Like its neighbor Oklahoma, Texas didn't waste any time getting its minimum service legislation passed through the legislature over the objections of the Federal Trade Commission and the Department of Justice. All that remains is for Governor Rick Perry to sign the amendment and it becomes law.

Rep. Joe Pickett, D-El Paso, who sponsored the legislation, attached the amendment to a housekeeping bill last month requiring real estate brokers to do more than use the MLS as an advertising medium for sellers. Brokers would be required to do what they must already do under state licensing law. The only difference between the state licensing laws and the amendment is that the latter details what minimum service should be for a brokerage -- to handle offers and answer questions for its clients.

And that's where the controversy rages -- what is a fair level of minimum service?

Clearly, some brokers believe that minimum service should be listing otherwise FSBO-minded sellers' homes into the MLS. For a flat fee, they let these sellers into the MLS cooperative where the seller is then on his/her own to negotiate the transfer of their homes.

But they create these business models at their own risk.

The MLS is not an advertising medium, and if certain powerful government bodies decides that it is, all brokerages will be in trouble, limited service brokers included.

Brokers believe the MLS is a cooperative between professionals to present listings for sale to the collective body of professionals to sell to their customers and clients. Most feel the MLS was never intended to become an advertising shortcut for anyone -- consumers or brokers.

The MLS is a storeroom. Advertising is a media broadcast to consumers. But with the advent of the Internet, MLS inventory is capable of being broadcast, but only with the permission or against the objections of participating brokers.

Some say they didn't join a professional cooperative to spar with amateurs. Pros want to deal with other pros on behalf of their clients. But the limited service broker wants a competitive edge -- minimum service can be streamlined to a few hundred dollars for a few clicks of the keyboard. The consumer pays in advance and its non-refundable! What could be better?

This means that as limited service brokers they don't have to be available to handle offers and answer questions -- the time-consuming, liability-laden activities that even full-service brokers dearly wish were more profitable, and they are surely better avoided in a low-profit model.

But limited service brokers are forgetting a key strategic point -- the reason they are licensed. They aren't licensed by the state because that gives them access to the MLS. They are licensed because they've agreed to protect consumers. That means some form of minimum agency or transactional brokerage.

No one has to be licensed to provide a classified ad to a newspaper, and by the same token, no one has to be licensed to put a listing in the MLS.

This is a fine point that the courts will eventually use to club the real estate industry to death.

MLS-entry-only listings may have appeared to be the perfect have-your-cake-and-eat-it-too business solution, but here's why it isn't.

MLS-entry-only listings allow the public to remodel the MLS away from a cooperative into an advertising medium. If all brokers and agents did were to advertise listings for consumers, they wouldn't require licensure. Anyone could hang out a shingle, as was proven by a recent California case.

ForSaleByOwner.com won a major victory against the state of California last year when the state tried to demand that the dotcom acquire a real estate license to showcase FSBO listings online. The site, which also gave virtual sales advice much like a traditional brokerage would do, objected that Internet media should be treated the same as traditional media. If newspapers are allowed to show listings, why does an online service have to be licensed to do so? The Federal District court agreed and ruled that the distinction between Websites and newspapers was purely arbitrary. The state of California declined to appeal.

Besides the ruling in this case, another significant factor was that ForSaleByOwner.com was represented for free by the counsels at the Institute for Justice. This is a heroic consumer hook if there ever was one.

Most brokers say they don't participate in MLSs to provide a competitive edge to their competitors, but to benefit consumers. Otherwise why share inventory with competitors? It is these brokers who can easily foresee the day when the Institute of Justice or someone else backs consumers to tear down MLS membership barriers as if they were the Berlin Wall.

This threat is very real. As long as the Federal Trade Commission and the Department of Justice believe that the MLS should be an open advertising medium for consumers (which is at the heart of their objections on the NAR's virtual office policy) they will keep pressuring the states to overturn their minimum service laws until the Fed intervenes to "regulate" the renegade real estate industry.

Senator Michael Oxley will have all the justification he needs to direct government agencies to examine the competitive conditions of the real estate industry, which he has already done in instructing the Government Accounting Office to look into real estate practices, particularly the online display of listings, and what he will push for is fewer reasons for states to license brokers. If brokers don't have the protection of licensure, then any entity that is strong enough to provide a new service model will be in a fine position to capture the real estate market and set their own fees for services.

Without licensure, there are no real estate commissions, no standards, and no protections for real estate industry workers. It would be a perfect setup for banks -- which have been lobbying to do this and circumventing state oversight, through the help of Oxley and others already. Banks can already perform some functions of real estate sales and management without the need to obtain a state real estate license which puts them above competition with brokers because they aren't required to follow state real estate licensing laws.

And the limited service brokers are unwittingly playing right into their hands. The coup de grace to the real estate industry would be the passage of limited brokerage services with no limitations -- that's the entry point that banks need.

Oxley may believe this is best for consumers because banks are heavily regulated, but the upshot will simply be moving fees from one man's pocket to another's.

Banks won't be more generous to consumers on fees than the real estate industry. In fact, it will be much easier to inflate fees line-by-line under a flurry of bank "services," than it will be to hide the current single largest line item at closing -- the brokerage commission.

And that's where the risk is greatest for consumers. Choosing a limited service broker may be tempting for anyone who wants to save money, but it can be costly if they aren't prepared to handle the challenges of a typical real estate transaction, which can range from opening their homes to strangers, to negotiating against professionally trained agents, to navigating disclosures, and much more.

Imagine if the only entities left doing organized real estate services were banks. Will they be competitive? Will consumers benefit?

It's hard to say, because the costs to consumers won't be quantifiable or provable until it's too late. It will be impossible to go back into a transaction that's completed and arm-chair quarterback how it coulda-shoulda been played.

It's time the real estate industry, including the limited service brokers, take a good, hard look at the strengths and weaknesses of brokerage services and licensure, and work together to protect organized brokerage on behalf of consumers first and foremost.

While limited brokers are stinging from Texas' legislation today, they could well be thankful tomorrow.

Published: June 6, 2005

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Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment. Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's. 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. To contact Blanche, email her at . For more articles by Blanche, click here.