IAR's repsonse to critics of HEA 1339

Following the publication of an article on HEA 1339 in the Louisville Courier-Journal last week, some well-known Indiana bloggers fired off some poorly-informed posts in our direction. We at IAR think that these criticisms are way off the mark, as HEA 1339 was in no way designed to restrict competition and will actually increase consumer protection. After all, at a time when Indiana continues to lead the nation in foreclosures, doesn’t it make sense that Hoosiers who choose to use a licensed real estate professional should not be abandoned during the most important financial transaction of their lives?

There are a couple of major misconceptions about this legislation. One is that it introduced a new concept of requiring minimum standards. The reality is that Indiana has licensed and regulated real estate professionals for decades. And as in every licensed profession, there are minimum standards enforced by the state to protect consumers. HEA 1339 was needed because the previous law contained a loophole that allowed licensees to avoid all of the statutory responsibilities. HEA 1339 merely says that a very small subset of these duties cannot be contracted away.

Another misconception is that the law requires a real estate licensee to be involved in every aspect of a real estate transaction. We noticed a recent report by WISH-TV (Channel 8) in Indianapolis on this topic, and the associated article on the station’s website (click here) reads:

“There's a new law set to begin in Indiana that says an agent must be involved in every part of the transaction.”

This is patently false. If one simply reads the bill (click here), one can see that it most certainly does not require such involvement. It only addresses what the Courier-Journal article’s author, Lesley Stedman-Weidenbener, accurately calls, “a list of services that may seem like the basics to those who’ve bought and sold a home: answering questions offers and counter-offers, and assisting with the transaction paperwork.”

Under HEA 1339, so-called discount real estate firms will still be able to provide a variety or “menu” of services. Contrary to the implication of at least one critic, there is absolutely no requirement that an agent assist in marketing the home. Consumers can approach real estate transactions like choosing a restaurant—does one want a “fast food” approach where you perform certain services oneself or a more expensive full-service approach?

The new law ensures only that consumers cannot be completely abandoned during the transaction. We do not believe that asking a licensed professional to answer questions represents an onerous burden that will stifle competition. In fact, IAR finds the allegations that this law was designed to be anti-competitive offensive.

(It should be noted here that for those consumers who are experienced in home buying and selling and do not want any services, using an attorney or the for-sale-by-owner route will always remain options and are unaffected by HEA 1339.)

Perhaps the most preposterous statement we have seen is that the new law “outlaws” discount brokerages. The law does not address discount brokers, commissions, or the level of payment for any services. Illinois and Texas have laws similar to the new one taking effect here in Indiana on July 1^st. Discount real estate operations, or those who offer fewer services than full-service firms, have not closed up shop in these states. Here are just a few examples we found during a quick web search:

http://www.royal-realty.com/

http://www.helpusell.net/

http://www.nuwaymls.com/mlsil.asp

http://www.turn-keyrealty.net/page4.html

http://www.domesticsale.com/realestate/Brokers/Illinois/

http://www.payless-realty.com/

When Hoosiers are navigating the complicated process of buying and selling homes and decide to use a licensed professional (which is, of course, optional), they should know that their agent will answer questions and respond if called upon. After all, this is the most important financial decision in the lives of most Americans and involves significant legal liabilities.

Finally, although several states have passed similar laws to HEA 1339, no evidence has yet been produced showing adverse impacts on the discount brokerages operating in those states. We encourage everyone to first read the legislation here before jumping to conclusions about the intent of the Indiana Association of REALTORS® and our members. Click here to link to the text of HEA 1339.