Tuesday, June 06, 2006

Taking on the DRE

The California Department of Real Estate, DRE, announced last week that there are about 500,000 real estate licensees in the state which means that one in every 52 adults has a real estate license. The number of licensed agents has increased 30 percent in the last two years and 57 percent from 2000. Having a real estate license in California is second only in popularity to a having a driver’s license. California will license, regulate and tax hundreds of professions from accountants and acupuncturists to veterinarians and vocational nurses. Real estate is one of the largest vocational groups.

No other state vocational association has grown as much as real estate. And why not? Obtaining a real estate license does not require a higher educational degree, years of apprenticeship or a substantial financial commitment. The entire process of obtaining a license can be completed in less than three months and cost less than $500. Once licensed, the earning potential is unlimited, the work hours flexible and with an unlimited amount of free time. What a dream job!

Not every licensed agent is engaged in listing and selling real estate. The Department also regulates mortgage professionals. Having a group of real estate regulators looking over the activities of loan originators and lenders is like having the Cemetery and Funeral Bureau regulate the Medical Association. While lenders and salespeople both deal in money and real estate, the processes are completely different. Appraisers have their own regulatory agency (Office of Real Estate Appraisers) and so should the mortgage industry.

Jeff Davi, commissioner for the DRE, in a prepared statement said, “The level of interest in real estate licensure is unprecedented. With so many new licensees, the DRE has increased its consumer protection efforts.” The Department’s idea of increased “protection efforts” is to increase their presence on the Internet. Consumers may go to the web site at www.dre.ca.gov/licinfo.htm and check the status of licensure. With 500,000 licensed agents, the probability is pretty good of finding the name, address, and license number of your agent in the DRE’s database. But more information is required.

What consumers will not find on the DRE web site is any type of evaluation or designation process that provides additional information about the licensee. The problem that consumers have is not in determining if someone has a license but determining some level of experience and competency. Before turning over the house keys, sellers might want to know the number of complaints filed against a particular real estate firm, if the brokerage firm maintains professional errors and omissions insurance, what educational background has a licensee completed and affiliated professional designations and membership.

One helpful designation that the DRE could include on their web site is the voluntary Realtor membership. Realtor membership wasn’t always voluntary. It used to be a requirement to gain access to the MLS systems when MLS was owned or controlled by the local Realtor Associations. Today, membership is voluntary. Realtor members have the privilege of paying additional yearly dues to their local, state and national organizations and abide by a code of ethics. Since the department makes no distinction between Realtors with an ethics code and all other licensees, Realtors are placed at a theoretical competitive disadvantage. The Department could easily place an R by a Realtor licensee to differentiate the two.

All motorists are required to carry vehicle insurance and all licensed agents and brokers should be required to carry Professional Liability Insurance. Errors and Omissions Insurance reimburses the public from mistakes and misrepresentations made by the insured. If another driver bumps my car, I have some assurance that an insurance policy exists that will reimburse me for the repairs. Buyers, sellers and borrowers have no such assurance from their agent unless the agent is insured. The Department’s Recovery Fund, is limited to only $20,000 for certain intentional and fraudulent acts. The Department should require all practicing brokers and agents to maintain Professional Liability Insurance or at least recognize the ones who do on their web site.

Academic achievement is no guarantee of success in business or of ethical practice but it does demonstrate a disciplined commitment. The Department already maintains a record of all pre-licensing and continuing educational classes for every licensee. That information should be made public as well as any degrees and professional designations from accepted organizations or institutions.

The use of the Internet can provide viable choices to consumers if the information is available. The DRE’s web site provides the name, address and license number of all licensees. However helpful that information is, it could be more meaningful by providing additional information as to the experience, professional accomplishments and commitment to their profession of brokers and agents.


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