEO for Redfin, a company that offers rebates to buyers, wrote about the proposed legislation in the company blog — Redfin has plans to expand its operations into the Chicago area. The blog noted that Molaro and a co-sponsor of HB 4313, state Rep. Angelo Saviano, R-River Grove, both received contributions from the Illinois Association of Realtors in the 2006 election cycle.
The bill, introduced Jan. 9, was assigned to a committee on Feb. 13 and a staff member for Molaro said it will not likely be heard in committee this week.