The Texas Real Estate Commission on Monday will consider whether to propose minimum-service rules for real estate brokers that could hammer discounters.
Texas was the first state to establish new policies that would require brokers to perform a range of services – a move that would require some discount and limited-service brokers to change their business practices. The commission in November 2002 adopted an amendment to the state administrative code to establish new service standards, though the commission repealed this amendment in May 2003 “for further study of the issue.”
The commission later proposed the rule changes again, and the Texas Attorney General’s Office considered whether the commission had the authority to establish such rules. In December 2004, the Attorney General’s Office issued an opinion on the matter, concluding that the commission does have the authority to enact the rule change.
The rule changes reviewed by the Attorney General’s Office would require that brokers accept and present to their clients offers and counteroffers to buy, sell or lease property; assist clients in developing, communicating and presenting offers and counteroffers; and answer clients’ questions relating to offers, counteroffers and notices.
In the Attorney General’s opinion, this proposed rule “falls squarely within the commission’s rule-making authority.”
The commission’s Feb. 21 agenda states that there will be a discussion of the Attorney General’s opinion about broker minimum-service standards, followed by “discussion and possible action to propose amendments concerning broker responsibility.”
Since the Texas commission first proposed the new service standards, other states have followed suit with their own minimum-service plans, and state Realtor associations have supported such changes. The Illinois state Legislature passed an act in August 2004 that defined minimum-service standards for real estate agents who enter into written brokerage agreements to act as the exclusive representative of a client.
The Missouri state Legislature is considering a similar proposal, and the Wisconsin Realtors Association is pursuing changes to licensing law relating to limited-service brokerages. Other states, too, are considering similar changes.
In each case, proponents of the changes have argued that the new service standards would benefit consumers who might not otherwise realize that some companies do not provide a full range of real estate services, and that it would help to reduce conflicts when traditional real estate brokerages are working with limited-service brokerages in real estate transactions.
Proponents of such policy changes have said that industry professionals are generally the source of complaints about lacking minimum-service requirements.
Aaron Farmer, broker-owner of Austin-based Texas Discount Realty, has been a vocal opponent of the commission’s plans to change service-standards for real estate brokerages in the state.
Farmer said he doesn’t believe the government should be in the business of regulating minimum-service requirements in real estate. “This is not something the government should be doing,” he said. If the commission enacts the rule changes considered by the Attorney General’s Office, “it would definitely impact my business,” he said, adding that he would seek comment from the Federal Trade Commission on whether such a rule change is anti-consumer and anti-competitive.
James Campbell Cooper, an attorney advisor for the FTC’s Office of Policy Planning, said the FTC continues to follow the matter in Texas, though the FTC did not submit any comments for consideration by the Texas Attorney General and has no plan to submit comments at the Texas commission’s Monday meeting.
“In the past the FTC has commented on existing and proposed laws or regulations that prevent consumers from choosing their preferred mix of service and price, when there is no evidence that such restrictions are necessary to prevent consumer harm,” he noted.
Farmer, whose company offers limited services for a flat-fee or fuller services for discounted fees, said he plans to make some comments at the commission meeting, and he said he expects that “a lot of problematic issues” will surface if the commission follows through with the proposed rule changes.
Loretta DeHay, general counsel for the commission, said that if the commission decides to propose new rules relating to minimum-service standards, there will be a 30-day comment period in which the public can provide feedback about the proposed rules. After this period, the commission could adopt the rules or make changes to the proposed rules. The rules do not require approval by the state Legislature.
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