Continuing education for real estate agents may have "raised the bar" for the profession – but the effect was felt far more on agent’s wallets than consumers, according to a new report from a Suffolk University think tank.
The report, "Massachusetts Real Estate Licensing Requirement Benefits Agents Not Consumers," was written by economist Benjamin Powell and Evgeny Vorotnikov. It was sponsored by the Beacon Hill Institute – a public policy research group and the research arm of the Department of Economics at Suffolk University in Boston – and The Tuerck Foundation, a free-market-supporting think tank.
The Massachusetts Association of Realtors (MAR) has long advocated for more stringent professional education requirements for Realtors. Current regulations require real estate licensees to take 12 hours of continuing professional education per year, and in recent years MAR has lobbied to increase that amount.
"Contrary to the claims of the MAR, their lobbying was not a public-spirited attempt to improve the quality of service for consumers," wrote Powell, a Massachusetts Real Estate Sales Person’s licensee, albeit on inactive status. "Instead, it is a case of an industry lobbying group succeeding in getting regulations passed to limit competition."
According to the report, before the continuing ed requirement, a licensee could maintain the license indefinitely by paying an annual renewal fee. But adding the professional education requirement raised the expense of maintaining a licenses, shoving part-time agents who might have done an odd sale here or there out of the profession, the report suggests.
Following the adoption of the requirement in 1999, the number of licensees in the state dropped by more than half, according to the authors’ research.
But the decrease seems to have had little effect on the quality of service for consumers. The report examined the number of complaints about agents, as well as the number of complaints resulting in disciplinary action by the licensing board, as a measure of service quality. The authors found that the change in the number of agents didn’t affect the number of complaints at all. What it did do, they suggest, was "increas[e] the incomes of remaining agents by 17 percent."
"The agents who were pushed out of the market by the continuing education requirement were apparently not of any lower quality even if they were only partâ€time agents," Powell and Vorotnikov wrote. "Also, there is no indication that the classes themselves increased the quality of the remaining agents. These results are directly contrary to the claims made by the realtors’ associations that these continuing education requirements were in the public interest."
MAR representatives, of course, had a different opinion.
"We think that requiring 12 hours over two years – little more than an afternoon a year – is a minimum level of education and is hardly a barrier. For most families, real estate is the biggest investment they’re going to make. To require an afternoon a year for the people who are going to help them, we think makes sense, and to say that it doesn’t, makes no sense," MAR CEO Rob Authier told Banker & Tradesman. "We’re definitely for education. We’d like to see more."
The group pointed out that it now sponsors free online options for Realtors to complete the requirement, and that the professional licensing board offers many options attuned to different aspects of the industry, ensuring that even specialists like commercial brokers are receiving useful instruction.
"The idea that six hours is a major hurdle to being in the real estate business doesn’t make any sense to us. We view it as an opportunity for people to educate themselves to better serve their clients," said Steve Ryan, director of government affairs for MAR. "Massachusetts was the 49th state to pass continuing education requirements. We weren’t breaking any new ground here. I’m not aware of any state that’s thinking of reducing or eliminating the requirement."
But despite arguments to the contrary, study co-author Benjamin Powell said he sticks by his research and his claims that more strident continuing education requirements unnecessarilyforced agents out of the field.
"If sacrificing six hours a year wasn’t all that much of a barrier than we shouldn’t find the huge decrease in the number of agents associated with the implementation of the continuing ed requirement," Powell told Banker & Tradesman. "We control for the other factors that should influence the number of agents and find a huge decrease caused by continuing ed. [MAR] can claim that’s not a barrier but the evidence obviously indicates they are wrong."
