Rumors of DRE enlightenment by consolidation

California governor Jerry Brown has proposed the consolidation of the Department of Real Estate (DRE) into a bureau within the Department of Consumer Affairs (DCA), as outlined in his January 2012 budget proposal. In order to cut administrative costs and encourage efficiency, the DRE and other licensing departments would be absorbed into the DCA. The DCA exists primarily to license and oversee California’s professionals in all industries.

Other California departments involved in the consolidation proposal include the Office of Real Estate Appraisers (OREA) and the Structural Pest Control Board.

first tuesday take: The governor’s proposal would eliminate administrative redundancies and, for the DRE management, do more than just change the name on the door. The current real estate licensing scheme would not be diminished, but enhanced.

A change in management will likely improve the standards of conduct currently sanctioned but inadequately enforced by the DRE.

The DRE was established to police the competency of real estate licensees and enforce standards of conduct the public expects and deserves. However, it has evolved into a convoluted bureaucracy, which has consistently demonstrated an inability to penalize the bad actors in the real estate industry and protect homeowners from their unethical behavior. Of course, past DRE commissioners (and governors) have disagreed, seeing more in doing less. [For more information regarding real estate fraud and the DRE, see the December 2010 first tuesday article, Break the law, keep your license: real estate-related fraud and the DRE.]

The Legislative Analyst’s Office (LAO) has oft criticized the lack of education required of real estate licensees applying for their license. As evidenced by the un-tempered boom-time market which led to the crash of 2008, the disproportionate amount of client responsibility authorized for new real estate agents to undertake in relation to the small measure of education required to practice under that license generates gatekeepers with a malformed sense of ethical duty. Most have little ability to represent members of the public in the largest financial transactions of their lives.[For more information regarding the LAO criticism of DRE education requirements, see the December 2009 first tuesday article, DRE’s failure to oversee its licensees and protect consumers.]

Unsurprisingly, the DRE — with its vast history of appointing commissioners deeply rooted in California political circles — cannot adequately protect consumers without bending to the will of local trade unions. The last DRE Commissioner, Jeff Davi, served as the Director for the California Association of Realtors (CAR) before being appointed by Governor Schwarzenegger to oversee the DRE. CAR, the largest trade union in California, influences the DRE commissioner’s office to make a license less difficult to acquire in order to increase their member base, earn greater revenues and weaken enforcement against its members. [For more information regarding the DRE Commissioner’s resignation, see the May 2011 first tuesday article, California DRE commissioner resigns.]

In an effort to encourage real estate education reform and increase consumer protection, first tuesday supports elimination of the DRE Commissioner position along with the DRE’s consolidation. It is an irrelevant, titular bestowal for political purposes only; a clear contradiction to the real estate licensing scheme designed to produce well-educated licensees and screen them to protect the public from financial harm in real estate transactions. Without the DRE and its redundant figurehead, the DCA has room to establish reasonable education and practice requirements for real estate licensees similar to those enforced by the OREA.

The OREA has an initial trainee license requirement through which a newly licensed appraiser must be managed by an experienced appraiser in good standing. The experienced appraiser can only have three trainees under him at any time. Newly licensed sales agents need a two-year apprenticeship program requiring them to work alongside an experienced broker or agent before graduating into a “certified” sales agent status —an internship. [For more information about the failure of the current broker supervision scheme, see the December 2010 first tuesday article, The rabbit and the greyhound: DRE disciplinary action and broker supervision.]

Without an extensive re-work of the DRE’s licensing requirements and chain of command, real estate trade unions will continue to endorse their own members’ best interests which now means that consumer protection falls by the wayside. The governor’s proposal to eliminate irrelevant and politically oriented agencies is an idea worthy of support from the licensed gatekeepers of real estate dealings. Education and experience must be mandated and its quality controlled, free from the corruption natively inherent in every political agenda.

Re: “The Governor’s Budget Summary – 2012-2013” from Governor Jerry Brown