The trouble with cops is that they make you feel safe when you’re not. Instead of attending to your own security on your own dime, you expect Officer Vengeance to swoop in and save you, like Batman with a beer-belly. Never happens, but we never stop insisting that it can, that it will, that it must!
I think the real estate laws tend to work the same way. In reality, every minimum standard becomes the de facto maximum standard — and the minimum standard in real estate is outrageously low. Yet consumers are convinced that licensing and license enforcement are sufficient protections — Captain America with a clipboard — for the biggest asset they own.
This is a mistake, and, arguably, it is also the root cause of all the problems affecting the real estate industry. The NAR campaigned state-by-state for licensing laws not to protect the consumer but to protect its own membership from “unfair” competition. The NAR is a cartel in the sense that real estate licensing laws exist to limit competition, thus to sustain artificially high prices. In naked essence, the laws consumers think are protecting them exist to fleece them instead. This is true of every sort of commercial regulation — and this is why regulation is sought by the established firms in a particular line of business in the first place.
An obvious first place for the Department of Justice and the Federal Trade Commission to start, in attempting to fix what ails the real estate industry, would be to deregulate everything. If Chester the Barber wants to tape pocket listings to the mirror behind his chair, let him. If Sellsius° wants to do more than advertise other people’s listings, let them. Caveat emptor, of course, but let the buyer beware in full cognizance that due diligence and care are all the protection an emptor or venditor can ever have in any commercial transaction. The courts might make you whole after you are injured, but your beer-bellied Batman is always scarfing donuts when you need him the most.
But: This won’t happen. Real estate licensing requires so little training that almost anyone can pass the state test to get a license. Real estate practice requires so much knowledge, experience and luck that almost no one can succeed in this business. If we got rid of the licensing laws and just let people sink or swim, almost everyone would sink. The survivors would compete on reputation, which is the best protection consumers can obtain. But this makes way too much sense, so we know it will never fly among a people irredeemably addicted to compassionate lies.
But here’s the next best thing: Get rid of the two-tiered broker/salesperson licensing scheme. Many of the complaints Ardell makes are the consequence of brokers having arbitrary power over salespeople. This morning, The Real Estate Tomato documents an outrage that is only possible because of the existence of the broker license.
If every salesperson were free to fly his or her own flag, either as self-employed agent or in mutually-voluntary aggregations, innovation in the real estate industry would be the rule and not the strenuously-resisted exception…
Technorati Tags: arizona, arizona real estate, blogging, disintermediation, dual agency, phoenix, phoenix real estate, real estate, real estate marketing
Todd Tarson says:
Get rid of the brokers?? Now you’re talking!!
I have a love/hate thingy going with brokers in general, nothing in a particular individual broker mindset. I guess it comes from the relationship that all listings (for example) are the property of the broker. Something about that just doesn’t sit right with me.
I’ve liked the three brokers that I have hung my license with, but at this point I am on my own and calling the shots. All of them. Yes I do hit up my broker on occasion to use him as a sounding board on a transaction or some other issue, and frankly I think there will always be a need for some kind of counsel figure for lowly agents like me.
I don’t have any solutions for this though, but would favor a move to some sort of change. I’d stay in leadership if there was some kind of movment to support surrounding this issue.
August 21, 2006 — 12:42 pm
Ardell DellaLoggia says:
Also, I think a lot of agents would do better work, if they didn’t feel it wasn’t their butt on the line, but the Broker’s.
August 21, 2006 — 4:05 pm
Greg Swann says:
> I guess it comes from the relationship that all listings (for example) are the property of the broker. Something about that just doesn’t sit right with me.
I say this when I teach pre-licensing: The real estate laws exist for the benefit of the brokers. The broker’s license is the license worth having, and that’s because a broker’s license is a license to steal.
I’m sure you know this, but others might not: I am a designated broker. We don’t recruit agents, but that’s the actual purpose of the license. Brokers don’t sell houses, they milk their salespeople for a living.
> I think there will always be a need for some kind of counsel figure for lowly agents like me.
Check. It’s called a manager. If you were a young auto mechanic, you would take jobs with more experience people until you were ready to start your own shop. There’s nothing wrong with that. It’s the unequal legal relationship that gives brokers their power. The favorable tax treatment for independent contractors doesn’t help, either. If real estate offices were run like real businesses, everyone would be better off.
For what it’s worth, we may see this one in Arizona. The big name brokers want to keep double-dipping but escape the dual agency law suits. Being a manager of 1,000 principals might be just as profitable as being the broker of 1,000 sub-agents. The fact is, it’s the marketing leverage, not the broker, that sells agents on Realty Executives or RE/Max.
August 21, 2006 — 7:45 pm
Greg Swann says:
> Also, I think a lot of agents would do better work, if they didn’t feel it wasn’t their butt on the line, but the Broker’s.
Having to qualify — and pay — for their own errors and omissions insurance might be enough to put a lot of them in another line of work…
August 21, 2006 — 7:46 pm
Todd Tarson says:
I obviously agree with your response to me. As you know I’m in a much smaller populated area. I basically know all the brokers on a first name basis… and unfortunately I’d only consider hanging my license in only a handful of those broker offices.
My next logical step is probably get my brokers license and be a DB for myself mostly. I’d consider taking on other more seasoned agents and maybe start a mentoring type of program.
But I have way too much on my plate right now with my service to the Association and the new regional MLS we are putting together. Plus I also have to weather the storm that is the slow market I find myself in right now before I consider any outlay into a new shop.
August 22, 2006 — 7:03 am
Greg Swann says:
> I’d consider taking on other more seasoned agents and maybe start a mentoring type of program.
In theory, we’re a 100% shop, and our E&O insurance is cheaper if we recruit only agents with advanced training — GRI, ABR, CRS, etc., or a broker’s license. We haven’t put the theory to the test yet, and I don’t know when we will. In brokerages with two or fewer agents, the ADRE doesn’t require a Policies and Procedures manual — a strong incentive to stay small.
August 22, 2006 — 7:38 am
rudolph d. bachraty III says:
greg – you said:”If Sellsius° wants to do more than advertise other people’s listings, let them.”
when sellsius° finally get’s of the ground, each individual member will have complete control of all their membership benefits, of which listings are but one part. sellsius° will be a community where individuals can promote themselves, their listings and their businesses.
for more info visit: http://blog.sellsiusrealestate.com/?page_id=148
thanks greg!
-rdb.sellsius°
August 23, 2006 — 11:52 am
teresa boardman says:
I know you wrote this more than a month ago but I just found it. 🙁 I was wondering when we would bring real estate companies into the discussion. Buyers are changing, real estate agents are changing, and the entire industry is changing except for real estate companies and brokers. They have been absent from our continuous incessant discussions. Why?
October 1, 2006 — 6:22 am
LA says:
This article is exactly what I was looking for to sound off on. In our agency, I work in a team of two, we have/had three times the listings as the other agents combined and the highest sales record. Our broker decided to sell the out and the new broker let only my team go with no reason. We were told it is the brokers perogative. She did it just to have the listings. In our area brokers compete with their own agents for listings and sales and she had none of her own. Once they were in MLS in her name, she called me as asked me to come back. What audacity. All we can do is start over. I am seriously considering forming some kind of organization for the protection of agents. If you think about it we have none and no resources or recourse available to us if we do lose our job.
September 30, 2007 — 12:29 pm
Stephani says:
Thank you for writing such an important post.I found the link The Real Estate Tomato documents an outrage mentioned above is extremely useful.
December 5, 2008 — 1:18 am