Watch Out for Sleazy Realtors

It's the same old saw: The economy falters, the government loses its regulatory teeth, creeps crawl out of the woodwork and consumers take it in the wallet.

Some of the blame for the growing levels of unanswered complaints against real estate agents in California goes to budgetary reductions in the government's staff to enforce the law.

Some of the blame goes to the new and growing cadre of young and inexperienced agents -- inexperienced in part because requirements for obtaining a real estate license in the Golden State are less than that of a hair stylist.

And of course, there are people in every profession who wake up every morning looking for an easy mark.

In the end, bottom-line driven consumers share some of the blame for spending more time trying to whittle down the agent's commission than they do scrutinizing an agent's experience.

Given the recent news, that's being penny-wise and hundreds of thousands of dollars-foolish.

California's Department of Real Estate said it received more than 10,000 complaints in the fiscal year ended June 30, up 29 percent from the previous year and up one-third from three years ago.

A backlog of 3,663 cases is double what it was four years ago and, as complaints have risen, the department's staff has shrunken by three workers in as many years.

The increased level of complaints and backlog coincides with a 44 percent increase in the number of real estate agents in last five years, pushing the total to about 400,000. In some areas, including Los Angeles and Silicon Valley, the number of real estate agents outnumber the number of properties for sale.

"These figures make for a cut-throat industry," says Anthony Marguleas of A.M. Realty in Los Angeles. He's authoring a book about the real estate industry and notes how easy it is to become a real estate agent in the Golden State.

To get started selling real estate in California, the state requires only about 50 hours of training. A hair stylist and chef need 30 times more -- 1,500 hours each.

At 600 hours, even an esthetician needs more training than the Californian professional who is about to assist clients in what could be his or her most valuable transaction ever.

That's a real nail biter.

However, if there is a growing problem with real estate sales performance in California, it is a problem of sizable concern. California is a big state, but the problems aren't confined to its borders.

Nationwide, the number of licensed real estate agents has swollen to 2.5 million, according to the Association of Real Estate Law Officials and NAR says membership has risen 25 percent over the last five years to more than 1 million.

"When I bought my first home, the Realtor was more than accommodating. He treated us like we were special. We felt like we were the upper class of society even though we were a young newly wed couple without two extra nickels to rub together. After closing our agent sent us a $100 gift certificate to Sears. We bought our lawn mower with that gift certificate," said Atlanta GA-area Christine Karpinski, who a decade and a half and many home purchases later has hired many real estate agents.

"Nearly 15 years later, just a couple of months ago we bought two cabins. The Realtor showed up 45 minutes late to the closing. The title company said the funds were not going to be disbursed that day and my Realtor stood up and said, 'Well, I wish you would have called me. I would not have come if I knew that you wouldn't be giving me my check,'" said Karpinski.

Karpinski said in her own, unscientific survey of investment home buyers, she thought financing was going to be their biggest headache.

"They all said 'the Realtor.' Most complaints I heard was that Realtors don't take them seriously. Other complaints were they don't take time with them and getting information necessary to scrutinize the deal was like pulling teeth," she said.

Given the special nature of real estate investments and the growing demand in second home purchases, the industry may not be keeping pace with buyers' and sellers' needs -- especially in niche areas.

Marguleas recently told RealtyTimes.com, "The fact is that many people are becoming real estate agents with a minimum of training -- because the industry makes that possible. Many real estate agents don't have much grasp of the business at all, let alone the intricacies. The typical real estate agent probably started out in another occupation and either wasn't making enough money, lost their job and couldn't find another in the same area of business, or just decided to 'give it a go.'"