Sunday, March 19, 2006

Realtors Lobby Screws Indiana Homesellers

The Indiana Law Blog picks up on a letter to the editor in today's Star, which discloses how the Indiana realtors lobby has screwed Indiana homesellers big time through a new law which quietly made its way through the Indiana General Assembly and was recently signed into law by Gov. Daniels. The bill, HB 1339, will effectively shield traditional real estate agents from competition they are now getting from low-cost agents.

Patrick Woodall, a senior researcher with the Consumer Federation of America, clues us in on how the new law screws Indiana's homesellers:

At the urging of traditional real estate brokers, the Indiana legislature quickly and quietly passed a bill that would make homeownership even more expensive. House Bill 1339 requires all real estate brokers to provide "minimum services." This seemingly innocuous change is an attempt to protect brokers' 6 percent commission from market competition. Unfortunately, Gov. Mitch Daniels signed this anti-consumer bill.

The change will require real estate agents to provide a full set of services -- 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. It is an attempt to prevent consumers from accessing a range of new, lower-cost real estate models.

New brokers, for a much lower fee, will market homes in the multiple listing service and provide marketing support but allow the homeowner to handle everything else -- show the house and negotiate the closing -- or hire a different party to provide those services. For example, many homeowners have turned to for-sale-by-owner services, which provide little more than a multiple listing and a yard sign . . .

In other services, new business models using the Internet and technology brought improvements years ago -- such as in securities brokerage and travel -- but the changes are only beginning to affect the real estate industry. Rather than embracing market competition, industry leaders are attempting to use government to preserve the old model and prevent consumers from using less expensive real estate services. Similar efforts to limit competition from Internet real estate brokers drew a Justice Department antitrust lawsuit against the National Association of Realtors. And the same effort is behind the Indiana legislation.

The Antitrust Division of the Justice Department, along with consumer groups and many new real estate brokers, opposes the law. Gov. Mitch Daniels did not act in the best interests of consumers and homeowners when he signed this legislation.



HB 1339 was sponsored by Rep. Tim Harris (R-Anderson) and Sen. James Merritt (R-Indianapolis). It passed the House on a 56-38 bipartisan vote, and it passed the Senate unanimously. Even some traditionally pro-consumer legislators in the House sold out to the realtors lobby, including Rep. Bill Crawford (D-Indianapolis), Rep. Matt Pierce (D-Bloomington), Rep. Clyde Kersey (D-Terre Haute) and Rep. Peggy Welch (D-Elletsville).

The Indiana Law Blog notes the irony of the legislation. In a March 6, 2006 entry, the blog had an entry discussing how real estate agents were becoming an endangered species, quoting from an NPR Morning Edition report. That report talked about the pressure Internet-based services were placing on traditional real estate agents and how they might be going the same way as travel agents and stock brokers. The blog now writes that "real estate agents have now become 'a protected species' in Indiana."

Advance Indiana wonders just what impact this new law will have on Indianapolis-based Homeyeah.com. Their fees are 40%-90% less than the traditional real estate brokers' fees. As it describes its services, "Our proprietary business model and technology allows buyers and sellers to take more control of their transaction without sacrificing necessary information and licensed professional guidance at critical points during the transaction process."

2 comments:

Anonymous said...

HomeYeah.com is back in Indiana in 2007! The real estate company, which left the Indiana market for more than one year, was recently sold to a REALTOR in Indiana. HomeYeah.com now offers professional real estate services just like the traditional brokers, but at a set fee.

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