Alabama Gov. Bob Riley signed legislation this month that will require all real estate agents in the state to perform a minimum level of service for their clients, such as assisting consumers in negotiating offers and counteroffers and answering questions relating to real estate transactions.
Alabama is the latest state to pass such legislation despite protests by the U.S. Department of Justice and the Federal Trade Commission. The federal agencies also wrote letters this year to state officials in Missouri, Oklahoma and Texas to express objections to similar real estate measures in those states.
Representatives for the Justice Department and Federal Trade Commission have said that such measures can be anti-competitive and can limit consumer choice in the real estate marketplace by preventing some companies from offering fewer services than are mandated by the measures, and they encouraged state officials to reject or revise the measures.
In every case, legislators and governors in those states approved the measures, which have been backed by state Realtor trade groups. Federal officials have said that federal agencies that enforce antitrust laws are essentially powerless to bring action against state-approved legislation – even if the legislation is deemed to be anti-competitive – because states generally have immunity from federal prosecution in such matters.
Ken Wallis, chief legal adviser to Alabama’s governor, said it “was just a no-brainer” to approve the new real estate law. “The bill was designed to protect the sellers of real estate and real estate transactions in general,” he said, noting that the legislation passed the Senate with a 35-0 vote and it passed the House with a 95-1 vote.
The text of the new law states that brokers and agents in the state, when accepting an agreement to list a property owner’s property for sale, “shall, at a minimum, accept delivery of and present to the consumer all offers, counteroffers, and addenda to assist the consumer in negotiating offers, counteroffers, and addenda, and to answer the consumer’s questions relating to the transaction.”
“The average seller has to have additional assistance in a transaction,” Wallis also said. “There are 100 things that the average seller does not know, and somebody’s got to help them with it. It’s no different than paying a doctor’s fee or a dentist’s fee. You’ve got to have those services and the public benefits from having a good agent or broker to handle their transaction for them. The governor’s interest in this matter was deciding if the law was in the best interests of the public.”
Greg Masood, director of governmental affairs for the Alabama Association of Realtors, has said that the new real estate law in Alabama was designed to help consumers receive adequate representation in real estate transactions. The new law becomes effective on Nov. 1. Masood said today that the association plans to inform its members about the new legislation through its various publications.
The Justice Department and Federal Trade Commission issued a letter to Alabama legislators in May that urged them to reject House Bill 156, which set new minimum-service requirements for real estate professionals. That bill died, but on July 19 the state Legislature introduced identical minimum-service language in a new bill, Senate Bill 17. That bill was quickly passed in a special session of the Legislature, with final approval on July 26. Riley reportedly signed the bill Aug. 3.
The National Association of Realtors has not announced formal support for this so-called minimum-service legislation, which has been proposed or approved in more than a dozen states, though the association has provided legal advice to executives at its state Realtor associations. In addition to states that have pursued legislation to enforce minimum-service standards, a number of other states have introduced and passed similar regulations that did not require legislative approval.
State associations have said that the minimum-service laws help to ensure that consumers receive all of the services they need in a real estate transaction while eliminating circumstances in which agents feel obligated to assist consumers they don’t represent when those consumers lack full representation.
Opponents to the laws, meanwhile, have said that consumers should have the right to choose which services they need in a transaction, and that the laws can limit competition in the real estate marketplace by prohibiting some forms of limited-service real estate practices.
In one of the most contentious minimum-service battles, the Texas Real Estate Commission in November 2002 adopted new state rules that established minimum-service standards. The owner of a discount real estate company in Texas filed a lawsuit to block implementation of those rules, and in May 2003 the commission repealed the new rules for further study.
Later, the commission reconsidered similar rules, and the Justice Department and Federal Trade Commission sent a letter to the commission in April 2005 urging members not to approve the rules. The state Legislature then introduced and passed a bill that included similar language to the rules that the commission had considered, and Texas Gov. Rick Perry signed the legislation in June. It will become effective Sept. 1.
In Missouri, the state Realtor association spent $50,000 to hire a Washington, D.C.-based lobbying firm to assist in passing a minimum-service law.
An association official said the trade group was prompted to hire an outside lobbying group after federal agencies objected to the measure. The Justice Department and Federal Trade Commission wrote a letter to Missouri Gov. Matt Blunt in May that urged him to veto the legislation. Blunt signed the bill into law in July, and it will become effective Aug. 28.
In Oklahoma, Gov. Brad Henry signed a minimum-service bill into law that became effective immediately because of an emergency provision stating that it is “immediately necessary for the preservation of the public peace, health and safety.” The Justice Department, in an April letter, had urged Oklahoma legislators to reject minimum-service legislation. The Legislature made some slight changes to the bill, though these changes were not endorsed by Justice Department officials.
In a May 25 letter, Justice Department officials had encouraged Oklahoma legislators “to take the time to further clarify the language in the bill to ensure the preservation of consumer choice.”
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