Realty panel's growing pains

Hard-pressed commission awaits better days with own funding

November 06, 2005|By JUNE ARNEY | JUNE ARNEY,SUN REPORTER

The Maryland Real Estate Commission sees light at the end of the tunnel. It just needs to make it to July.

That's when the regulatory agency expects an infusion of funding that will allow it to add what it considers sufficient staff - a luxury it hasn't had as the real estate market fueled record home sales and added thousands of agents and brokers to the industry it regulates

Even as the real estate market boomed, budget cuts left the commission with a skeleton staff to handle an increased load. At one point, its permanent investigative staff dropped from five persons to two, resulting in a growing backlog of unresolved complaints and unanswered queries.

"I'm sure there are plenty of people who feel they were not given good service," said Elizabeth A. Beggs, the commission's executive director.

Come July, the commission will be assured its own stream of funding. A new law provides that the fees it collects will be dedicated to its budget rather than reverting to the state's general fund. That means the commission will be able to hire more staff.

"My homebuyers should be able to call and get an answer quickly and not have to wait until a year later," said Carroll County Republican Del. Susan R. Krebs.

Krebs is one of the sponsors of the self-funding legislation.

Commission Chairman Nancy R. Simpers, a Realtor with Prudential Carruthers Realtors in Elkton, said the budget constraints were especially frustrating at a time when real estate fees were rising along with the market.

"The self-funding is going to help us because we'll be able to have more investigators who can process the claims quicker," Simpers said. "Our hands were tied. It was mind-boggling to know that through fees we put a lot of money in the coffer but had no control over how it was used. It's been a struggle."

Between the 2001 and 2005 fiscal years, complaints to the Real Estate Commission increased by 50 percent, to 488.

In the same period, the number of people coming under the commission's purview exploded. About 9,000 real estate licenses were issued in the last fiscal year, up from 2,700 just four years earlier, according to commission data. It now oversees more than 50,000 agents and brokers, Beggs said.

Nationwide, the number of real estate agents has topped a million, up 10 percent from last year, according to the National Association of Realtors.

It follows that such growth means a greater workload for regulatory commissions, said Joe McClary, a consultant with MCS Information Technology in Montgomery, Ala., who works for the Association of Real Estate License Law Officials.

"The numbers alone, you're just bound to get more complaints," he said. "A lot of these people getting into real estate are new. They don't have experience, and they're more likely to get in trouble."

The hot market and increased competition also increase the likelihood of unethical behavior, such as exaggeration of home values and false advertising, including bait-and-switch practices, McClary said.

Across the nation, misrepresentation of the facts tops the list of consumer complaints about real estate agents, he said.

Harry Loleas, deputy commissioner of occupational and professional licensing in Maryland's Department of Labor, Licensing and Regulation, said the additional funding should enable the commission to add six or seven people to its staff of 13. In addition to its regulatory role, the commission approves course content and education providers for real estate professionals.

The extra money may also allow the agency to be proactive through public service announcements or educational brochures distributed through Realtors and other industry outlets, Loleas said.

For its part, the local real estate industry welcomes a beefed-up commission.

"In an industry that's been exploding like the real estate industry, it's very difficult to do the work with a staff that stays constant," said Mark Feinroth, director of legal and regulatory affairs for the Maryland Association of Realtors, which lobbied for the change in funding. "It was clear that they were understaffed and overwhelmed for a very long time.

"A complaint that languishes is bad for both the citizen who filed it and the licensee."

Beggs readily concedes feeling overwhelmed. With her staff stretched thin as the market frenzy peaked, she would come into her office each Monday to face 150 e-mail messages and regularly found her voice mail filled to capacity.

"I couldn't empty it fast enough," she said. "You thought you were seeing the end of the tunnel, and then bam, the industry explodes."

While the volume of complaints represents just a fraction of the sales volume, many require complex and time-consuming investigations to gather and present facts for disciplinary hearings or for homebuyers' claims against the state's Guaranty Fund.

About half of homebuyers who file complaints are seeking compensation from the Guaranty Fund, Loleas said. Homeowners can be awarded up to $25,000 for financial harm.

The commission also has a range of punitive powers, including the ability to revoke an agent's or broker's license. The commission also can issue reprimands, order suspensions and impose fines.

In the past fiscal year, the commission issued one revocation, two suspensions, seven reprimands and 26 fines, Loleas said.

Even with signs that the real estate market is cooling, Loleas does not foresee a sharp drop in the commission's workload.

june.arney@baltsun.com

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