Builders need to license sales agents

Construction companies scramble to meet state deadline

Developers who rent or sell homes they constructed are currently exempt from licensing requirements. Instead, the builder and staff sales agents are required to register with the Home Builder Registration Unit in the Consumer Protection Division of the Attorney General’s Office. As of June 2006, the unit had almost 3,900 registrants.

There are thousands of people who need to be licensed under the new regulation, and there is no clear path on how to get them all licensed in time, said Tom Ballentine, director of policy for the Home Builders Association of Maryland.

Del. Michael L. Vaughn (D-Dist. 24) of Bowie said he decided to reintroduce the licensure bill, similar to one proposed in 2001, after receiving complaints from constituents about commitments made at the point of sale that were not being delivered, he said.

‘‘I see [the law] as a way of adding credibility and accountability to the sales process,” Vaughn said.

If commitments are not honored, a consumer may file a lawsuit or go to the Attorney General’s Office and try to arbitrate, Vaughn said. But if a developer fires an unethical employee, that person can simply get another job and carry on the same business practices, he said.

If those agents are licensed, the Real Estate Commission can fine them or they could lose their license, Vaughn said. ‘‘Their record is going to follow them,” he said.

The commission is authorized to suspend or revoke a license and-or impose a penalty of up to $5,000 for violations.

Although the law does not specify how developers should comply, they can either work with a licensed real-estate agent or have their staff take a real-estate course and pass the state test, Vaughn said.

Having real estate sales agents regulated by the commission is ‘‘a plus for the public,” said Ilene Kessler, president of the Maryland Association of Realtors. ‘‘It’s more consumer-friendly.”

But Ballentine said the bill is full of unintended consequences that will cause hardship for people in the home sales business and end up costing the consumer more.

Adding the transactional cost of a real estate broker could be expensive for homebuyers, Ballentine said. There’s a possibility that the costs could be lower than the market standard, ‘‘but that’s not a guarantee,” he said. ‘‘This could add thousands of dollars in transaction costs.”

It is also possible that people who have worked for the same company for decades will lose their jobs, which will affect their pensions and benefits, Ballentine said. They will either be ‘‘involuntarily terminated” or move to a brokerage company, he said.

The top concern for homebuilders is the looming October deadline, as their staff must take a 60-hour real estate course and then pass a test to be licensed, said Katherine F. Connelly, executive director of the Maryland Real Estate Commission.

Those homebuilders who decide to have licensed sales agents will also need to either hire a broker or set up an arrangement with a brokerage company with which their employees would be affiliated, Connelly said.

‘‘The commission’s education and examination requirements would likely discourage a number of agents from becoming licensed ... ,” according to a legislative analysis.

Builders and their new-home sales agents are already covered by the Home Builder Registration Act. That law’s penalties against builders who don’t meet obligations are much higher than those resulting from a consumer complaint with the Real Estate Commission, Ballentine said.

The potential cost of this mandate for builders has not been calculated yet. ‘‘That’s something that people are grappling with now,” Ballentine said.

There would be reasonable ways to address concerns within builder registration by making changes that don’t have the downside of diminishing consumer protection, increasing costs to homebuyers and having heavy impact and hardship on employees in the new home sales business, Ballentine said.