Real Estate Brokers’ Duties to Their Clients: Why Some States Mandate Minimum Service Requirements

Anupam Nanda
Katherine A. Pancak

As with the articles in this issue, this introduction reflects the views of the authors and does not necessarily reflect the views of the U.S. Department of Housing and Urban Development.

This study attempts to determine why certain states have adopted real estate broker minimum service laws in the United States. The federal government and academic literature assume that such laws were the result of anticompetitive industry collusion and, therefore, serve no consumer protection justification. Using hazard models and state data over 8 years, however, we find that factors reflecting state brokerage influence—strong industry associations and broker membership on licensing boards—do not result in the enactment of minimum service laws. Factors suggesting consumer protection motivations—greater number of complaints against brokers, stricter prelicensing requirements, and a Democratic state legislature—increase the likelihood of law adoption.