Sunday, June 25, 2006

MSM Finally Reports on Realtors Protection Law

A draconian new law which is putting discount realtors out of business in Indiana to protect the traditional, self-serving real estate brokerage market, is finally getting some coverage from the main stream media. The Indiana Law Blog and Advance Indiana both reported extensively on this new law months ago, but the MSM refused to cover it, perhaps because real estate brokers advertise extensively in their publications. Kudos to Lesley Stedman Weidenbener for being the first member of the MSM to report on the new law, although she's pretty late to the game. Weidenbrener writes today in the Courier-Journal:

A new state law will require Indiana real estate agents to provide a list of services that may seem like the basics to those who've bought and sold a home:

Answering questions, handling offers and counter-offers, and assisting with the transaction paperwork.

But critics of the law, which will take effect Saturday, say it will squeeze out an emerging choice for home sellers in some areas — one that lets clients choose and pay only for the real estate services they want.

The so-called "a la carte brokers," more common in larger cities than in smaller towns or rural areas, offer a menu of services for sellers who want to handle part but not all of the transaction themselves.

For example, a broker might charge $500 to put a home on the privately run Multiple Listing Service, which makes it readily available to thousands of real estate agents across the state and country. But the homeowner would handle showings, offers and financial details by themselves or with the help of an attorney.

The new law has already had its intended effect. As AI exclusively reported, a local real estate discount broker, Home Yeah, anticipated losing 62% of its business as a result of the new law's enactment. That was a little too much for the company's new owners. Weidenbener writes about Home Yeah's decision to close up shop in Indiana:

In Central Indiana, though, discount broker HomeYeah is closing up shop because its California-based owners don't want to work in the state's new anti-competitive atmosphere, said the company's local agent, John Slimak.

HomeYeah offered a $499 Multiple Listing Service listing to sellers in addition to more expensive packages that provided additional services.

Slimak has now started a new Indianapolis business — HomeChoice — that will offer complete real estate services. He plans to charge a 1 percent commission but provide full services. He said that's unfortunate for many of his customers, who he said have saved thousands of dollars with the multiple-listing package, for which Slimak also went to the closing and handled the title work.

"It's a shame," he said. "People who were savvy home buyers and sellers could get their deals done faster and quicker without buying full services."

Home Yeah represented a glowing local Internet success story when entrepreneur Gerry Hays launched it back in the 1990s. It's now on the ash heap of history thanks to the self-serving real estate brokerage industry which didn't like the much-needed competition. Our sentiments are shared by Angie Hicks, founder of locally-owned Angie's List. She tells Weidenbener:

But Angie Hicks, founder of Angie's List, an information service for homeowner services that expanded last week into the Louisville metro area, said the law removes competition from the real estate services market and means some sellers will have to pay for services they don't want.

In a traditional transaction, sellers pay commissions that total 6 to 7 percent of the selling price — half to their own agents and half to the buyer's agent. By using discounted services, those sellers can save thousands of dollars.

"It's really a law that's reducing consumer choice," Hicks said. "The majority of people still use traditional real estate agents. But for people who have bought and sold houses often and are equipped to handle parts of the sale, this law would be eliminating choices."

Weidenbener notes that the Justice department has had concern in other states about the anti-trust ramifications of such laws. The article doesn't say whether the Justice Department is considering any action against the new law.

The Indiana Law Blog gives its reaction to Weidenbener's story.

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