Don't trust realtors? New ethics regulations will restore confidence

Many potential apartment buyers encounter a common problem of distrust towards realtors. This distrust often stems from preconceptions and past experiences where buyers felt a need for more transparency, excessive pressure to sell a property, or received only partial information. Many intermediaries are perceived as motivated mainly by personal interests and immediate financial gain instead of providing honest and professional service.

To restore trust in real estate brokers, the Interior and Environmental Protection Committee, chaired by MK Yaakov Asher, recently began discussing the Real Estate Broker Regulations (Professional Ethics), the 2024 Law, submitted by the Ministry of Justice.

The regulations establish professional ethics rules for real estate brokers licensed by the ministry. These rules dictate the expected behavior of brokers, including duties when representing more than one party in a real estate transaction. For instance, the regulations state that a real estate broker must not provide information about the property or transaction that they knew or should have known was incorrect or misleading.

During the discussion, Section 15 of the regulations caused outrage among real estate agents' representatives, who requested its removal. This section requires brokers to disclose agreed-upon brokerage fees, including their calculation methods. Brokers questioned the relevance of such disclosures, asking, "Why is it relevant to know how much each party pays?"

Points raised by the discussion in the Interior Committee

Attorney Amir Haran, Head of the Division for Regulation of Professions at the Ministry of Justice, explained that the Realtors Law, enacted in 1996 and amended in 2012, needs further updates due to significant changes in the real estate world over the past 30 years.

Today, there are 21,290 active realtors who pay a fee. Haran emphasized that recent studies, including an international comparative study, a comprehensive survey, and round-table discussions, revealed a need for better-defined regulations to improve citizen services.

Lotan Lasky from the Ministry of Justice elaborated on a survey it conducted that revealed significant dissatisfaction with rental transactions and gaps in core services provided by brokers. Over 30% of respondents reported unfair practices, including brokers providing incorrect information or placing payment burdens on buyers who received no service. 

This issue is prevalent in high-demand areas. Lasky noted that the new regulations could save the economy NIS 196 million annually by reducing transaction errors and subsequent civil lawsuits. The ministry promised to review the regulations' impact within five years of publication to ensure goals are met.

Noi Hasson, a disciplinary prosecutor at the Ministry of Justice, stated that they receive about 50 complaints annually against real estate brokers. She anticipated an increase in complaints due to the new regulations but noted that this had been considered. Hasson mentioned that some comments from the Chamber of Realtors were accepted during the formulation process.

The committee's legal advisor, Adv. Tomer Rosner, highlighted two fundamental issues currently unaddressed in the regulations: the need to distinguish between sale and rental transactions and between commercial and residential properties. Ministry representatives acknowledged these points, agreeing to refine the regulations accordingly.

Chairman of the Interior Committee MK Yaakov Asher called for public comments to move the issue forward towards a vote, noting the lack of position papers typically received before such discussions.

Ron Novotny, CEO of Anglo-Saxon Realty, welcomed the proposed regulations as beneficial for the brokerage industry. However, he cautioned against imposing excessive costs on brokers, which could ultimately be passed on to customers. A representative from Re/Max raised concerns that over-regulation could harm clients.

Nechama Bugin, Chairperson of the Chamber of Appraisers, highlighted issues with unqualified individuals providing property valuations, which undermines certified appraisers and often leads to legal conflicts. Shira Avidov from the Civil Rights Association demanded that the ethics rules explicitly forbid brokers from engaging in discriminatory practices.

Itzik Levy, chairman of the National Chamber of Real Estate Brokers,  expressed optimism about the regulations, seeing them as a step towards enhancing the profession's value. He thanked attorney Amir Haran and his team for their efforts in implementing comprehensive ethical guidelines for all brokers in Israel.

Levy addressed concerns about the requirement for brokers to disclose their fees, arguing that such transparency could infringe on privacy and is not a common practice globally. He emphasized the importance of reaching a consensus on the depth of information that brokers should provide to clients during transactions.

The proposed regulations mark a significant move towards improving the professionalism and transparency of real estate brokers in Israel. The Interior Committee continues to seek public input to refine these regulations before a final vote.