Arguing For No Real Estate Licensing Is Just Plain Nutty
June 9th, 2007 Deeper Thoughts, Family Life
At the risk of inciting further hoopla, I’ll do it anyway. Trust me it’s not a vendetta here. I’ll use my Playstation 3 voice I promise.
Greg Swann gets a weekly main stream media gig on the Arizona Republic (thumbs up, wish I could say the same for me). This weeks post is Consumer is the loser with real estate licensing, broker argues.
Text in bold is by me to highlight my point.
“The model legislation for real estate licensing laws in every state was written by the National Association of Realtors. The purpose of these laws is to artificially limit entry into the real estate business, with the objective being to artificially raise the prices paid by consumers.”
Thats a fine straightforward case. Plenty of professions do exactly the same thing. But then…
“Adding a new Realtor costs virtually nothing, so many brokerages are packed wall-to-wall with thoroughly incompetent agents — haphazardly trained but licensed by the state to wreck your financial life forever.”
Ummm hang on.
If the laws purpose is to create a bottle neck and limit the number of agents, why is every brokerage packed wall-to-wall with agents? I asked the same question in the comments over 24 hours ago, but no reply.
Why decry haphazard training, but want to do away with licensing? When it boils down to it, isn’t licensing someone for something a State authorizing that enough training has taken place? If you’re complaining about haphazard training, wouldn’t the more obvious solution be higher standards for licensure?
Though of course for Greg that would circle into the argument that the whole thing is a ploy to create a bottleneck and limit the number of agents in the industry. Both thoughts do make sense on their own, but held together they aren’t internally consistent.
Then last night it hit me like a thunderbolt exactly why doing away with licensing is just plain nutty.
No licensing means there would be no more agents. The legal construct of “a real estate agent” would vanish. With that change the entire category of Agency Law would be null and void. Agency Law only regulates one thing – namely agents. Nothing to regulate means the law will never be used.
No licensing = no agents = no agency law = well at least dual agency isn’t a concern anymore.
Speaking as a pretty new agent, the pre-license education was shockingly, woefully inadequate. And I was lucky enough in that I had a great pre-licensing instructor in Fred Southwell at Greater Hartford Association of Realtors. I’ve spent an enormous amount of effort since then educating myself of course, but thats correcting the error of a low hurdle rather than trying to earn a halo.
The hurdle to get into this business has to be more than simply having a pulse and $500. It does no one any favors, least of all the new agent themselves. Looking back I’m profoundly grateful for the lack of business my first few months of being in the business created. I’d probably be sued into the ground and divorced if leads had actually panned out back then.
Honestly though… arguing for no real estate licensing is just plain nutty.
[Random Thought: Why would NAR seek to limit the number of realtors anyway? Wouldn’t it be in NAR’s interest to have a huge customer base? Wouldn’t it be in NAR’s interest to have a shocking low entry into real estate, and then correct the issue of low agent education by offering dozens of high priced designations and trainings? Oh…]
June 9th, 2007 at 4:55 pm
Ahem.
The case law of agency is at least 2500 years old.
The historical rationale behind occupational licensing laws is well established.
“Nutty” is not an argument.
Doing zero research does not commend your mind to mine.
June 9th, 2007 at 5:33 pm
Hi Greg, glad to finally have you here as a commentor.
I agree “nutty” is not an argument. It’s not intended to be. You well know a few people would like me to lead an anti-greg parade, and “nutty” is as disarming as a word as I could think of. I’d like to hear your view on these two statements though.
“The purpose of these laws is to artificially limit entry into the real estate business.”
and
“brokerages are packed wall-to-wall”
You have to agree that these aren’t logically consistent wouldn’t you?
Also if the historical rationale behind occupational licensing laws are well established, why suggest doing away with licensing?
I’m curious as to where agency case law is recorded as happening 2500 years ago. As I understood it the principle-agent relationship is evolved from the master-servant relationship under English Common Law. I won’t claim ancient law as a speciality though.
“Doing zero research does not commend your mind to mine.”
LOL I blame pre-licensings lack of education. Like I say, the bar should be much higher.
June 9th, 2007 at 6:17 pm
> You well know a few people would like me to lead an anti-greg parade
Say what? What would be the point of that?
I intend to come back to licensing at BHB, but not right now.
June 9th, 2007 at 6:33 pm
Not much, which is why I refuse to do it.
Looking forward to it.
Thanks for visiting.
June 9th, 2007 at 9:13 pm
At last, an opportunity to comment on Greg’s post without censorship. Greg has a blacklisting policy (he used to say he didn’t blacklist. Another flipflop. Greg, it isn’t moderation if every comment is censored. But I leave that for another day). Back to the post’s premise.
Greg said “The purpose of these (licensing)laws is to artificially limit entry into the RE business with the objective being to artificially raise the prices paid by consumers”
To effectively limit entry requires a difficult test and stricter licensing requirements, or admission quotas (there are no quotas–you pass, you’re in). By your own admission Greg, the test is too lenient (like Geico, even a caveman can do it) and the barrier to entry very low, causing an OVERSUPPLY of (starving) agents and no corresponding reduction in costs to consumers, based on any study I’ve seen. Unless you can cite such a study, I believe, sir, your argument is doggie doo-doo.
Housing costs are primarily related to supply and demand of product, relative cost of renting, wages, unemployment rates, mortgage interest rates, confidence in the US economy, as well as consumer choice of competing business models in the marketplace.
Since the Stone Age, the purpose of licensing is to establish a basic level of competency to reduce the incidents of complaints and provide consumer confidence in the profession, provide documentation for statistical study, as well as to raise revenue for the state.
(BTW, I notice you have some alphabet soup designations—pray tell why? To justify your worth and right to your compensation, I suspect. Do you think that is artificial?)
PS Translation of Greg’s statement “I intend to come back…but not now” — the subject is not worthy of debate.
June 9th, 2007 at 9:25 pm
Athol, at the risk of being accused of the dreaded “hoopla”, which “few people” wanting you to lead are you talking about? Has anyone asked you to? Also now running the more popular risk of misidentification that has become a virus thriving in the thick fog of our community innuendo, let me disabuse you of the idea that it was me, in case that’s who you meant.
I realize its in your interest to cultivate relationships with those on your A List, however I hope in “refusing to do it” you’re characterizing a real discussion with someone other than me. I don’t recall asking you to lead any sort of parade. Indeed, the core point of my comments to you and Sellsius was that no one needed to ask either of you to assume the position, inasmuch as you were both already racing to see who could beat whoever the current marshall is* to the reviewing stands. The suggestions that you compete were meant to be humorous, and Sellsius at least took them that way.
Then again, perhaps it wasn’t me you were talking about. “Web 2.0, the Social Internet — we just need to figure out who the hell we’re talking about having socialized with.” (TM)
(*I sure hope Boardman hasn’t packed up her baton. Much as I seem to be enjoying the job, I’d really rather have the opportunity to move on.)
June 10th, 2007 at 1:28 pm
Interesting. I read “lead” as “get involved in” and John read it as “take charge of”. In terms of the word used, I guess John has the correct definition. I wonder which use Athol intended?
June 10th, 2007 at 1:56 pm
Licensing does not a professional make. Nor does it necesarily protect the public BUT it certainly does not harm them. At a minimum it requires criminal back ground checks(at least in Florida). I can’t even imagine what kind of folks would get into our business if there were no licensing requirements. That’s a scary thought.
June 10th, 2007 at 2:57 pm
I’m with you, Bryant. The state can only do so much to protect the public from the unscrupulous, but that much is important, and they should continue to do it.
By the way, Stay Puft Marshmallow Man is a hoot! Tom Hopkins says one of the fundamental characteristics of a champion is he’s always positive. Sell a house this weekend!
June 10th, 2007 at 6:09 pm
I answer some of the questions here in http://reagentinct.com/2007/06/10/playing-softball/
Generally speaking my postion would be as outlined by Broker Bryant. Licensing isn’t a magic bullet, but nor is it a cup of poison either.
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