Did you know that home buyers and sellers who have a problem with their agents can take their grievances to a state real estate board?
If you haven’t, you are not alone. According to the latest report from the Consumer Federation of America – a national organization of more than 250 state and local nonprofit consumer groups – 21 of 47 state commission websites completely ignore consumers. Only 11 of them provide what CFA calls “adequate” information for consumers.
However, it can be a good thing that buyers and sellers are unaware that they can call their state agencies for assistance. The common purpose of these agencies may be to regulate agents, brokers, and businesses, and they may be mandated to receive, investigate and respond to consumer complaints. But none of these institutions has the power to compensate consumers who turn out to have been treated unfairly or illegally.
While most states maintain clawback funds to allow aggrieved consumers to seek redress, the CFA recently reported that plaintiffs are only eligible if they have a favorable decision from a court or mediator.
CFA senior researcher Stephen Brobeck found only a handful of states that publish information on the complaints. When the information was available, less than 10% of complaints resulted in a citation, fine, suspension or revocation of license for the offender. And even then, the majority of actions were not the result of a consumer complaint, but rather the criminal conviction of an agent or acting without a license.
Brobeck found that disciplinary action against officers generally took the form of fines, and sometimes requiring the offender to take a course, often in professional ethics. Rarely has a license been revoked.
The head of the CFA also finds fault with the composition of these committees (called “councils” in some states). Only 15% of the seats on these boards are held by people outside the real estate industry, and none are held by consumer or housing advocates. It is only in New York that the State Board of Real Estate is required to have a majority of non-industry members.
And that’s not the extent of industry dominance. Of the identifiable seats unrelated to the industry, the CFA report says nearly half are either vacant or held by people from allied companies – or agents or brokers themselves.
In other words, in most places the fox is guarding the chicken coop.
“A commission dominated by industry members is predisposed to look at issues from an industry perspective, make decisions that favor industry over consumers and sometimes forget that its mandate is to serve the people. consumers as well as industry, ”the report says.
Governors typically appoint members of the real estate commission, usually at the request of the board and its administrator. But even then, a few questions arise: if they are selected by the industry, do they have the interests of consumers at heart? And do they have the will to challenge those who selected them in the first place?
These commissions are valuable in that they train and empower agents and brokers, and can penalize them for a wide variety of offenses. But for consumers, they leave a lot to be desired. “Many industry commissioners ignore consumers or fail to understand and appreciate the important role of educating and protecting buyers and sellers,” said Brobeck.
State real estate agencies would be much more likely to recognize and act on their obligations to buyers and sellers if there were strong public and nonprofit leaders who also held commission seats.
Brobeck would like to see more representation from consumer organizations and housing advocates – perhaps a lawyer or even an economist with no “financial ties” to the company.
“Even a single consumer or housing advocate… would likely have a positive impact,” he says.
This latest CFA report comes at a time when the practice of residential real estate – a $ 2 trillion a year business, driving $ 100 million in sales commissions – is under increased scrutiny. Several antitrust lawsuits have been filed against the National Association of Realtors, for example. And the Justice Department withdrew an agreement the previous administration had made with NAR to further investigate the group’s rules and conduct.
In its latest court case, the DOJ said the NAR rules “restrict how real estate agents can market properties, dictate how real estate commissions are set and hamper commission negotiations.”
Brobeck thinks his study fits these reviews perfectly.
“State real estate commissions should not escape the scrutiny of the industry,” he says. “The lack of independent and effective regulation has contributed to the anti-competitive practices that are the subject of private and government antitrust litigation.”
In a previous report, the CFA specifically criticized the lack of information buyers and sellers need to make informed decisions on state real estate commission websites. Only 11 of these websites received a “good” rating from the CFA, and not a single site was rated “excellent”. Those in 39 states and the District of Columbia were rated “fair” or “poor”.
“The insufficient consumer information provided by most real estate commissions largely reflects the fact that they were created and are dominated by the industry,” Brobeck said at the time. “They clearly do not recognize their responsibility to consumers at all. They need to take consumers more seriously.
Lew Sichelman has been covering real estate for over 50 years. He is a regular contributor to numerous housing magazines and to housing and housing finance industry publications. Readers can contact him at firstname.lastname@example.org.
This story was originally published 8 November 2021 6:00 a.m.