Real Estate Pros Anxious for End to State Shutdown

During the state shutdown, the Commerce Department isn't processing licenses and renewals for some real estate professionals-which is leaving some without work and keeping new agents from entering the field. And an extended shutdown would have a much larger impact, which could be felt by homeowners and prospective buyers.

Among the many industries that are anxiously awaiting an end to the Minnesota state government shutdown, the real estate industry hopes that the adverse effects it has experienced will soon be alleviated.

Because if the shutdown doesn't end soon, things will only get worse.

Christopher Galler, chief operating officer of the Minnesota Association of Realtors, told Twin Cities Business on Monday that the shutdown has already affected some of the state's real estate agents, all of which are required to be licensed.

Agents with active licenses are unable to transfer from one brokerage to another or to launch their own businesses, because the Commerce Department isn't processing the necessary paperwork. And if a brokerage is shuttered during the shutdown, its agents' licenses are “frozen” and they cannot move to another brokerage, according to Galler.

Individuals seeking their first real estate licenses cannot formally apply to the state-meaning that no new agents can enter the field during the shutdown. Galler said that an average of about 100 new real estate agents and brokers typically enter the business each month in Minnesota, based on his organization's membership data.

Agents must renew their licenses every two years by filing for a renewal and completing 30 hours of continuing education. About half of the state's real estate agents had a June 30 deadline to renew-and agents who missed that deadline can no longer conduct business in the state, because the Minnesota Department of Commerce isn't processing renewals.

“For a lot of our agents, that hasn't been a problem,” Paul Eger, vice president of governmental affairs for the Minnesota Association of Realtors, said. But his organization, which represents about 19,000 members, has received “a significant number of calls and e-mails” about the issue, in part because some agents waited until the last minute.

For example, an agent may have completed his or her necessary continuing education hours five days before the June 30 deadline. But the education provider has 10 days to submit the information to the state-which means the information may not have been processed in time. “They are without an active license,” Eger said, adding that missing the deadline in the past would have likely resulted in a “period of inconvenience”-not unemployment.

And without the Commerce Department's oversight, real estate companies are in a sense unable to fire their agents. Companies can terminate the independent contractor's agreement with an agent, but that termination isn't officially recorded by the state agency. A fired agent would “be in limbo and unable to transfer” to a different company, Galler explained.

Matthew Baker, a vice president for Coldwell Banker Burnet who oversees the company's Minneapolis Lakes office, said that the inability to apply for licenses or license renewals has hurt some in the industry. His company “communicated a lot” internally to ensure that licenses were renewed on time, but the shutdown has kept new agents from getting to work. “We have a couple of people who have completed classes, but they now have to wait to formally apply” for their licenses before they can perform work for Coldwell Banker Burnet.

Adverse Affects Could Grow

If the shutdown continues, it will affect more and more real estate professionals-and it could negatively impact homeowners as well, according to Galler.

A key concern: About half of the state's real estate appraisers must renew their licenses by August 1, but they won't be able to if the shutdown continues. If those appraisers' licenses expire, “the other half can't pick up all of the business,” and it will “clog up the system,” Galler said.

For example, first-time homebuyers planning to close on a purchase in mid-August could experience delays in lining up financing, but they will likely have already given notice to their landlord of an expected move-out date. If deals are delayed, some of those people could “in effect become homeless,” Galler said. The commercial real estate industry could experience significant issues, too, if appraisers are unable to renew their licenses.

Galler said that his organization intends to go before a court-appointed special master on Friday, assuming the shutdown has not ended, to plead the case that licensed real estate professionals in good standing should be able to continue to work past their renewal deadlines even if they're unable to renew their licenses due to the shutdown.

In addition to appraisers, other key professionals involved in real estate transactions-like closing agents and some insurance providers-could be in the same boat if the shutdown continues, according to Eger. “We're very concerned about the impact the shutdown will have on the industry as a whole,” he said, adding that new “adverse impacts are coming to light every day.”

Media reports indicate that the shutdown has also complicated home building, as companies that rely on state inspections could face costly delays. For example, FOX 9 News reported that state inspectors aren't available to conduct inspections of electrical work, causing projects to stall.