There is wide support for new real estate licensing legislation in the District to replace the law passed by Congress over 40 years ago.
The licensing proposals would require brokers and agents take approved courses to qualify for licenses for the first time and would require brokers to have at least two years' experience as agents.
They would also eliminate temporary licenses for agents and create a recovery fund to reimburse individuals with a claim against a broker or an agent. The fund would replace the current system of individual bonding.
The current law provides neither the professional standards sought by the real estate industry nor the protection the public requires. In addition, many of the provisions contained in the 1937 statute are cloudy, impractical or impossible to enforce.
A closer look at proposed legislation shows a number of areas where revision should be considered.
Should a regulatory body have the right -- without a hearing -- to terminate the ability of an individual to earn a living?
The new regulations, if passed, would permit summary suspensions without hearings in cases where the commission feels that a "clear and present" danger is posed by the actions of a licensee. This provision offers no right of due process and is fundamentally unfair.
Since the bill also gives the commission the authority to seek an injunction through the courts, summary suspensions without a hearing represent regulatory overkill and should be eliminated.
In many real estate transactions, third-party inspections for termites or structural defects are included in the purchase offer. The proposed regulations prohibit licensees from obstructing these and other forms of inspection. It also bans top brokers from continuing "to act on behalf of a seller who unreasonably refuses or prevents such inspection(s)."
What is "unreasonable" conduct by a seller? What can a broker do about it? If a broker does not continue to act on behalf of the seller, has the broker violated his agency obligation to his client?
While brokers should have an affirmative obligation to influence such conditions of a purchase offer as they can, they should not be responsible for the conduct of sellers over whom they have no control.
Cooperation among real estate brokers can be a valuable tool in the sale of property. Current regulations as well as the proposed law require that brokers have the written consent of owners or their agents before offering properties for sale.
Yet a situation often develops where an agent, in driving in an area with a prospect, will enter a house without prior arrangement as it is being held open by an owner or independent agent. Such cases are common and when they occur, the cooperative regulation has been breached because the agent has no authority to show the property.
An alternative proposal would provide that the written authority to sell a house only would be required in those cases where an owner is not represented by a broker or where a broker markets property with signs, advertising and other forms of promotion that clearly describe the listing as "exclusive."
The proposed regulations would prohibit the use of "any trade name or insignia of membership in any real estate organization of which the licensee was not a member." This means that brokers should not call themselves "Realtors" unless they are members of the National Association of Realtors, a trade association.
NAR maintains that the term "Realtor" is a "registered collective membership mark" that is the property of that organization. Whether "Realtor" is the property of one organization or a word which has slipped into common usage is a matter for the courts to decide.
The regulations should not require a public body to protect the commercial interests of a trade association. If there has been an abuse of "Realtor," it should be the responsibility of the NAR, and not the public, to take appropriate action.
A practice banned in many states and that should be forbidden in any new District licensing act is the required use of a particular settlement attorney or title company by a residential purchaser. Also, a buyer should not be compelled to use the seller's broker or a specific group of brokers or method of marketing to sell property the buyer may have as a condition for purchasing a new home.
Federal law currently bans the sale of title insurance through a particular source as a condition of the sale.
The use of "net" listings is prohibited in many jurisdictions and should be made illegal here. A net listing is an agreement under which a seller hires a broker to sell a property and the broker gets everything above a set price as a commission.
As an example, a home is listed for $75,000 and sells for $90,000. The broker would receive a commission of $15,000. With net listings, a broker or an agent can take great advantage of a seller who is not familiar with the housing market.