State regulators want to give real estate agents more freedom to practice outside their respective jurisdictions.
Real estate licenses, regulators say, should be more like drivers’ permits: Once an agent is approved to practice in his or her home state, they should be able to work in any other state, even in those with more stringent licensing requirements.
Ultimately, their goal is complete portability, giving real estate professionals the right to practice in all states with a single credential. But for now, they’d settle for reciprocity between neighboring states, the theory being that markets are defined by demand, not boundary lines.
Licenses are funny things, though. While real estate agents value them so much they want to carry them around with them in their hip pockets and handbags, independent home inspectors would rather not be licensed at all.
The bottom line for consumers in all this infighting? Understand that a license to practice real estate or perform home inspections is nothing more than a certificate showing a minimally acceptable level of competence. To find a good agent or inspector, you have to look beyond that piece of paper.
Actually, nonresident agents can obtain a temporary license in almost any state to do a single transaction, as long as they pay a fee and team up with state-licensed brokers who would be responsible if something went wrong. And 20 or so states already have written agreements that allow agents from neighboring states to list and sell property within their borders on a regular basis.
But, while “reciprocity exists in some fashion, it still needs work,” says Charles Clark, a real estate commissioner in Georgia, one of two states (New Mexico is the other) which has enacted a law providing the framework under which nonresident agents can work.
ARELLO, the trade organization for the state agencies which administer the nation’s 2 million-plus real estate licensees, has long favored reciprocity.
“We’ve been working on this for over a decade,” says ARELLO President John Neelley of the Mississippi Real Estate Commission. “But we need the support and help of the real estate community if we are going to be successful at the legislative level.”
Of course, state regulators don’t want agents to cross their borders without any restrictions. But as long as they meet a few basic requirements–that the agent’s home-state license must be current is one, and that the agent must affiliate with a resident-broker, pay any required fees, and agree to abide by the laws of the nonresident jurisdiction are some others–they think it’s OK to move at will from one state to another.
However, not everyone is as enthusiastic as the regulators, many of whom come directly from the business they oversee. For example, some brokers are dead-set against reciprocity because they fear additional competition. “Why would I want to be responsible for someone coming in here competing with my agents?” said one broker.
But more important, some state legislators are afraid their more rigid licensing requirements will be compromised if they allow agents from states with lesser standards to practice in their territories. And Steven Brobeck, executive vice president of the Consumer Federation of America, agrees.
“As long as there is a significant difference in the quality of the education and training between states, reciprocity is probably not a good idea because in the long run, it will lower standards overall,” Brobeck says.
Brobeck would support reciprocity between states with equivalent licensing requirements. But he thinks “the real solution” lies in more uniform standards. And that’s a sentiment shared by Gary Clayton, executive vice president of the Illinois Association of Realtors.
Licensing officials, on the other hand, say that despite variations in training and education requirements from state to state, every state has reasonable enough standards for assessing and assuring competency of their resident real estate agents.
They also argue that the inability of agents to obtain nonresident licenses puts consumers in danger, because some buyers and sellers use agents in whom they have confidence regardless of their residency.
Even though that leaves consumers without any of the safeguards they would have if they dealt with a nonresident agent, a fact they may or may not realize, they still “demand a certain degree of flexibility when they choose to work with an agent, irrespective of where that agent holds his or her license,” says Clark of Georgia.
“So reciprocity will enable Realtors to take advantage of natural markets unfettered by artificial barriers, while protecting consumers from the unauthorized practice of real estate.”
The question of licensing home inspectors also revolves around standards. Generally, inspectors favor licensing as long as the requirements are as strict or stricter than those for membership in the American Society of Home Inspectors, their principal trade group. Anything less, they say, and practically anyone could gain a license.
“We’re not against licensing per se, but the qualifications are too low in the bills we’ve seen,” says ASHI spokeswoman Vera Hollander. “If it doesn’t take much to be licensed, people will be lulled into a false sense of security.”
But without some sort of licensing requirements, anyone can hang out an inspector’s shingle without proving their competency. Moreover, while organizations such as ASHI can discipline members, they can’t shut down unfit inspectors as state regulators can.
Only five states–Texas, Oregon, Maryland and North and South Carolina–oversee home inspectors in one fashion or another. But nearly 20 other states have considered but rejected licensing.
Some mavericks within the business favor licensing. James Liles of Quality Residential Inspections in Raleigh, N.C., points out that ASHI members are only “a very small percentage” of what is considered by many to be a “growth industry.”
(According to ASHI’s Hollander, less than half of the nation’s estimated 10,000 full and part-time inspectors are ASHI members.)
And Sig Anderman of Inspectech, California’s largest home-inspection company, says regulation is necessary “to protect home buyers from unqualified, poorly trained individuals . . . with no financial backing to stand behind their opinions.”
ASHI and the majority of its members have no doubt there are unscrupulous operators out there who print up cards and go into the business. But they argue that the need for licensing has yet to be demonstrated.
Mark Cramer, an Indian Rock Springs, Fla., inspector, says the larger concern is that if licensing becomes a reality, inspectors will wind up being regulated by real estate agents and builders who could use the process to stop inspectors from blowing up transactions because they are reporting more than they think they should.
That’s a point echoed by Milford, Pa., inspector E.L. Buck, who says realty agents in his area already steer their clients to inspectors who will compromise their work just to make sure the deal goes through.
On a different but related front, 17 states, the District of Columbia, and Puerto Rico license interior designers.
Don’t confuse interior designers with interior decorators. Whereas most decorators work from their homes and have no real technical training, designers are closer to architects.
Interior designers tend to favor licensing for two reasons: to distinguish themselves from decorators, and to keep architects from taking the larger assignments. Many states require that only licensed professionals can work on projects over a certain size.
“It’s a turf battle,” says John Spitz of the National Kitchen and Bath Association. “Interior designers want their fair share of the work, and the only way that they can get it is to be licensed.”
