New rules proposed or enacted by state real estate commissions in Texas, Illinois, and Missouri are targeted to curtail a new wave of discount real estate agencies that operate fee-for-service business models for home sellers who choose minimum services and in most case, waive fiduciary options. Other states, including California, are considering similar moves. The new rules and regulations have the support of the state REALTOR® associations as well as the National Assn. of REALTORS®. Are states trying to protect the consumer from "minimalist" listings that offer marketing but no representation? Or do state commissions act in behalf of REALTOR® associations trying to maintain a status quo for commission dollars?
"Spurred on by feedback from consumers and real estate licensees, states are looking to solve some of the problems presented by the growing number of brokerages offering "limited-service" listing agreements. These agreements, in which the listing broker offers no services other than placement of the listing in the multiple listing service, have left many real estate professionals in an ethical quandary." -- F. P. Maxson, Associate Counsel, NAR Legal Dept.
A consumer choice MLS-only business model adopted by some real estate firms allows consumers to place a listing in a multiple listing service for a fixed fee that ranges from $200-600, compared with a more customary commission fee arrangement. Additional services in the MLS-only model (i.e. multiple photos in the MLS, virtual tours, signs, advertising, lead sharing, property brochures, etc.) are available at additional cost. In many cases the home seller will elect to list a property in the MLS, select the additional services, pay the fee upfront, and then handle the rest of the transaction himself/herself. Sometimes the home owner retains the right to sell the home as a FSBO with no additional monies due to the listing broker.
When a Buyer's Broker shows one of these properties, it is generally up to the Buyer Broker to present his/her own offer to the seller and negotiate the sale directly with the owner of the property. In most cases, the basic services listing agreement can be updated to a full-service listing at the option of the seller and listing office. In many of those cases, the upfront costs associated with the "minimalist" listing are rebated to the seller at settlement.
The Illinois regulations went into effect in August, 2004. They embody the essence of the issue that exists in the other states:
1) Accept delivery of and present to the client all offers and counteroffers to buy, sell or lease the client’s property or the property the client seeks to purchase or lease;
2) Assist the client in developing, communicating, negotiating, and presenting offers, counteroffers and notices that relate to the offers and counteroffers until a lease or purchase agreement is signed and all contingencies are satisfied or waived; and
3) Answer the client’s questions relating to the offers, counteroffers, notices and contingencies."
Texas takes the notion a step further:
"...A broker who represents a principal under a listing contract that grants an exclusive agency to the broker may not instruct or authorize another broker who represents another party in the transaction to negotiate directly with the principal."
"Discount" brokers see the rule as the state's way of supporting the REALTOR® lobby [in Texas] to limit competition, which may lead to a contentious "public comments" period", according to Realty Times.
Did state regulators consider the changing business model of banks who use online bidding facilities? One of the country's premier bank clearinghouse companies and HUD's asset manager and sales vendor, First Preston, is located right in Texas. First Preston is at the forefront of modern Internet technology and uses BidSelect to collect bids on HUD properties and bank properties around the country. In those transactions there is NO discussion between the listing agent and selling agent; NO discussion between the seller and listing agent about contracts and counter offers; and selling agents hold escrow funds in their own accounts.
Will these new rules preclude HUD sales and online sales of bank properties? We're guessing that it will not. We welcome your comments.
First Preston doesn't fulfill many of its obligations to the properties such as maintance and security. It is understaffed and mis-managed. It is also trying to get involved in Faith-Based initiatives if passed by Congress in the future.
Note from Fran: This post was submitted by a person who used an e-mail address for the former president of First Preston. I sent a follow-up e-mail to the person named and it was returned as undeliverable. Certainly claims such as these should be substantiated. I'm very curious to know what the sender means in terms of the FP's involvement with faith based initiatives as well as the other claims. I hope that the sender will send an e-mail for follow-up. I will respect confidentiality in this matter.
Posted by: First Preston former employee | June 22, 2005 at 08:31 AM