This is me in today’s Arizona Republic (permanent link):
Consumer is the loser with real estate licensing, broker argues
We’ve been talking about real estate licensing laws, admittedly an exercise in futility. Whatever arguments I might make for repeal, it remains that the Arizona Department of Real Estate is not going to dry up and blow away like tumbleweed.
But here’s an important question: Who do real estate licensing laws benefit?
If you thought of consumers, that would be incorrect. The model legislation for real estate licensing laws in every state was written by the National Association of Realtors. The purpose of these laws is to artificially limit entry into the real estate business, with the objective being to artificially raise the prices paid by consumers.
The fact of the matter is that virtually all government regulation of commerce exists to limit supply, thereby raising prices. This is not an unavoidable consequence, but since regulations are either written by or heavily-influenced by the regulated industries, the alignment of government and business in one conspiracy after another against the consumer is a nearly-universal outcome.
As we discussed last week, another key beneficiary of real estate licensing laws is the real estate broker. Real estate salespeople must be licensed, but in order to work, they must also “hang” their licenses with a real estate broker, another category of license.
The broker will take a bite out of every dollar his salespeople bring in. It is not an exaggeration to say that a broker’s license is a license to steal.
It gets better. Real estate brokers have managed to get themselves exempted from IRS income reporting and withholding regulations. In any other business, the boss has to withhold taxes. Taxes are vile, but the reporting and withholding requirement discourages careless hiring practices. There is a significant cost to adding employees, so employers will not take a chance on just anyone.
Not so real estate brokers. Adding a new Realtor costs virtually nothing, so many brokerages are packed wall-to-wall with thoroughly incompetent agents — haphazardly trained but licensed by the state to wreck your financial life forever.
If you think these laws and regulations benefit the consumer, think again.
More on real estate licensing laws:
- Want innovation in real estate? Get rid of the Brokers…
- Zillow.com at the Dawn of the Age of Abundance: Working for free is not a crime, trying to forbid it is…
- Zillow.com notes: Fear and Ludditism, advertising, a better farming strategy and more
- Arizona Republic: Realtors side with Zillow.com
- New real-estate licensing law fails consumers
- Arizona real estate licensing fuels debate
I had an “Ask the Broker” question about licensing last night. I’ll try to get to it later today.
Technorati Tags: arizona, arizona real estate, compensation for buyer representation, disintermediation, phoenix, phoenix real estate, real estate, real estate marketing
Michael Krotchie says:
Greg I’m going to have to disagree on a few points. I agree, the point of a controlled organization IS to limit entry into the RE business but the objective is to PROTECT the consumer.
No one trying to sell their home is obligated to use an agent but most of them find it *in their best interest* to use the help of someone who is more knowledgeable in a certain area than they are.
And some people just don’t have the time or desire to wade through the transaction process, willingly paying a little more to have someone else do it for them.
Prices aren’t being raised “artificially”; rather, consumers are paying a disclose fee and are completely aware of it.
Drawing from your statements, I can say that a delivered pizza price is being “artificially” raised by the tip that is added to an order. You have the option of going to pick up the pizza, but you’re tired, you’d rather have it delivered. So you willingly accept you will have to pay more to have someone help you get the pizza to your door without you leaving your sofa?
Is there a difference?
June 8, 2007 — 12:04 pm
Sock Puppet says:
“The purpose of these laws is to artificially limit entry into the real estate business, with the objective being to artificially raise the prices paid by consumers”
“Adding a new Realtor costs virtually nothing, many brokerages are packed wall-to-wall with thoroughly incompetent agents.”
If the laws purpose is to limit entry, why are brokerages packed wall to wall? Wouldn’t that excess supply of agents drive prices down? Why didn’t NAR require/suggest licensing being a high hurdle instead of a low one?
Been a long day with much yet to do, I’m lost here.
-Athol
June 8, 2007 — 5:20 pm