Federal antitrust officials are opposing real estate legislation, proposed in Michigan, that they contend would leave fewer options for real estate services and would likely decrease competition among real estate professionals and cause consumers “to pay thousands of dollars more in commissions to real estate brokers.”
U.S. Department of Justice and Federal Trade Commission officials, in an Oct. 18 letter to a Michigan state senator and the director of the state Department of Labor and Economic Growth, urge the Legislature to reject the law proposal, which is backed by the Michigan Association of Realtors. The letter is signed by Deborah Platt Majoras, chairman of the Federal Trade Commission, and Thomas O. Barnett, acting assistant attorney general for the Justice Department’s Antitrust Division.
The proposed legislation, House Bill 4849 and its companion HB 4850, require that real estate brokers who enter into exclusive agreements with consumers to perform a minimum level of services for those clients, including the acceptance or presentation of offers and counteroffers to buy, sell or lease property.
Also, the law requires brokers who enter into these relationships to assist “in developing, communicating, negotiating and presenting offers, counteroffers and related documents or notices” in a real estate transaction, and assist as necessary “to complete the transaction under the terms specified in the purchase agreement.”
Federal officials have opposed similar proposals — often referred to as minimum-service or limited-service measures — in a handful of other states, and lawmakers in those states passed the measures despite federal objections. Several other states are considering or have already passed laws or rules with similar language.
Officials at the Michigan Department of Labor and Economic Growth, the regulatory agency governing real estate licensees in the state, testified against HB 4849 to a legislative committee and requested a letter from federal officials “in support of its opposition to the bill,” according to an announcement today by Federal Trade Commission and Justice Department representatives.
Realtor trade groups are the key proponents backing the legislation — Realtor association officials have said such measures are necessary to protect consumers by ensuring they receive a sufficient range of services in a real estate transaction, and to guard against confusion by full-service real estate agents who participate in real estate transactions involving consumers who contract with limited-service companies.
Opponents of such laws have countered that there are not enough complaints against limited-service companies to justify the legislation, and some limited-service real estate professionals have alleged that Realtor associations appear to be using their political clout to help enact anti-competitive laws.
“There’s no need for this legislation,” said Cheryl Lynch, co-owner of Lake Michigan Realty Center in New Buffalo, Mich. Lynch, a full-service real estate broker and outspoken opponent of the law proposal in Michigan, said she has engaged in conversations with Justice Department officials about the law proposal, and she does not expect state senators to approve the measure, which has already passed the state House of Representatives.
Lynch referred to the law proposal as a “back-door approach” to requiring all brokers to perform the same minimum-level of services in the state. “It’s a scheme to legally kill off competitors,” she said. If the law is passed, multiple listing services in the state could choose to block limited-service listings from reaching the MLS, she said, while only allowing those listings to which the minimum-service law applies, for example.
Robert Campau, vice president of public policy and legal affairs for the Michigan Association of Realtors, said today that the letter by federal officials “shows a fundamental misunderstanding of laws already in place in Michigan.”
He added, “All these bills do is keep people from mischaracterizing the services they are going to provide. The bill is in no way meant to change business models or reduce competition or prevent any business model from being provide to the public.”
In their analysis of the legislation, federal antitrust officials said that while the legislation applies minimum-service requirements to exclusive agency agreements, many multiple listing services in Michigan “require that the listing broker establish an ‘agency relationship’ before allowing a broker to list a property in the local MLS. Therefore, consumers who live in areas that are served by MLSs with such rules and who wish only to have their house listed in the MLS must sign brokerage agreements that create an agency relationship and bring into play the minimum services requirements.”
All real estate companies in the state can now enter into exclusive agency relationships with consumers, the federal officials noted, though if the law is enacted all companies that enter into these agreements will have to provide the required level of real estate services.
“Real estate professionals who offer a fee-for-service option provide a competitive constraint on the pricing of real estate professionals who offer only the full-service option,” officials state in the letter. “By limiting the availability of customized offerings, (this bill) likely will protect real estate professionals who choose to offer the full complement of services from having to compete with those who offer consumers more choices in the quantity and types of services.”
Fee-for-service real estate companies include real estate brokerages that offer to list a property for sale in an MLS but provide few other services, for example, and those companies that provide a full menu of services and charge a flat rate for each services.
Campau said the law proposal has nothing to do with MLS policy. “This legislation has no effect whatsoever on what MLSs want to do or don’t want to do, or what business models they include. (The legislation) is making sure that people who claim to provide fiduciary-type agency services to the public clearly provide those services in a way that is documented to the consumer up-front.”
According to the Justice Department, about 80 percent of MLSs in the country are owned by Realtor boards.
David L. Walley, broker-owner for Payless Real Estate Services, a company that offers rebates and fee-for-service real estate services, said he does not believe the public stands to gain from the legislation. He said he fears that if the law passes, MLSs will enforce policies that will block his ability to submit property listings — an MLS in his area already blocks listings that are not exclusive agency listings, he added.
“What I’d have to do is change the services I provide and the level of my activity involved and adjust my fees to accommodate this, which I’m already in the process of doing,” Walley said. “I would have to eliminate those options that are less than the exclusive agency agreement.” Simple disclosure forms are all that is needed to ensure that consumers know exactly what services they will receive in a real estate transaction, he said.
Campau said the Realtor association has not yet had discussions with senators about the law proposal. “I suspect we’re going to start talking to the Senate now,” he said. “I am confident that as the facts are laid out before the Legislature that they will be interested in seeing that if (real estate professionals) promise something to the consumer that they will follow through with that promise.”
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