Lobbying Leads to Bad Laws

Real estate licensing laws exist to protect consumers from incompetent and dishonest practitioners.  And as in most professions where the licensees are presumed to have superior knowledge and expertise, certain duties are imposed upon licensees to help balance those disparities.  Those duties are imposed through a framework of laws called licensing laws.

Unfortunately, real estate licensing laws have been so influenced by powerful lobbying groups, that it could almost be argued that these laws now serve to protect licensees from consumers.  Many laws exist today that take away the consumer’s ability to file class action lawsuits and that legalize behavior that would otherwise be against the law. It has gotten so bad, that it may even be true that consumers would be better off without these licensing “protections.”

Competence

Consumers tend to place a lot of reliance and trust in the real estate expert whom they have hired.  And consumers have a right to expect a certain level of competence and loyalty from their hired expert.  Unfortunately, real estate licensees, through their Realtor Associations, have successfully lowered the legal duties owed to their clients to an almost non-existent level.     As an example of the types of licensing standards one should expect from an expert, compare to attorneys.  Attorneys have a tremendous amount of training prior to entering their field and have significant continuing educational requirements.  They are also bound by Rules of Professional Conduct that forbid them from representing a client in an area of the law for which they are incompetent.  Violations can result in severe and public licensing enforcement actions.   Perhaps even stricter standards apply to the medical professions.    Not true with real estate agents, inspectors, mortgage officers, title insurance agents or closing agents.   The minimum competence standard is non-existent.  In many states a high school education is not even required to obtain a real estate license and there is only about 30 hours of required training (most of which is geared towards passing the exam).  To make matters worse, the continuing education that real estate licensees receive is often skewed by free “educational” offerings by other service providers hoping to gain a referral stream or arranged by the brokerage firm which may have an entirely different and potentially anti-consumer agenda.

Masses of Asses

Apparently there exists a business model conceived by a group of very large brokerage firms who call themselves “The Dirty Dozen.”  This business model is called the “Masses of Asses.”   The purpose of this business model is to provide as many free employees as possible to large brokerage firms so that it will increase the likelihood that one of these “employees” might sell a house to one of their friends or relatives.    Since real estate agents are commissioned sales people, they are essentially “free” employees.   The tax laws treat them as independent contractors so they are paying for their own expenses and work their own hours.  Since they are not “employees,” brokerage firms don’t have to pay them unless they actually sell a house.  They are essentially “free employees.”   So why not have as many of them as possible to increase the likelihood of a sale?    By lowering the licensing standards to an almost non-existent level, the influx of real estate licensees is almost assured.