VAR Introduces Draft Legislation to Clarify Agent Services
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From: InSight Realty
By: Lawrence Bunnell
New limited service definition recommended
The Virginia Association of Realtors today released their first draft of a proposed legislative change to Virginia's real estate agency law. The new law would allow real estate brokers to provide real estate services on an "a la carte" basis thereby allowing home buyers and sellers to choose the types and levels of real estate services they want rather than being forced to purchase a bundle of services for a relatively high commission rate.
The new legislation comes at a time when the debate over "mininmum service requirements" for real estate agents and brokers is being waged across the country. Several states, under pressure from Realtor Associations, have already passed legislation requiring real estate brokers to perform certain minimum brokerage acts such as receiving and negotiating the purchase contract on behalf of the home seller, providing real estate advice throughout the transaction and even attending the real estate closing. The effect of these requirements has been to pressure flat fee and discount brokerage models into having to alter their service offerings to provide bundled services and, of course, forcing consumers to pay more for professional real estate assistance.
Rather than forcing consumers to accept a bundle of services for a higher fee, the VAR has taken another tack: "disclosure". Limited service representatives would be required to make certain additional disclosures to buyers and sellers of real estate and to enter into a written agreement expressly outlining the extent of their services. According to the proposal, the limited service representative must have a written brokerage agreement with the client that "(i) discloses that the licensee is acting as a limited service representative; (ii) provides a list of the specific services that the licensee will provide to the client; and (iii) provides a list of the specific duties of a standard agent as applicable, that the limited service representative will not provide to the client."
According to the proposed Virginia legislation, working under a "limited service engagement" the real broker would be acting as an independent contractor. Limited service brokers could provide "ministerial acts" such as placing a property into the MLS for the home owner, or providing home selling tools or home buying assistance without entering into an "standard agency relationship" that might require the professional discretion or judgement of the broker.
The legislation also addresses a key concern of traditional real estate agents who fear that limited service brokerage might require them to perform duties on behalf of their non-clients in order to facilitate a real estate transaction. The new law's disclosure requirement provides for the customer to acknowledge that "neither the other party to the transaction nor any real estate licensee representing the other party is under any legal obligation to assist the [real estate customer] with the performance of any duties and responsiblities of the [real estate customer] not performed by the limited service representative".
Generally, the proposal is a boon for consumers as well alternative real estate models. By providing for a new type of brokerage relationship and offering consumers a choice in the types and costs of services they obtain from real estate brokers, the legislation would help to transform real estate into a more efficient and cost-effective industry.
Relevant Link: Texas passes limited-service real estate law
Keywords: limited service, mls only, flat fee, real estate law
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