State Laws Proposed to Limit ‘One-Stop’ Home Buying
Arguing that additional safeguards are needed to protect consumers against deceptive business practices, proponents of affiliated business legislation have introduced bills in Illinois and Colorado that could interfere with the ability of builders to provide their home buyers with readier and less expensive access to mortgage financing.
Two bills on this issue have appeared so far in this year’s state legislative sessions:
- llinois House Bill 4731 would make it illegal to condition or refuse the sale of residential or commercial property based on a purchaser’s choice of mortgage, title, appraisal or insurance provider. It would also make it illegal to increase the cost of the property based on a purchaser’s choice of these providers. In addition, the bill would prohibit a person or entity selling or transferring real property from requiring a purchaser to use a specific provider as a condition to receiving an incentive, promotion or special offer. This bill has not moved forward since it was referred to the House Rules Committee.
- Colorado House Bill 1141, which recently passed the House Business Affairs and Labor Committee, would establish a new state regulatory structure for affiliated businesses in the state. The measure represents a compromise on legislation that would have mandated title agencies to maintain at least 40% of their business with unaffiliated sources.
Builders have pointed out that there are already laws in place that accommodate healthy competition while providing safeguards for consumers.
“The practice of offering incentives is expressly allowed and regulated in the federal Real Estate Settlement Procedures Act (RESPA), which also provides that a builder cannot charge more for the home on the back end,” said Eric Menyuk, assistant general counsel for California-based Ryland Group, Inc.
Additionally, federal and state consumer protection laws protect buyers from the alleged harm cited by supporters of the Illinois and Colorado legislation.
Empirical data suggest that some home buyers prefer the “one-stop shopping” approach to home buying, and that one-stop shopping offers potential consumer benefits such as convenience and lower costs.
The most recent survey on the subject, performed in March of 2002 by Harris Interactive, found that 82% of the 2,052 recent and prospective home buyers who were polled said that they would “strongly” or “somewhat” strongly consider using a one-stop shopping service for their home purchase.
The study also found that more than 90% of home buyers who did not use one-stop shopping programs believed that if they had used one, they would have had a better overall home-purchase experience.
For more information on affiliated business legislation, e-mail Alex Strong at NAHB, or call him at 800-368-5242 x8279.