Karen Webster recently wrote about the agent responsibility act that is going to be effective there starting July 1, 2008 in Michigan.
With some states now requiring minimum service standards and these new service disclosure laws...it leaves me wondering why?
Agents want to be seen as professionals and have value. Any buyer or seller who has had a good agent understands exactly what they bring to the table. They get it because they have experienced top notch service.
Many good agents (including myself) have compared ourselves to doctors, lawyers, CPA's etc, but the fact is we are not. It's not because what we do isn't hard and worth it though.
When I got my Master's degree, I spent two years in graduate school which included over 1,500 hours of internship time before I was unleashed on the community. In Oregon you can practice as a therapist with that, or you can get your license which is another 2,500 hours of intense supervision. This license status allows you to bill insurance companies since they now see you as competent.
To get my real estate license in Oregon was 120 hours of class, and a 200 question state test that I needed to pass. It was a piece of cake. Now considering that we are dealing with $60,000-mega million dollar investments, the entry standards are not appropriate.
So while I understand the minimum service requirement laws, and now this service disclosure law, my thoughts seem to be that we are doing this backwards. We are trying to regulate people that have no business doing this in the first place.
I've never signed anything from my doctor that says I understand that he will check my blood pressure, and pulse, listen to my heart and lungs, etc. I just know that is what they will do. What happens when you elevate the entry standards is that you tend to get people that are more committed to the profession. It took a lot of work to get there, and as such they tend to stay there. I think people that are focused on making real estate their profession, are less likely to be unethical (there are no absolutes). Maybe that is an err in my thinking, but I do believe it to be true. I do think if we raised the standards, minimum service requirements and service disclosure laws would not be needed.
I do think we would still have limited service representation since it is a viable model for a few consumers in the marketplace. I just think they would be better. You'd have agents that could explain the program to consumers so that they really understood what they were getting. There really are good limited representation agents out there. I have worked with some. Their clients know EXACTLY what they are getting.
So this brings me to my point...why are we wasting legislative time and creating regulations that are only bandaids to the real problem....
It is just too stinking easy to be a real estate agent. I believe if they would just make entry standards harder and required an internship, laws like this would be mute.
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29 Comments on Are we going about this backwards?
What a great blog! I've never quite understood why folks who deal with the average consumers largest asset are only required to have the tolerance to sit through a few hour class and pass a test that's barely a tick above the drivers license test. Come on... the average home is worth more than twice what the average American has invested in their 401K and yet brokers have to have, in most cases, an MBA or equivalent and pass the securities exam(s), which anyone will tell you takes more than a little effort.
The reason it's like that, in my opinion, is that like the mortgage mess we're in now, the floodgates (standards) were never raised and when the boom hit we were flooded with every warm body that saw real estate as the road to easy money. Now of course they're licensed and we can't get rid of some that should have never been an agent to begin with... so legislatures around the country apply the band-aid approach and try to force standards to improve through statutory enforcement and continuing education rather than front end entrance requirements. It's a backasswards approach, but what are we going to do?
Karen-I love it. Free classes UNTIL you pass. Now there is a program that ensures quality! I agree that you don't realize you don't know anything in real estate until you have done a few transactions. I mean I was on another forum, and the questions agents were asking were soooo basic. I just feel bad for consumers that get really bad agents.
Jesse-I agree. Buying and selling a home is a serious investment with significant consequences for consumers. I feel bad when I see such poor representation out there.
Your point is well taken about the floodgates, so the bandaid is appropriate at this time. It just seems like there are a lot of bandaids happening, without dealing with the cause of the problems. I think this downturn is a great time to "reformulate" licensing laws that require more training. It is just better for the consumer and the industry.
"We are trying to regulate people that have no business doing this in the first place." How true. Maybe it is time to have serious eduicational requirements.
In this changing reality, a real estate professional should be way better equipped with knowledge, that it is now. Betting it on agents doing it themselves is naive.
I think this downturn is a great time to "reformulate" licensing laws - I couldn't agree more. We've been lobbying for it here for a number of years and we've seen incremental increases but nothing substantive. Unfortunately all that does is hurt the consumer.
MELINA - You hit the nail on the head. It is way too easy to become an agent. In New York, it only requires 45 hours right now, although thankfully, it is increasing to 75 hours in July. Still, it would be great if it were even harder to get licensed. I'm hoping that the additional hours and the more competitive market in NY will keep more people from entering the field that want to "try real estate."
The masses are starting to share your feelings, and none to soon for me. I have heard from a couple of people at NAR mid-year "raising the bar" was heard a great deal. Hopefully it is a call to action and not a cliche'.
Jon-I know on one of your blogs we talked about this very topic. Oregon has some of the more stringent requirements, and IT DOES make a difference. Some of the stories people talk about on AR, I just don't hear about here in Oregon.
Jesse-you keep advocating for change. The consumers and the agents deserve the best.
Adam-I guess I shouldn't be complaining too hard about our 120 hours. That is almost 3x as much as you are required to do now. Real estate is too complicated to have standards that are that poor.
Unknown-I would hope that is more than just talk as well. Real Estate is a much more difficult profession that current entry standards would indicate.
Not sure legislating higher standards will produce the desired rffect of better representation for the consumer !
Melina...
I agree that it's way too easy to get licensed. A monkey can pass our State exam.
We even have some of them there monkeys practicing Real Estate. And I do mean practicing, as in, maybe some day they'll figure it all out :)
Can I have a banana for this comment? :)
TLW...ROAR!
Bill-I disagree. Compared to some of the Florida stories I hear from agents, we don't have those kinds of things happening regularly here in Oregon. So just requiring more, really does help to weed people out. Obviously we still have unethical people, ALL professions do.
TLW-You folks in FL have some of the most insane real estate horror stories ever. Sometimes I think the Bermuda Triangle shifted and is over your state.
TLW...for you I'd splurge and send you a box of plantains. Although...maybe some of those "practicing" monkeys agents would get confused by it. Some of them might not know how to spell it.
Melina...
California also has insane RE stories. I'm beginning to think it's from the sunshine :)
Your banana comment had me thinking maybe I should deliver a case of bananas to our local BOR :)
I better stop it now...Maybe I'll write a post about how the folks that run our Board...Oh. Never mind. What I'm thinking is the kind of thing that gets me trouble :)
TLW...ROAR!
Oh, sure, YOU get featured! Just kidding. Congrats.
TLW-OOO OOO A A!
Karen-what can I say...you are an inspiring woman! I did give you some link love though :)
You are correct in your judgments about it being too easy to get licensed in real estate, Melina. Higher entry standards would solve a lot of problems. That said, we have to start somewhere.
Just getting this bill passed is a step forward.
Are you communicating your opinions to your state & national organizations to increase standards of entry?
You are right. It is too easy to get a real estate license in Oregon. I am hoping this market correction will weed out a few of the agents who don't have a clue about "Standard of Care." As a consumer and you hire a broker, you should be able to be comfortable with the fact that you have hired a competent professional. Unfortunately, that is not the case in our profession or many others. Most folks are worried enough about their home purchase, they shouldn't have to worry about their real estate broker as well.
I agree that the bar needs to be raised, but I disagree that the state license is the best place to bring about that change.
As you mentioned, there are plenty of bad doctors, dentists and accountants... and they all have WAY more training that real estate agents. Spending 100 hours or 1000 hours doesn't ensure quality practitioners. It might weed out a few of the "just plain dumb" people that can currently muddle through. But, I see a bigger threat from those that are smart... with bad intentions.
I think that the biggest obstacle is that the NAR has become a trade union, and has stopped working to raise the quality level of its members.
Personally, I'd like to see a free market solution.
Bonnie-I agree we have to start somewhere. I just don't know why they aren't look are requiring agents to know more before the hit the streets. The laws are meant to protect the consumer. I just think they are going about it the wrong way.
Leslie-Welcome to AR. It's always nice to see local folks on here.
Lane-The smart ones with bad intentions will always get through. Not much you can do about that. Me...I'd just like to screen out the people that can't use a gramatically correct sentence on a contract. I guess they do in the "just plain dumb" category. I'm not sure what free market solution you are talking about. I think we have that now, and clients are screwed over everyday. There has to be a better way to maintain free enterprise, while protecting the consumer a little better.
I agents really want to be elevated in professional status to that of a CPA, etc, then we have to raise the entry standards. There is a reason why I am not allowed on the trading floor at the stock exchange. I don't have the knowledge to be there. The stakes are high for the homeowner.
Melina, the NAR could be free market solution. Instead of accepting anyone that can write a check and sit for 4 hours for the "ethics training" they could institute a mentor/apprentice program... like many trades. This would do a few things:
When you take your care in to be serviced, do you get an ASE certified tech? Good chance you do if you are getting something bigger than an oil change... and there is no law requiring, but the techs make more, the shops charge more and the techs are generally very good.
If the government were to do it, it would soon stop being about the capability of the licensees, and become more about their demographics and the voting block.
Lane--The only problem I see with the NAR being the solution is that you don't have to be a Realtor to joing every MLS. Mine does not require membership. So what about those people?
We are already going political with minimum licensing laws and now the service disclosure laws. If you have to regulate something, at least get an internship. I wasn't thinking of something federal...boy would that be a nightmare. I was thinking more of states just getting it together and requiring more stringent standards.
I just think that the Realtor designation is meaningless BECAUSE people are forced to join it in order to join the MLS, and quite frankly they allow anyone to have the designation. Pay your dues and you are a Realtor.
Melina, sounds resonable. California in the near future will require a person wanting a RE license to have completed four years of college. Now to me that in its self is still not enough, however it might slow down the really stupid people from getting a license.