Dear Monty: You believe that agency law doesn't work. All 50 states have real estate agency laws. Several articles including “Is the Real Estate Brokerage Act Working?” It suggests that the real estate agent is not working. What are the problems with the Real Estate Transaction Business Act?
Monty's Answer: In Wisconsin, 238 businesses require licenses, which is far more than was regulated 20 years ago. They all seem to work on the surface. Measurable data occurs when a consumer files a complaint after being treated unfairly. To understand what's working, we need to take a closer look at the data. For the state of Wisconsin, that data can be found at the Department of Safety and Professional Services. Other states may have similar methods.
defect
Part 1: The roots of the real estate brokerage industry go back over 100 years. When real estate agents began sharing their inventory, horses were outnumbering cars as the primary mode of transportation. In his early 90s, when “buyer agencies” first existed, there was no internet, no smartphones, no applications. Technology has changed consumer behavior, but the real estate industry, including regulators, trade associations, and brokers, operates under outdated regulations and inefficient practices.
Number 2: Congress should recognize that housing costs and fees are high. The Securities and Exchange Commission regulates financial planners who handle large transactions. The Real Estate Review Board regulates real estate brokers. Disputes and complaints often involve large sums of money. The examination committee is made up of real estate brokers and real estate brokers, and the real estate brokers are general members. The board would better serve the public by flipping the majority to consumers.
Number 3: Low barriers to entry due to outdated real estate models that require ongoing talent. Obtaining a barber's license requires at least 1,000 hours of classroom study or a two-year apprenticeship at a cosmetology school with at least 3,712 hours of practical training and at least 288 hours of theoretical instruction. A real estate agent must complete her 72-hour prelicensure program approved by the board or her 20 semester credits at an institution of higher education. Brokers make trades worth hundreds of thousands of dollars with high commissions. The barber charges her $20 to $50, and her hair grows back.
Number 4: Inefficient mediation models, training, and supervision increase the cost of services. A doctor invests more than four years in university, four years in medical school, and a residency. The barrier to entry into becoming a real estate agent after obtaining a license is shallow. All they need is a car, a smartphone, and an intermediary to hire them. Brokers leave the learning, training, and supervision to agents.
No. 5: There is no insurance against unrecognized financial mistakes. Errors and omissions insurance can help brokers and agents repay customers if an agent commits a wrongful act against a customer. There is no compensation if the customer is not aware of the loss.
Number 6: Infrequent real estate transactions have a negative impact on consumers. Asymmetry is when the seller of a service knows a lot about the service, but the buyer knows very little. Low barriers to entry make it easy for people with ulterior motives to enter. Customers mostly look for agents because they rarely make transactions in their lives, but some people take advantage of that asymmetry to attack customers.
These six elements are among the most difficult to recognize of many. These opinions are the result of more than 50 years of direct collaboration and follow-up with agents and consumers.
Richard Montgomery is a syndicated columnist, published author, former real estate executive, serial entrepreneur, and founder of DearMonty.com and PropBox, Inc. He offers consumers a choice of solutions to their real estate questions. Follow him on Twitter(X) @dearmonty or at DearMonty.com.
Photo credit: Jen Theodore on Unsplash
