A company that operates an online database with consumer reviews of local contractors is lobbying against new real estate laws that require licensees to perform a specific set of services for clients.
Angie Hicks, founder of Angie’s List, seeks to change a law enacted July 1 in Indiana and block similar legislation in Michigan. Hicks said in a statement that the Indiana law “is anticompetitive and limits the choices consumers have for selling their home. Homeowners with experience in the selling process should have the freedom to decide what they can handle, and in turn have the option to save potentially thousands of dollars in commission fees.”
Angie’s List does not allow consumers to rate real estate professionals and a spokesman said the company has no plans to do so, though the company does allow ratings of home inspectors and real estate appraisers, among other contractors. The company, founded in Indiana, has about 500,000 members in 35 states and 67 cities.
Other states have also passed or considered similar measures — sometimes referred to as minimum-service laws — and officials at the U.S. Department of Justice and the Federal Trade Commission have issued statements in opposition to these laws in several states.
Realtor trade groups are the primary backers of the state measures, and Realtor association officials say the measures are intended to ensure that consumers receive an adequate level of service in real estate transactions while preventing confusion for other real estate agents when a home seller does not receive full representation in a transaction.
DOJ and FTC antitrust officials, consumer groups and proponents for limited-service real estate companies, meanwhile, have said that there are not enough consumer complaints to justify these measures, which can have the effect of restricting consumer choice and limiting competition.
Jonathan Swain, a spokesman for Angie’s List, said consumers brought the Indiana law to the company’s attention, and the company published an article in its members’ magazine in June about minimum-service laws.
The Angie’s List article states that minimum-service laws and bans on real estate rebates to consumers “were on the books in 22 states and under debate in four more.” An editorial comment in the article states, “We believe minimum-service laws are anticompetitive and stifle consumer choice, which is the foundation of the service we provide our members.”
A company poll, meanwhile, found that 67.5 percent of respondents “believe commissions paid to traditional real estate agents are too high,” while 85 percent used a traditional real estate agent for their last home sale and 72 percent plan to use a traditional agent the next time they sell.
Karl Berron, vice president of government relations for the Indiana Association of Realtors, said the association pursued the legislation to protect consumers and association members.
“Our members were concerned about situations where they found their agents in the middle of transactions where sellers had no representation. There were concerns both on the liability side as well as just the fact that consumers were being left without representation,” he said.
In some cases real estate licensees “were essentially avoiding all agency responsibility” in representing their clients, he said, “which we thought really negates the purpose of the license law to begin with.”
Officials for the U.S. Department of Justice testified in opposition to the Indiana minimum-service measure, House Bill 1339, in a state Senate hearing, Berron said. Members of the state Senate unanimously passed the measure despite these federal objections. But the legislation had earlier received a mixed reaction from members of the state House, who passed the bill in a 56-38 vote.
Gina Talamona, a Justice Department spokeswoman, said that the department has opposed real estate-related laws that could potentially restrict consumer choice and drive up costs for real estate services, though she offered no specific comments about the Justice Department opposition to the Indiana law.
The Indiana law provides that all real estate licensees, unless they are assisting an individual without compensation, must be available to receive and present offers and counteroffers in real estate transactions, and “assist in negotiating, completing real estate forms, communicating, and timely presenting” of offers, counteroffers and other related items in real estate transactions. Also, licensees must “timely respond to questions,” according to the text of the new law.
Banned under the law are business models in which licensees offer to list a home for sale in a multiple listing service but provide no other services for clients, for example, and any other business models that do not provide all of the services specified by the law.
While some states have passed minimum-service laws that allow consumers to specifically opt out from receiving certain services from agents, Berron said this “waiver” concept was considered but was ultimately not deemed strong enough. “As our folks thought through it they in the end decided that the minimum duty concept was really the least intrusive and solved really the basic problem. Everyone with a license ought to be held to some minimum level of responsibility and that was the way to ensure that.”
He also said that the new law offers flexibility for different business models. “You are going to see a variety of ways that firms choose to deal with this. I don’t think there will be a strict interpretation.”
Berron said that the media has latched onto to the minimum-services issue “as if there’s some conspiracy” by the real estate industry, though he said he has not heard a single comment from a member of the Indiana Association of Realtors “related to trying to disadvantage some firm. I’ve only heard about (the new law) talked about in terms of liability for themselves or how it affects unsuspecting consumers.”
The Justice Department apparently “sees this as one arrow in their quiver — one way to keep pressure on the industry,” while Angie’s List may have joined opposition to minimum-service legislation as a publicity stunt, Berron added. “They are not a consumer advocacy organization. They are a profit business that has figured out that they benefit by finding their name in print on this law.”
Swain, of Angie’s list, said the company will work to encourage the Indiana Legislature to change the law and is teaming up with consumer groups including the Consumer Federation of America.
If the Indiana law were changed to include a waiver that allows consumers a choice in which real estate services they want or do not want, “it could really stand out as an opportunity to strike balance between consumer protection and consumer choice, and not place any unnecessary burdens on the consumer,” Swain said.
