The last hours of a state legislative session is a paradise for avaricious corporate interest groups. This is the time when they can sneak through, without public debate or even public notice, some of the most craven laws against consumer or small-taxpayer interests ever enacted.
Among the lobbies that ply this just-before-midnight stealth strategy is the real estate industry. With its alliances of banks, lawyers, title companies, and appraisers, the industry has managed to gouge home buyers and sellers for billions of dollars each year, according to the Consumer Federation of America.
The Realtor lobby struck again recently in Hartford, Conn., June 9 — the last day of the legislative session. Lobbyists convinced legislators to ram H.B. 6981 through the state senate. The proposed law would further erode any allegiance that real estate agents must pledge to either the buyer or the seller of a home.
Most home buyers do not know that their real estate agent legally represents the interests of sellers, unless he or she is a buyer broker who only represents buyers. H.B. 6981 would effectively permit licensed real estate agents to enter into relationships with buyers and sellers during the same transaction — a conflict of interest.
The opposition of numerous consumer groups and others supporting the rights of property buyers defeated the real estate industry’s effort to push a similar bill through the Massachusetts legislature.
Having lost the battle in Massachusetts, the real estate industry leadership ensured that the Connecticut bill was kept very quiet. The industry did not mention it during its one-day mass lobbying effort in the capital, nor did trade publications mention it. After they finally learned about it, opponents labeled it the “Stealth Bill.”
These disreputable tactics are par for the course for the real estate industry, which has one of the most powerful trade associations in the country — the National Association of Realtors. NAR’s legislative cronies have systematically weakened real estate consumer protections throughout the country to minimize the industry’s liability to the consumer.
In Connecticut, NAR weakened consumer protections by authoring and ensuring the passage of H.B. 6981, a bill that allows “designated agency.” The bill would limit consumers’ access to fair representation in real estate transactions while ensuring that megabrokers maintain their profits. “Designated agency” enables one real estate firm to simultaneously “represent” both sides of a real estate transaction — ensuring the largest possible commission for the firm. It’s analogous to one law firm “representing” both the defendant and the plaintiff. Under “designated agency,” both the buyer and the seller may be “represented” by a different licensed person, within the same firm, although that “representation” will be significantly reduced.
Neither licensee would be adequately overseen by his or her supervisor (the broker and often the owner of the firm), as occurs in the majority of transactions where different firms are used. Licensees are required to be supervised by the broker, who must pass more stringent requirements to practice.
“Designated agency” is particularly dangerous for consumers because licensees largely learn their profession through on-the-job training provided by the broker, rather than through classroom education. Although real estate licensees are dealing with houses, which are the largest financial investment for most American consumers, the classroom education requirements are much lower for a real estate licensee than for a hairdresser (30 hours versus 1,500 hours).
Proponents shepherded H.B. 6981 by hiding it in another real estate bill, H.B. 6954. The latter exempts real estate licensees from obligations to disclose to prospective home buyers any information they have concerning ex-convicts living in the neighborhood. This exemption may be a prelude to future industry efforts around the country to reduce real estate agents’ common law duty to disclose all material facts — matters such as leaky roofs, termites, or environmental liabilities.
H.B. 6954 and its “designated agency” amendment is the real estate industry’s latest successful attempt to reduce its allegiance to the consumer and the diligence it must practice have in protecting the consumer’s interests. Since pro-corporate Connecticut governor John G. Rowland will sign this bill, it will be yet another shield for the real estate industry against responsibility and legal liability.
Maybe there should be a citizen task force that figures out how to stop the heavy-handed, last-minute misbehavior of legislators that has become an odious tradition in most states.