June 8, 2007: The consumer is the loser with Arizona real estate licensing
We've been talking about real estate licensing laws, admittedly an exercise in futility. Whatever arguments I might make for repeal, it remains that the Arizona Department of Real Estate is not going to dry up and blow away like tumbleweed.
But here's an important question: Who do real estate licensing laws benefit?
If you thought of consumers, that would be incorrect. The model legislation for real estate licensing laws in every state was written by the National Association of Realtors. The purpose of these laws is to artificially limit entry into the real estate business, with the objective being to artificially raise the prices paid by consumers.
The fact of the matter is that virtually all government regulation of commerce exists to limit supply, thereby raising prices. This is not an unavoidable consequence, but since regulations are either written by or heavily-influenced by the regulated industries, the alignment of government and business in one conspiracy after another against the consumer is a nearly-universal outcome.
As we discussed last week, another key beneficiary of real estate licensing laws is the real estate broker. Real estate salespeople must be licensed, but in order to work, they must also "hang" their licenses with a real estate broker, another category of license.
The broker will take a bite out of every dollar his salespeople bring in. It is not an exaggeration to say that a broker's license is a license to steal.
It gets better. Real estate brokers have managed to get themselves exempted from IRS income reporting and withholding regulations. In any other business, the boss has to withhold taxes. Taxes are vile, but the reporting and withholding requirement discourages careless hiring practices. There is a significant cost to adding employees, so employers will not take a chance on just anyone.
Not so real estate brokers. Adding a new Realtor costs virtually nothing, so many brokerages are packed wall-to-wall with thoroughly incompetent agents -- haphazardly trained but licensed by the state to wreck your financial life forever.
If you think these laws and regulations benefit the consumer, think again.
Greg Swann is the designated broker for BloodhoundRealty.com, a full-service Metropolitan Phoenix real estate brokerage. This article originally appeared in the West Valley regional sections of the Arizona Republic.
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Am I link-baiting? You bet. The quid pro quo is free content for your site that pulls eyeballs and excites interest.<a href="http://www.bloodhoundrealty.com/" target="_blank"> Phoenix Realtor Greg Swann</a> suggested I share this with you:
