President Biden’s latest executive order could impose an unnecessary burden on those who seek to do business in a different state. Here’s how it can impact the real estate industry.

On July 9, 2021, President Biden signed an executive order outlining 72 initiatives that the White House would like to address, including one that could impact licensing and continuing education requirements on a national basis.

The order is designed to eliminate or reduce overly restrictive occupational licensing requirements that can impede workers’ ability to find jobs and to move between states.

Agents who move out of state, who live on the border of two neighboring states that do not have reciprocal licensing requirements or who have multistate businesses, often have to meet separate sets of licensing and continuing education requirements for each state where they do business. These requirements can be particularly onerous, especially for military spouses or others who are forced to move and need to start earning income as quickly as possible.

As President Biden observed in his remarks about the executive order:

“Look, it can’t be a significant burden to get a new license in a new home state. That burden can’t be around anymore. It takes time and it takes money. It takes a toll on a family’s income while you’re waiting. We should remove that barrier, providing more mobility, more opportunity, higher wages for families on the move.”

To illustrate this point, when I moved from California to Texas in 1998, I decided to become licensed in Texas. Even though I had a community college teaching credential in real estate, had been a licensed broker since 1982 and had taught the California licensing courses at the college level since the mid 1980s, I was still forced to take all the same classes that someone who had never been licensed was required to take. 

I also recently spoke with Michael Lissack, who is a licensed Realtor in seven different states. He told me how he had to take the exact same continuing education course in Massachusetts that he had taken in Florida. The only difference was the cover page that said “Massachusetts” rather than “Florida.” When he appealed, Massachusetts turned him down. 

Is national reciprocity a good idea? 

The scenarios described above impose an unnecessary burden on those who seek to do business in a different state. The Biden executive order clearly indicates the barriers to reciprocity need to be removed.

To understand what is entailed in implementing national reciprocity, it’s important to first understand the various models that currently exist. 

3 types of portability laws

The laws governing reciprocity are known as “portability laws.” They fall into three separate categories

  • Cooperative: The out-of-state agent is allowed to enter another state and carry out the real estate business.
  • Physical location: The broker or agent can conduct the business remotely in another state and not in person.
  • Turf states: The out-of-state broker or agent is not allowed to conduct real estate business in the state.

In terms of the breakdown by state:

  • The full reciprocity states include Alabama, Alaska, Colorado, Delaware, Georgia, Kansas, Kentucky, Maine, Mississippi, Missouri, Virginia and Washington. 
  • Partial reciprocity states include Connecticut, Florida, Idaho, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Minnesota, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, West Virginia and Wisconsin.
  • No reciprocity states include Arizona, California, Hawaii, Indiana, Kentucky, Montana, Michigan, New Jersey, South Dakota, Texas, Vermont and Wyoming. Agents in these states have to repeat their entire real estate education and licensing process as if they had no previous training or experience. 

Florida’s partial reciprocity or “mutual recognition agreement” provides a roadmap for how reciprocity could work on a national basis. Rather than having agents from other states retake all the licensing courses and the full state real estate exam, experienced agents from the eight states with Florida reciprocity agreements are only required to pass a 40-question test regarding Florida real estate law. 

Barriers to implementation of national reciprocity

State commissions and departments of real estate currently control real estate licensing and CE requirements. These entities exist to implement and administer the laws and regulations created by state legislatures.

Any attempt to make changes that run afoul of the state’s mandated legislative real estate oversight will probably run into considerable opposition from various state and local Realtor associations.

A second issue is whether a presidential executive order takes precedence over state laws and the entities they create to administer those laws, rules and regulations. Third, implementation would be a logistical nightmare. Specifically: 

  • Would a national real estate exam and license have to be created or would there be a two-part exam, one addressing general real estate principles nationally and then a second part for the specific laws for the state where the agent would be practicing?
  • If there is a national/state exam, who would be responsible for determining the content of the exam, writing the exam, administering it and then granting the license? 
  • What would be the costs, and how would it be funded? 
  • What would the rollout look like, and how long would it take?

Fourth, even if a change of this magnitude were to occur, it would take several years to implement. What would happen if Biden is not reelected in 2024 and the new president rescinds Biden’s current executive order? 

The question no one is asking

The most important issue here is, “What is in the best interest of the client?” Just passing an exam doesn’t guarantee an agent can adequately represent a client in an area where they haven’t lived or done business before. In fact, most top agents refer out business that’s not in their immediate market area and take a referral fee. 

Nevertheless, eliminating onerous requirements on experienced agents to obtain licenses in a different state should be eased. Furthermore, agents who can show they have taken the exact CE course in another state within the appropriate time period shouldn’t be forced to repeat it a second time. 

Will national reciprocity occur? 

The bottom line is a national reciprocity program would be a logistical nightmare to implement and would face substantial challenges from Realtor associations and from many states as well. 

Bernice Ross, President and CEO of BrokerageUP and RealEstateCoach.com, is a national speaker, author and trainer with over 1,000 published articles. Learn about her broker/manager training programs designed for women, by women, at BrokerageUp.com and her new agent sales training at RealEstateCoach.com/newagent.

Bernice Ross
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