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Saturday, July 22, 2006

Ind. Law - More today on real estate law change [Updated]

I've updated yesterday morning's ILB entry on WRTV's feature last evening on the General Assembly's anti-discount broker changes to the state real estate law. Access it here.

Here is a headline from a story in Inside Business Today, headed "Indianapolis-based Angie's List is asking the Indiana General Assembly to repeal or modify the state's new minimum services law," and featuring the company's press release. Some quotes from the release:

Calling Indiana's new minimum services law anti-competitive and a blow to consumer choice, Angie's List is asking the Indiana General Assembly to take action to repeal - or at least modify - the statute, which took effect July 1.

The new law requires real estate agents engaged in exclusive listings to be available to answer questions, accept and present offers and help with the closing process. As a result of this requirement, limited-service or discount brokers are no longer able to offer some of their lower cost or "a la carte" options to consumers.

"The minimum service law is anti-competitive and limits the choices consumers have for selling their home," says Angie Hicks, founder of Angie's List. "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."

The push for tougher minimum service standards across the U.S. has also caught the attention of the U.S. Department of Justice, which has sent letters encouraging governors and legislators considering such requirements to reject them on the grounds they harm competition and, hence, consumers. * * *

If not an outright repeal by state legislators, Angie's List wants the law transitioned to a version that strikes a more fair balance, similar to a law passed in Virginia and one currently being considered in Ohio. These versions mandate that agents disclose the services they are required to offer, but allow homeowners to opt out of any services they do not need, thereby keeping operating costs down and allowing discount brokers to continue offering lower-priced services.

Interestingly, the CEO of Angie's list is Bill Oesterle, who managed Governor Mitch Daniels' 2004 campaign. Daniels signed the new minimum services law earlier this year; the ILB wrote at the time: "I've wondered why Governor Daniels signed this bill so quickly. My take on the Governor had been that he was for business competition, not against it."

Here is a related column from the Washington Post today, that begins "When it comes to protecting consumers in the real estate market, are the foxes guarding the henhouse?" Some quotes:

That's the conclusion of new research by the Consumer Federation of America into the relatively obscure state regulatory commissions that oversee residential real estate. Whereas other key industries regulated at the state level -- utility and insurance commissions, for example -- typically are run by professionals independent of the industries they oversee, real estate commissions are dominated and essentially run by active real estate agents and brokers.

That, according to the Consumer Federation, makes them slow to act on consumer complaints and slow to introduce needed consumer protections. It also prejudices them against "nontraditional" approaches such as limited-service, limited-cost options that can save consumers money. Sometimes the industry-dominated commissions are the primary authors of state regulations or laws that directly harm home sellers and buyers, including statewide bans against real estate fee rebates to customers, the group said. * * *

State commissioners also have allowed real estate agents to ignore legislative requirements such as early, formal disclosure to consumers about who the agent represents in a transaction. The National Association of Realtors cited agents' noncompliance with state disclosure rules as a growing problem in the industry earlier this year.

State commissions dominated by real estate agents have actively opposed the growth of money-saving nontraditional brokerage approaches, especially those involving Internet-based firms, according to the Consumer Federation. In several states this year, real estate commissions have sought to retain or enact bans against rebates to home buyers and have supported "minimum service" regulations that discourage the growth of discount-brokerage concepts in which consumers assume greater responsibility in the sale of their homes while paying brokers lower commissions or flat fees.

[Updated 7/23/06] Here is a link to the Consumer Federation of American press release.

Posted by Marcia Oddi on July 22, 2006 07:52 AM
Posted to Indiana Law