Technology TransactionsShould We End State-Wide Real Estate Licensing?
By it"s nature real estate is a localized commodity. If you"ve ever
heard someone say, "my home would be worth $200,000 more if only it
was located elsewhere" you can see the issue: Location is crucial.
The home isn"t located elsewhere, it"s located where it is and
that"s one reason it"s not worth an additional $200,000.
Real estate regulation was developed long before the advent of the
Internet and traditional licensure rules reflected the reality that
real estate was localized and so were realty brokers. Today the
reality is the same but marketing has changed.
In the old days state-wide licensure was not an issue because Smith
was a property expert in his own community and not the entire state
of, say, North Snurbia. But with the Internet Smith may effectively
claim to market properties and represent buyers statewide by simply
using the keyword term North Snurbia on his Web site. Smith
will then be listed whenever someone searches for a broker anywhere
in North Snurbia, including places where Smith is both lawfully-
licensed and totally unfamiliar with local property trends.
State-wide licensure may be good for Smith, but is it good for the
public? Does the public benefit when Smith effectively offers to sell
homes or represent purchasers in communities where he has no local
connection, no understanding of local news (the road opening or the
old factory that"s closing) and no familiarity with the local housing
stock?
The time has come to seriously consider the idea of localized
licensure, realty licenses restricted to communities where brokers
and salespeople are fully aware of local property trends, say a given
city, county or group of counties rather than an entire state.
Localized licensure would merely reflect the obvious truth that real
estate is a commodity influenced by geography -- and the geography
that influences property values is not statewide. The fact that
broker Smith is the world"s leading authority on property
transactions in Comquat County does not mean he knows anything about
property values or trends elsewhere. The public interest is not
served by allowing Smith to suggest, imply or state that he has any
expertise outside the geographic domain where he is actually informed
about local issues and property trends -- a domain unlikely to
include an entire state with its cities, suburbs, towns, farms,
forests, fields, lakes and shores.
Consider driver"s licenses. That you have a license to drive a car
does not mean you"re qualified -- or allowed -- to drive a
motorcycle, semi-trailer, ambulance, fuel truck, wide-load, hazardous
materials carrier, mobile crane, military tank, bus or limousine. We
understand that different vehicles require different skills and
training -- and the same is true with real estate.
If the states move to localized licenses there would be several
marketplace changes:
*Brokers would be required to advertise the specific locality
where they are licensed and not just the state. This would help the
public identify which brokers to contact when looking for property or
representation in a given area.
*Real estate brokerage would return to the concept which is
central to property transactions: location.
*The value of local expertise would be reinforced in the public
mind.
Where could broker Smith practice if neighborhood licensing when into
effect? The community where he lives and, if different, the community
where his office is located. What if he has a home in one place and a
second home elsewhere in the state? Not a problem, he can practice in
both communities. Same if he works from two offices.
What about three homes? Forget it.
What if broker Smith lives one block over the line in one county but
is familiar with property trends in the adjoining county? Real estate
commissions would need to consider such claims on a case-by-case
basis -- perhaps they could appoint a mediator to determine such
pleas. As well, there is nothing which says that licenses could not
be issued on a regional basis, providing the regions were
sufficiently localized, contiguous and comparable in terms of their
property offerings.
Is localized licensure a reasonable idea? We already have a broad
version of localized licensure -- the broker licensed in one state
cannot represent clients in the state next door, even if the "state
next door" is just a mile down the road.
Think about it the next time a broker claims to be active throughout
your entire state -- and has never seen your home, your street or
your community.
For more articles by Peter G. Miller, please press here.