Celebration by Texas Realtors has turned to fear as word gets out that the Department of Justice (DOJ), the enforcement arm of the Federal Trade Commission (FTC), has informed the Texas Real Estate Commission (TREC) and the Texas Association of Realtors, according to sources, to back off its new rule requiring limited-service brokers to provide a minimum level of service to buyers and sellers of homes.

At the Texas Association of Realtors' encouragement, the TREC had adopted a rule designed to prevent FSBO-minded sellers from getting access to the priceless MLS cooperative used by professional brokers. The rule also prevented MLS-only brokers from off-loading more work onto buyer's agents, and short-changing sellers on services they would later prove to need, against the wishes of some brokers who claimed they were more than fair with their limited service models.

The rules were designed to even the playing field, so that any broker who puts a consumer under contract provides a minimum level of representational services that the other side won't be forced to provide instead. Critics have said the rules keep the old boy' network of high commission sales in place.

Although other states have passed laws to curb the "unscrupulous practices" of limited-service brokers, as the Texas Association of Realtors put it, and it had the legal blessing of the Texas Attorney General which recently affirmed TREC's authority to clarify minimum real estate service standards, the FTC and DOJ have begun informing other states to back off their limited service rules, too.

On April 11, the DOJ wrote a letter to the Oklahoma state legislature urging the legislators to reject proposed legislation that would change current state law to eliminate the ability of Oklahoma real estate professionals to offer limited service. The Oklahoma rules would have restricted all fee-for-service or menu pricing.

The DOJ "expressed concern that the proposed legislation would cause Oklahoma consumers to pay more for real estate services, and would limit consumer choice by eliminating an entire class of real estate service providers."

The DOJ explained that "In the past, real estate brokers have bundled their services into a single package and consumers have been charged a single price, usually a commission based on a percentage of the sales price of the property. To meet the evolving needs of consumers and changing market forces, some real estate professionals offer consumers a menu of real estate services, and clients can choose to purchase only those services that meet their needs. The bill would likely harm competition in two ways. First, consumers who do not want, or need, all of the services traditionally provided in a package nevertheless would have to pay for all of them, which may cost them thousands more to buy or sell a home. Second, without competition from fee-for-service options, the prices for traditional, full-service packages are likely to increase."

"Competition in marketplaces across the country has demonstrated that many consumers save money by using only selected services from their real estate brokers. The proposed legislation would deprive Oklahoma citizens of the benefits of competition, such as lower prices and customized service levels, provided by fee-for-service brokers," said R. Hewitt Pate, Assistant Attorney General for the Department of Justice's Antitrust Division. The letter points to the lack of any evidence that providing a greater selection of real estate services has caused any consumer harm, much less harm that could justify such a broad prohibition on competition.

The Oklahoma Senate had already passed the rules, and was waiting for a vote by the House, when it received the letter, which was daunting enough to cause legislators to put off its vote on Senate Bill 673 this week.

Any attempt to stop limited service models appears to violate antitrust, and the DOJ will go after any commission, or association, that tries to enforce such a rule, but on the academic side, clients can be ill-equipped to proceed with a transaction because they didn't get the services they needed. So what's really right?

The Justice Department's Antitrust Documents Group could not be reached in time for publication to confirm their request to TREC and the Texas Association of Realtors.

Published: April 21, 2005

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Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. For more articles by Blanche, click here.