Whose Side Are Real Estate Regulators On?

When it comes to protecting prospective buyers in the Florida housing market, are the wolves (so to speak) in charge of guarding the henhouse?

New research by the Consumer Federation of America into state regulatory commissions that oversee residential real estate seems to suggest this.

Whereas other key industries regulated at the state level are generally run by professionals independent of the industries they oversee, real estate boards are dominated by active real estate agents and brokers, writes syndicated columnist Kenneth Harney.

According to the CFA, that makes the commissioners slow to act on consumer complaints and even slower to introduce needed consumer protections. They are prejudiced, as they have a vested interest in the matter, against the limited-service, limited-cost options that save consumers money. Sometimes the industry-dominated commissions are the primary authors of regulations or laws that directly harm home sellers and buyers.

• The CFA examined the structures and membership of regulatory commissions in 47 states.
• As of April, 79 percent of all real estate commissioners were real estate agents, brokers or licensees, or people who otherwise “earn a living through real estate transactions,” such as closing attorneys or title agents.
• Four states (Idaho, Louisiana, Mississippi and Nevada) require that all commissioners be real estate brokers or salespeople, while 11 states (Colorado, Kentucky, New Mexico, Ohio, Utah, West Virginia, Georgia, Indiana, Missouri, Oklahoma and Washington) require at least 80 percent of commissioners to hold real estate licenses.
• Only Rhode Island and Pennsylvania prohibit licensed real estate agents from constituting a majority of commissioners.
• Illinois, California and Minnesota are the only three states that appoint professional regulators who work full time to oversee the real estate brokerage marketplace.
• One out of four real estate commissioners nationwide, according to CFA, works for one of the four largest national real estate firms: Re/Max, Prudential, GMAC or one of NRT Inc.’s several brands — Coldwell Banker, Century 21, ERA and Sotheby’s.
• Even when state law requires public-interest commissioners by appointed, one in four is either a real estate attorney or a title agent.

Stephen Brobeck, Executive Director of the CFA and co-author of the research project, says that the heavy weighting of real estate commissions with industry members essentially stacks the deck in the industry’s favor, while harming consumers whenever the industry’s interests diverge from those of the public.

Not surprisingly, the real estate industry disputes the CFA’s conclusions. Malcolm Young, CEO of the Louisiana Realtors Association, said the state Legislature — not the industry — mandated that all nine commissioners be realty brokers or agents, because they understand the complex issues better than any independent appointee. involved in real property transactions.

Thomas Stevens, president of the National Association of Realtors, praised the services rendered to the public by active agents who serve on state-appointed commissions.