Mortgage Broker Regulations Add to Home Selling Costs

Thanks to minimum-service requirements on Florida home loan brokers, selling your house may have grown more costly. These new rules compel brokers to act as middlemen, even if that’s against the wishes of their clients.

“The way they’re going about limiting consumers’ ability to get reduced fees on real estate transactions is to go state by state to get the regulations changed,” says Colby Sambrotto, chief operating officer of ForSaleByOwner.com.

It’s all about money agrees Manuel Iraola, president of Homekeys.net, a Miami-based brokerage: “They are trying to force the people to do something under the banner that they’re protecting the interests of the consumers where, in reality, what they’re really protecting is the 6 percent commission.”

Realtors say they’re seeking government intervention to protect consumers. The current laws are simply making it more difficult to complete a Florida home loan transaction.

Analysis of new real estate broker laws

The new measures require real estate brokers to receive and present offers and counteroffers, offer negotiating advice, complete forms, and answer questions. This often means a buyer’s agent can’t even send a fax or make a phone call directly to a seller.

Tasks such as these are skilled work that “should not be done by a novice,” wrote RE/MAX’s chief legal officer, Geoff Lewis, in a letter last year to the Justice Department and Federal Trade Commission. “While some consumers may be sophisticated enough to represent themselves in some or all of the steps of a transaction, most are not.”

The argument for this Florida home loan protection

The Justice Department’s antitrust division remains unconvinced, insisting that consumers benefit by having a wide range of choices in the real estate services they get. The division asked six states not to pass minimum-service bills, calling the measures anti-competitive. Five of those six states adopted the rules anyway, and the division hasn’t challenged any of the state laws.

Florida was the first state to enact these regulations. Brokers in the state have to provide the aforementioned Florida home loan services whether or not the customer wants them. Moreover, clients have to pay for the services even if they would rather perform the duties themselves. It’s something buyers and sellers need to be aware of.

The new limited-service rules run counter to the do-it-yourself culture exemplified by the growing popularity of “for sale by owner” transactions. Brokers such as Texas Discount Realty identified and served a new breed of customer: those who don’t want to sell their homes all by themselves, but who don’t want to pay for a full suite of services, either.

Limited service, lower price

Before September 2005, Texas Discount Realty would charge $495 to add a house to the Multiple Listing Service and provide a lockbox and a yard sign. That was it. Sellers had to buy their own newspaper advertisements and hold their own open houses. They had to conduct their own negotiations and deal with title agencies on their own, or hire attorneys to help. Most sellers offered 3 percent commissions to buyer’s agents.

Those that support the new the law say it’s about preventing poor service, eliminating conflicts of interest and conforming with the legal definition of an agent.

Under the new law, listing brokers are required to field offers and present counteroffers, even if that means merely receiving a fax from a buyer’s agent and faxing it to the seller. Allowing sellers to communicate directly with buyers’ agents invites conflicts of interest, many claim, because the sellers often ask the buyers’ agents for advice.

That brings up another objection:

Full-service agents complain that limited-service agents create more work for them. “One agent agrees to work for half the commission assuming the other side will do their job,” RE/MAX’s Lewis told the Justice Department and FTC. “If the other side does not do its job, the first agent should not have to perform increased work without being paid more.”

This is a conflict that doesn’t look to be resolved any time in the near future. For now, just focus on the house you want and keep all this in mind as you consider a Florida home loan.