R. Scott Brunner
Re: House Bill 316--Virginia Agency Services Legislation
Dear Mr. Brunner:
In response to your request, this letter conveys our views on competition issues raised by House Bill 316 ("HB 316"), an amended version of which was submitted to the Virginia legislature on January 25, 2006. A copy of the current version of HB 316 is attached. This letter only conveys our views on the attached version of HB 316 and does not apply to any other version of the bill.
In conversations with members of my staff, you have indicated that HB 316 seeks to address potential consumer confusion that might arise from the diversity of services provided by fee-for-service real estate brokers. HB 316 would address this issue by means of disclosure, distinguishing services required by a "standard agent" from those required of a "limited service agent" or "limited service representative." The bill requires that a limited service representative must disclose in writing services which he or she will and will not provide.
As you know, the U.S. Department of Justice has commented on competition issues raised by legislative and regulatory proposals regarding real estate brokerage services in a number of other states. We typically recommend that the state or commission study carefully the need for any governmental restrictions and, if a need is shown, that any restriction be as narrowly tailored as possible.
The Department has not seen any empirical evidence indicating that fee-for-service brokers have created any significant consumer confusion. Nevertheless, if the Commonwealth of Virginia decides to address this potential concern, HB 316 has been tailored to address this concern while preserving consumer choice and competition. In particular, the bill does not require brokers to provide a minimum level of services. Rather, it requires real estate brokers to disclose the services that they will and will not offer while preserving consumers' ability to purchase a limited set of services.
More generally, HB 316 does not make illegal any type of limited service, flat-fee, or other brokerage models, or otherwise appear likely to displace competition in the real estate market. In addition, HB 316 includes a provision stating that "Nothing in this Article shall be construed to limit, modify, impair, or supersede the applicability of any of the federal or state antitrust laws," an important confirmation that HB 316 does not manifest an intent to eliminate competition in the market for the provision of real estate brokerage services.
Further, we understand that, under HB 316, a "limited service representative" does not become an "agent" as defined under Virginia law unless he or she so specifies in writing. Unless a limited service representative agrees to become an agent, such an individual is an independent contractor and must provide only those services agreed to by the parties to the brokerage agreement.
The Virginia Association of Realtors should be commended for its efforts to preserve consumer choice in real estate brokerage services. Continuing to allow Virginia consumers to choose the specific services that they want to buy can help save consumers thousands of dollars in one of the most important and costly transactions of their lives.
We appreciate this opportunity to present our views and would be pleased to address any other questions or comments regarding competition issues.