Could this secret stall real estate evolution?

Dear Monty: We have a significant problem with a real estate transaction. We ran across a state agency called a “real estate commission.” When we researched the commission, we discovered the commissioners are all real estate agents. We are reluctant to contact them. It seems like having a fox guarding a chicken coop. Do you have any information about real estate commissions?  

Monty’s Answer: Real estate agents are subject to two sets of rules. One set from the state’s real estate commission, where the state issues licenses to brokers and agents and enforces state real estate laws. The second set of rules is from the local Board of Realtors. Licensees who become Realtors must follow the local Board of Realtors rules. Home sellers and buyers who sell and buy directly, without a real estate agent, are not subject to the regulations of either organization.  

The Commission Rules

A real estate commission’s purpose is to protect the consumer of real estate service from brokers and agents. The state legislature abdicates its authority to the real estate commission to make and enforce real estate licensing laws directed to real estate brokers and agents. The laws include:

  • Issuing and revoking licenses.
  • Setting rules for continuing education.
  • Suspending.
  • Monitor agents.
  • Leveling fines.
  • Revoking an offender’s license. 

The Realtor Rules

Once receiving a state license, many real estate agents join their local Board of Realtors. One of the primary reasons many join is that the local Boards of Realtors have established a separate company that operates a multiple listing service (MLS). Realtor membership is required to access the broker members’ cooperative listing. When a licensee joins a real estate company that is a Realtor member, they are now subject to two different sets of rules: The rules of the Realtors Code of Ethics and the rules of the MLS, which guide what the brokers and agents must adhere to when entering a property into the MLS, advertising, marketing, and co-operating with other members when negotiating, removing contingencies, and closing a real estate transaction. The Board of Realtors has similar powers to the state rules, but only regarding the Code of Ethics; they cannot revoke a state license. Editor Note: There have been recent modifications to the Realtor rules that will be discussed in a separate post.

The Cause and Effect