The Department of Real Estate (DRE) has raised its statutory and licensing fees. It has been 27 years since the last increase. The fee increase was effective July 1, 2024.
At first glance, you might say the fee increases look large – 43% to 50% to renew a license. Placed in context, they are not large by half. DRE’s fees for statutory and licensing courses had not increased since 1997. In these 27 years, we have had a run of 100% increase in consumer inflation.
A dollar today only buys 51% of the needs a family bought in 1997. Thus, the DRE has been operating at declining levels for years. It was at the point where its ability to serve the public was compromised.
Some comparison is needed: Without concern for consumer inflation – or value of services – brokerage fees are set at 6% of property transaction prices. That is pay based on asset inflation – real estate values – not a household’s consumer goods inflation. And asset inflation since 1997 has way more than doubled brokerage fees.
Yes, we are aware that real estate transactions of all types – mortgage originations, leasing, sales – are experiencing greatly reduced turnover of occupancy and ownership. Thus, annual brokerage fees statewide are down significantly. This is about timing. But as the real estate market is clearly entering a recession, any increase in demands on licensees for cash is a tough sell.
As you know, the DRE is controlled by the California legislature, yet the DRE is not tax-funded. Thus, the sole financing for DRE operations is through the collection of fees from the real estate industry it oversees. No fees (read, taxes) are received from the other side of real estate the DRE serves, that being the consuming public.
All these fee increases were legislatively approved, which set a new maximum limit. However, the DRE chose not to increase fees to the maximum amounts approved. Likely a wise decision. The DRE will need to increase fees to fully cover operations in succeeding years. The data-based outlook for DRE’s fees from renewal and licensing over the next three or four years is not pretty.
Recall that once licensed, California agents and brokers only need to renew once every four years. You pay a modest renewal fee to be legally authorized – by the legislature – to receive brokerage fees for services. No other authorization exists to enable you to practice the profession as agents for owners, buyers, tenants and lenders, and, critically, give you the right to collect a fee.
For a comparison of fees you pay for stuff, consider a comparison for the rather inconsequential, once-every-four-years renewal fee you must pay to the DRE. In direct contrast to DRE fees, some licensees pay massively distorted annual dues demanded to be a member of what is simply a trade association which provides a declining level of camaraderie, such as the California Association of Realtors® (CAR).
A quick back-of-the-envelope math: when a licensee spreads the payment of the new $350 agent renewal fee over four years, this equals $87.50 annually. And annually, the dues paid to CAR are closer to $700 – and give you zero rights in return.
And of course, CAR membership is optional: DRE licensure is not. Trade union membership is neither required nor needed to practice real estate — and by state law clearly cannot be required to access any multiple listing service (MLS). But your DRE license must be maintained in order to practice real estate and enforce collection of a fee.
When you find yourself sweating over the DRE fee increase, perhaps a rational review of the “rights” acquired and associated costs of CAR membership would be your wisest move.
The health of the real estate industry depends in large part upon the financial health of the DRE as its policing unit. The bottom line result from DRE oversight: improved homeowner protection in mortgage originations, property management and leasing disciplines, and property sales transactions. CAR adds nothing to the health of the industry, all while hindering licensees at the MLS level and extracting their wealth.
Ultimately, the fee increase is both necessary and modest.
