Legislation proposed in Michigan specifies minimum services that real estate agents must perform for their clients when they enter into an exclusive agreement to serve those clients, riling some real estate professionals and consumer advocates who say the laws are unnecessary and potentially costly to consumers.
Officials at the Michigan Association of Realtors, which is backing the proposals, say the legislation won’t harm any real estate business models and is designed to simply spell out for consumers the services they are entitled to when they contract with a real estate agent.
The legislative proposal – two bills that are packaged together so that both bills must pass or neither can pass – outlines minimum-service requirements in those real estate transactions that involve a fiduciary relationship between agents and their clients, said Robert Campau, vice president of public policy and legal affairs for the Michigan Association of Realtors.
State law already allows for agents to serve as transaction coordinators, which means that they do not act as the agent of either a buyer or seller in a real estate transaction. Because transaction brokers are “completely unaffected” by the proposal, discount brokers that act as transaction brokers are likewise unaffected, Campau said.
“There is no regulatory change that would necessitate any adjustment of business models on anybody’s part. All this bill does is ensure that people understand what they’re contracting for.”
But Cheryl Lynch, co-owner of Lake Michigan Realty Center, a real estate company in New Buffalo, Mich., says she does not agree with this characterization. The legislation is not necessary, she said, as the issue could be solved with a change in real estate forms. Lynch said that her company offers full-service for real estate consumers, though she has been approached by consumers who want only limited representation in real estate transactions.
“Most of our customers are very savvy about market conditions. They don’t need full-service Realtors,” she said. She said the legislation would require agents to see a real estate transaction through from start to finish when operating under an exclusive agreement with clients, which will require agents to charge money for all of the mandated services. “It locks in the cost – this is cost-fixing,” she said.
In testimony to a Michigan legislative committee, Lynch said she is concerned that Realtor-owned multiple listing services could use this legislation to block limited-service property listings that are not exclusive agency listings from being entered into the MLS.
House Bill 4849 and House Bill 4850 provide that real estate brokers who enter into agreements creating an exclusive agency relationship must accept and present all offers and counteroffers to buy, sell or lease the client’s property or the property the client seeks to purchase or lease.
Also, the broker must provide “assistance in developing, communicating, negotiating and presenting offers, counteroffers and related documents or notices;” must provide assistance to complete a transaction following execution of a purchase agreement; and must assist in providing a complete and detailed closing statement.
A group of states have already enacted so-called minimum-service laws or regulations that require real estate brokers to perform certain services for their clients, at least for some types of relationships between real estate professionals and consumers. In a handful of cases, officials at the U.S. Department of Justice and the Federal Trade Commission have opposed the legislative efforts, asking state officials to block any attempt to limit competition or consumer choice.
The federal agencies have stated that consumers should be allowed to choose which real estate services they want, and discount, limited-service real estate business models should be allowed to compete in the marketplace.
State Realtor associations and legislators who have supported the measures, though, have said they seek to protect consumers by ensuring they receive an adequate level of representation in real estate transactions.
A U.S. General Accounting Office report, released today, states that 10 states are considering or have passed legislation that requires brokers to provide a minimum level of service when they represent consumers.
Campau said the Michigan association is well aware of the federal opposition to legislation in other states, and he said the state’s legislation is designed to be “fairly innocuous” compared to the legislation proposed in other states. He also said there has been a lot of “rumor” and “innuendo” about the perceived impacts of the legislation.
Officials at the state Realtor association have engaged in discussions with Justice Department officials about the legislative proposal, Campau also said.
“We’ve had discussions and they’ve asked questions,” Campau said.
Rich Robinson, executive director for the Michigan Campaign Finance Network, a nonpartisan, nonprofit coalition that researches campaign contributions and impacts, said the legislation “appears to be a solution in want of a problem. This appears to be an anti-consumer, anti-competitive bill. It looks like a bonbon to a special-interest group.”
He submitted testimony to the House Committee on Regulatory Reform, urging its members not to pass the legislation. The Realtors political action committee is very active in Michigan, Robinson also said, and in the last election cycle was the sixth largest political action committee in the state.
On Tuesday, the measures unanimously passed the Committee on Regulatory Reform, with slight revisions. The revised language states that licensed real estate professionals who do not enter into an exclusive agency relationship with consumers are not bound by the new requirements.
***
Send tips or a Letter to the Editor to glenn@inman.com or call (510) 658-9252, ext. 137.
