As much as Slimak is concerned about the impact on his own business, he points out that the big losers are Indiana consumers, who are deprived of real choices in selling their homes because of the protective nature of the new law. When the new law takes effect on July 1, 2006, it will impact HomeYeah's Market + product the greatest according to Slimak. For a flat fee of $499, a homeseller can market their home through HomeYeah, plus have their home listed on the Multiple Listing Service (MLS), which is managed by the local board of realtors. This requires the homeseller to offer the buyer's real estate commission (i.e., 3%-3.5%), while paying HomeYeah only the flat fee of $499. The Market + service represents 62% of HomeYeah's existing business.
As of July 1, 2006, Indiana's "Realtor Protection Law" will bar HomeYeah from offering this service. That's because the new law mandates that a selling agent provide a minimum amount of services in order to accept a fee for their service, such as marketing the home, receiving offers from potential buyers, sales negotiation and handling closing procedures, even if the homeowner doesn't want or need these advisory services. If a homeseller wants to utilize HomeYeah's services, it will now be required to purchase a much costlier service for $1,999, regardless of whether the homeseller wants the additional services.
HomeYeah is the brainchild of Gerry Hays. Before starting up HomeYeah.com, Hays worked as an environmental lobbyist for the Indiana Chamber of Commerce. He later sold the company to Help-U-Sell , the leading “fee for service” residential real estate franchising company in North America, after he expanded HomeYeah's services to several other states, including Indiana. Help-U-Sell's parent company is Ampac. With Homeyeah's strong presence here in Indiana and other states, the new law could potentially reduce its bottom line value to the company to the extent the new law cuts into HomeYeah's business in Indiana.
Slimak says that the Market + service is most often utilized by financially stressed homsellers, who have little equity in their homes to give up as commissions to agents in the course of the sale to avoid being upside down. A recent report in the Indianapolis Star recounted the high number of foreclosures in Indiana. The Star reported, "More than 7,000 Indiana homeowners faced foreclosure in the final three months of last year, a record high for a state that has led the nation in foreclosure proceedings since July 2004." The high number of foreclosures in Indiana are driven by factory layoffs, personal bankruptcies, stagnant home prices and aggressive lending according to the Star.
Sadly, Slimak notes that these financially stressed Hoosiers are the people who most need the benefit of the low-cost services companies like HomeYeah offer, and now Indiana's government is telling them that this option will no longer be available to them. A higher priority has been placed on shielding Indiana's traditional real estate agents and brokers from competition than helping our citizens in greatest need of assistance from the benefit of low-cost services.
Slimak says the company isn't taking the new law sitting down. Numerous lawyers are studying the new law and determining appropriate legal steps to fight it. Independent real estate brokers are likely to find a sympathetic ear from the U.S. Justice Department. The Justice Department has already announced it plans to take anti-trust action against the National Association of Realtors, alleging that its policies illegally restrict discounting of sales commissions and put online competitors at a disadvantage. Indiana Law Blog also has a new post today which provides further support for intervention by the Justice Department and the FTC against Indiana's new law.
The Justice Department has also objected to the very types of laws enacted by Indiana, which the realtors have been pushing in other states. The Wall Street Journal reports:
The government is also targeting industry-backed efforts to get state legislatures and real-estate boards, which set licensing standards, to enact regulations that in effect protect full-service real-estate agents and their commissions. Some brokers offer fixed fee-for-service, or menu, pricing that can lower consumers' costs, and others rebate a portion of the commission.
The Justice Department and the FTC have warned several states in recent months that such laws hamper innovation and competition, and have formally objected to industry-supported proposals in Oklahoma and Texas.
The Justice Department last month sued a Kentucky state agency that sought to restrict rebate payments to customers by residential-real-estate agents and brokers. In a complaint filed in U.S. District Court in Louisville, the U.S. charged that the five-member Kentucky Real Estate Commission illegally conspired to impose and enforce the rebate ban in order to fix commissions and deprive consumers of price competition by brokers.
Slimak could not understand how Gov. Daniels could sign a law that is so harmful to consumers and his industry. Advance Indiana suspects that an early announcement of support by the Indiana Association of Realtors for Gov. Daniels' Major Moves initiative may have shaded his thinking on this legislation just a wee bit.