MORE STATES ADOPT “MINIMUM-SERVICE” REQUIREMENTS FOR REAL ESTATE BROKERS
INDUSTRY NEWS, REAL ESTATE PRACTICE, TIPS FOR SELLERS
October 24th, 2008
More and more states are passing laws that require real estate agents to provide mandated levels of service 
to consumers despite raising the ire of the Department of Justice (DOJ).
DOJ’s antitrust division has monitored this trend and has stated such practices limit consumer’s ability to pick and choose the services they want and don’t want.
Real estate trade groups have argued such laws are necessary to ensure an adequate level of service is delivered to consumers in real estate transactions and to prevent confusion about where to turn for services not provided by “minimum-service” brokers.
The following states have already adopted minimum-service laws:
- Alabama
- Idaho
- Illinois
- Indiana
- Iowa
- Missouri
- Texas
- Utah
The following states have recently adopted similar laws:
- Kansas
- Maine
- Oregon
- South Dakota
- Washington
- West Virgina
Other states have rebate restrictions and some states have both minimum-service laws and rebate prohibitions.
Some real estate brokers utilizing the minimum-service business model try to avoid establishing an agency relationship with the seller (they don’t represent buyers in most cases) so they do not have to obey laws concerning fiduciary duties. For a flat fee, some of these brokers will do nothing more than place a listing on the MLS. The seller is on their own as far as advertising, marketing, showing the property, negotiating a sale, running an escrow and closing the deal.
However, in California, state law requires listing and selling agents conduct a diligent visual inspection of the home and report those findings in writing to any prospective buyer. This, in my opinion, is where limited or minimum-service brokers fail to comply with the law. If the buyer finds a problem after the sale closes, the minimum-service agent could be sued along with the seller for fraud or concealment of pertinent facts.
Real estate is, in many cases, one of the largest assets in one’s personal portfolio, so I can not understand why some would want to avoid having a reputable agent represent them from start to finish. The commission paid to a full-service agent is worthwhile if future litigation is avoided due to a seller trying to navigate the complex process of marketing, selling and closing a sale ALONE. Time will tell if these minimum-service business models survive as a viable branch of the real estate industry.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
