Progress Report: Consumer Services Task ForceJune 9, 2006

The Task Force was appointed in November of 2005 with the following charge: Mission Statement:

1. To review existing policy of C.A.R. and existing law of California regarding requirements for provision of minimum services by licensees to buyers and sellers;2. To examine minimum services statutes and consumer/business practices in other states, compare them to existingCalifornia law and policies;3. To determine whether the laws enacted in other states have had a positive effect on real estate practice in those states;4. To report and recommend to the President and the Board its findings and recommendations no later than the end of October 2006 as to whether changes in law or private sector policies and practice are appropriate, and if appropriate, which changes (if any) are most likely to be effective and which changes (if any) should have the highestpriority;5. The name of the Task Force to be the Consumer Services Task Force.The members of the Task Force include:
Robert Bailey, Chair, Thomas Carnahan, Vice Chair, David Barca, Allen Chiang, Liz Fitzgerald, Jeanne Garde, Vernon Hansen, Rick Hoffman, Marjorie McLaughlin, Lisa Muetterties, Bill Plattos, Tracey Saizan, Jeannette WayThe Task Force met for the first time in conjunction with the January 2006 meetings in Anaheim. The Task Force met by conference call on March 29, and again in person on April 26, 2006. The Task Force will meet at least one more time prior to the June 2006 Board of Directors meetings and make an interim report at the June 2006 meeting. A final report will be delivered at the October 2006 meeting.The Task Force has examined the minimum services efforts in other states and the applicable laws that already exist in California to regulate real estate licensees conduct. It seems clear that some “listing only” business models skirt, or violate outright, the requirements of existing law. In California transactions many of the inspections and disclosures are the duty (if not the actual responsibility) of sellers and not their agents.  This fact protects agents against liability, but also allows reduced services business models in which the agent can bargain for a principal to waive most if not all of the duties that normally fall to the agent.The Problems. The Task Force concluded that minimum or listing only business models present two categoriesof problems:Consumer issues:
- Seller is mislead into being an unrepresented FSBS, but without any preparation;
- Sellers suffer without the counseling function of an agent and needlessly incur liability;
- Unrepresented sellers may actually net less without representation; and,
- Lack of representation results in both delays and undisclosed defects.Agent issues:
- Agents are unwittingly drawn into an undisclosed dual agency role that they might otherwise have avoided;
- Agents may be pressured to complete both sides of a transaction even though their initial compensation agreement only calls for part of the commission;
- Buyers' agents may be presented with an irreconcilable conflict in which they do not represent the seller, but cannot abandon their buyer's interests.Possible Solutions.  The Task Force is considering the following possible solutions.
- - Better "up front" disclosure/information about what a limited service relationship will not deliver to theconsumer (usually a seller)
- Aggressive and proactive use of complaints to local associations of Realtors® or the Department of Real Estate -  Don't wait until a transaction "goes bad."
- Require listing agents to tell sellers what is legally required of a seller, even if the "listing" agent won't agree to perform the duties.
- Standardize a required statutory disclosure or description of  limited services.
- "Use a REALTOR®" campaign to educate licensees andthe public that (full service) REALTORS® meet statutory standards.
- A standardized form for buyers' agents to send to sellers advising them of their legal obligations in order to close. The "here's what we need from you" list would be much more specific than the current buyers' and sellers' advisory.Evaluating the Solutions. The Task Force will use the following principals to evaluate possible solutions:- Will the "solution" protect consumers?
- Will the solution protect licensees?
- Can the result be pursued by industry activity instead of legislative or regulatory activity?
- Can the result be accomplished through MLS changes?
- Will the proposal be effectively protect consumers dealing with non-licensees (e.g. Craig's List, Bank personnel, "zillow-type" valuation services)?Additional precautionary principles:
- Avoid creating a "roadmap" to greater liability for agents;
- Avoid creating a template in statute for the very kind of activity whose abuses we are concerned about. Put another way, our goal is to warn and protect our members and consumers, and not to show limited services agents how to become better facilitators.
- Discussions of remedies should focus on liability and consumer protection -- compensation is not the issue, and the market will adequately set prices based upon services.Next Steps: There seems to be an emerging consensus that there may already be enough legal options on the books already, and that a thoughtful combination of market forces and existing mechanisms (standard forms, educational campaigns, MLS rules and disclosures, DRE complaints for failure of statutory duties, and the like) may be effective. In particular, opinion seemed to be growing that the creation of statutorylist of duties or creation of a "facilitator" option in law might be a "cure" with more potential problems than the existing "disease."Next immediate step is to evaluate proposed mechanisms.