Association of Real Estate Licensing Law Enforcement Officials reaches new low

How bad is real estate licensing regulation in the United States?

Imagine if the leader of the one organization charged with organizing all the real estate licensing authorities in the U.S. were run by a Realtor. That is exactly what happened (click here). Once again, ARELLO has succumbed to the industry standard of allowing the regulated to be the regulators. Not only are most states infested with Realtors in their enforcement agencies, now the top regulatory and enforcement is again overrun by them. Just visit their sites (www.ARELLO.org and www.ARELLO.com) to see the many references to the Realtor Association.

Realtors have a cartel. They are the second biggest lobby spender in the United States (1st if you don’t count the U.S. Chamber of Commerce), they brag that over 90% of the candidates they supported got elected in the last election, they are the biggest advertiser in most local newspapers and control real estate news content, they practically appoint legislators and regulators, they write licensing laws that protect the industry from consumers, they have lowered the licensing entry standards so low that many states don’t even require a high school diploma, and they work together to ensure that consumers pay far more than they should for real estate services.

What does this mean for consumers? It means that we would likely be far better off without licensing laws that protect Realtors from consumers. If there were no licensing requirements, perhaps property data would be more freely available and Realtors could no longer hold that data hostage. Consumers could buy and sell houses at a fraction of the cost too.

The highly suspect Vision, Mission and Core Purpose statements of ARELLO:

VISION: ARELLO® is the essential resource for making real estate regulation better.

MISSION: ARELLO® supports jurisdictions in the administration and enforcement of their real estate license laws.

CORE PURPOSE: ARELLO® brings regulators together to promote excellence in real estate regulation.

You really need to pick your own title company

Few consumers understand that the title company that performs the closing on their house may be the most important service provider in the entire transaction. Title companies investigate title, they examine title and they make the incredibly important title and closing decisions that have an enormous impact on your transaction. They need to be impartial. That means that they can never be related to your brokerage firm.

Consider that most Realtors used to give their clients a list of 3 title firms to choose from with the disclosure that they are not affiliated with any of them. Today Realtors give their clients two choices – use my title company or go find your own. Realtors are responsible for most people overpaying for closing costs and using completely conflicted firms to do the work. If your Realtor recommends an affiliated title company, that is reason to stop trusting your Realtor in all matters.

How to select a title company:

  • Compare. Look for comparison sites that might disclose how much title companies charge and whether or not they are affiliated. In Minnesota, there is a local firm that provides a comparison of 20 title firms (click here). The regulatory division in Nevada compares even more (click here).  Disclosure – CAARE’s Executive Director used to own the Minnesota company referenced above.
  • Get a Quote. Visit the websites of the title firms you are considering and get online

    fee quotes. Ask the firm that you select to guaranty your quote won’t change.

  • Are they Rated? Visit the rating sites for any firms you are considering such as Yelp, BBB, GooglePlus, etc…
  • Enforcement Actions. You need to determine the name of the regulatory authority for your state. Most states allow you to look up licensees to see if they have enforcement actions. 
  • Social Media and ads. Search the firms you are considering for any evidence that they are throwing parties for Realtors, taking them to sporting events or any other inappropriate activities. In the real estate world, kickbacks are very illegal and are broadly construed to include “anything of value.”
  • Matching Fees. Watch out for Realtor induced fee matching. Especially if the firm is related to the Realtor’s firm. 

Our Advice

  • DO NOT TRUST your Realtor to make the title company selection for you.
  • NEVER use a title company that is affiliated with another service provider in your transaction.
  • ALWAYS look for an independent title company.

Why would you trust a  Realtor to recommend a title company when they have a huge commission riding on your transaction closing? 

Don’t believe the Realtor  who claims that they get nothing in return for in-house referrals. Realtors receive all kinds of substantial benefits from recommending in-house title firms: Better commission splits with their broker, more referrals, more floor time, better offices, lower rent, and anything else the broker can concoct. Many supervising brokers put extreme pressure on agents to steer clients into their in-house services.

Title companies owned by brokerages do not have to compete on service or price. Since most of their customers are steered to them by trusted Realtors, very few customers ask questions about price. And for the few savvy consumers who do ask, those

firms will typically match the fees of the independent firms. But don’t fall for it. These are companies that were willing to overcharge you in the first place. Worse, their conflicts make these firms very unsavory choices. Consumers are not just overpaying. They are being subjected to terrible conflicts of interests. In addition, these affiliated firms are not just hurting consumers, they are destroying competition in the title insurance industry. If you want to save money, receive truly unconflicted service and do your part to improve competition in this industry, select an independent title firm.

Independent title firms truly compete on service and price. UNLESS they pay kickbacks!

Seek out independent title firms that are not affiliated with Realtors, lenders, builders, attorneys or any other service providers. Then check for enforcement actions against the firm and search their social media for evidence of kickbacks or improper associations with other service providers. We’ve posted many examples on our website about how title firms routinely pay kickbacks to Realtors. Many of these make the local news. Avoid these firms.