PRELIMINARY PERFORMANCE REVIEW OF THE
Real Estate Commission
Proactive Enforcement Appears to
Decrease Disciplinary Activity
The Commission Should Limit Future
Expenditure Increases in Response
to Falling Revenues
The Commission has Developed an
Easy to Use Web Site
The West Virginia Real Estate Commission, created
in 1937, has the principal purpose of protecting the public against unscrupulous
practices of real estate agents. The Commission is composed of three members,
two of whom are to have been employed as real estate brokers or salespersons
for at least ten years. The third member is a representative of the general
public. Members are appointed by the governor by and with the consent of
the Senate. They serve four-year terms. The Commission meets on a monthly
basis. Members are compensated at a rate of one hundred dollars per day
while conducting Commission business. Members routinely receive compensation
for between three and five days per month. The Commission has six employees
including an executive director, a deputy director, an education director,
an investigator, and two secretaries.
The program of this agency can be generally classified into administration
and enforcement. The administration functions include the categories:
All fees collected by the Commission are paid by the executive director
at least once a month into the State Treasury fund designated as the Real
Estate License Fund. These fees pay for salaries and expenses including
the printing of an annual directory of licensees and for educational purposes.
The Commission's expenditures cannot exceed the revenue it collects.
Willful failure to pay any of the fees is just cause for revocation of or refusal to issue or renew a license. The last fee increase took effect in FY 1994 when eight of the twelve fees collected were raised. The Commission charges the following license fees:
License Fee Schedule
|Type of Fee||Amount|
|Examination Fee||$25, with no additional fee for second examination|
|Broker's Renewal Fee||$80, payable by the thirtieth day of June each year|
|Salesperson's Renewal Fee||$40, payable by the thirtieth day of June each year|
|Branch Office Fee||$80|
|Renewal of Branch Office License||$80|
|Transfer of Salesperson's License||$10|
|Duplicate License or Certification||$10|
|Change of Name||$10|
|Change of Office||$10|
The Commission can refuse a license for reasonable cause and can revoke
or suspend a license for unethical conduct as defined in §47-12-11.
Upon its own motion or the receipt of a verified written complaint, the
Commission determines the facts and if warranted holds a hearing for the
suspension or revocation of a license. Any applicant or licensee, or aggrieved
person has the right to appeal any adverse ruling within thirty days of
the service of notice of the action of the Commission.
The Commission does not act upon certain types of complaints. A statement
on the Commission's Web site describes the types of complaints in which
it will and will not act.
The Real Estate Commission regulates real estate licensees. The Commission is not empowered to enforce, interpret, modify, rescind or cancel listing agreements, purchase and sale agreements or any other contract, or to order the return of earnest money, award damages, settle real estate commission fee disputes or otherwise settle claims. If a licensee is found guilty of a violation of the Real Estate License Law or Administrative Regulations, the Commission has the authority to take disciplinary action against that licensee.
The Commission is authorized to conduct or to assist other entities
in conducting real estate courses for applicants. It may incur any expenses
in connection with these courses. The Commission also approves continuing
education courses for licensees. WVC §47-12-7A requires each licensee
to complete seven hours of continuing education, with each hour equal to
fifty minutes of instruction.
Issue Area 1: The Commission's Proactive Enforcement
by its Full-Time Investigator Appears to Decrease Disciplinary Activity
When Compared to Surrounding States's Real Estate Licensure Agencies.
Table 2 illustrates the number of complaints received by the West Virginia Real Estate Commission and disciplinary actions taken. The category of complaints labeled "tabled" include four from 1996 which were tabled indefinitely. Two of these involved on-going litigation and any action by the Commission was delayed for that reason. The complaint that was tabled in 1998 required additional information and was acted upon in January 2000. The complaints dismissed by the Commission frequently deal with the terms of a real estate contract which are dealt with through the court system or otherwise fall under the categories of complaints that the Commission does not act upon. There is no provision in §47-12 of the West Virginia Code which authorizes the Real Estate Commission to enforce, interpret, modify rescind or cancel listing agreements, purchase and sale agreements or any other contract. Other complaints dismissed by the Commission include those that, upon investigation, clearly involve no violations of the Code or administrative regulations.
Number of Complaints and Disciplinary Actions in West Virginia
|Calendar Year||Complaints Received||Complaints Dismissed||Complaints Tabled||Complaints Acted upon||Cease and Desist||Consent Decree||Reprimands|
As Table 3 illustrates, the West Virginia Real Estate Commission consistently
takes fewer disciplinary actions in proportion to the number of licensees
in the State than its counterpart licensure agencies in surrounding states.
Table 3 lists the numbers of both complaints and disciplinary actions per
1,000 licensees for each year from 1996 to 1999. These ratios show that
West Virginia's Real Estate Commission ranks last among the States listed
in the number of disciplinary actions taken each year, while at the same
time, the Commission consistently receives the smallest proportion and
number of complaints regarding its licensees. These data indicate that
there appears to a lower level of demand for disciplinary actions in West
Virginia than in surrounding states given the State's much smaller numbers
of licensees and complaints.
Comparison of Disciplinary Actions Between West Virginia and Surrounding States
|Resulting in Disciplinary Actions||Ratio
Actions Per 1,000/
Complaints Per 1,000
|Data Source: The Association of Real Estate License Law Officials (ARELLO) Digest of Real Estate License Laws and data received from The Maryland Real Estate Commission and The West Virginia Real Estate Commission|
Compliance Reviews Conducted by the Commission
While disciplinary statistics may appear
to suggest a lower level of activity in West Virginia than in surrounding
states, it must be recognized that the Commission makes considerable efforts
to be proactive in its enforcement activities. The investigator employed
by the Commission makes 300-400 compliance reviews of licensed brokers
each year. These reviews include audits of the brokers' Trust Fund Accounts,
which are maintained by brokers with all funds entrusted to them in the
course of real estate transactions. The investigator also examines compliance
with other requirements of the Code and administrative rules. Most
infractions discovered during these reviews are minor in nature such as
failure to display licenses, the use of improper signs to mark the business,
and minor discrepancies in the broker's Trust Fund Account. These reviews
may be an important reason why there are so few complaints made against
licensees in West Virginia. The Commission's proactive approach to enforcement
may serve as a deterrent to ethical and legal violations. The familiarity
with brokers around the State that the completion of these reviews gives
the Commission may also reduce the need for lengthy investigations after
complaints have been filed. Since the Commission ensures that brokers
are familiar with the legal requirements under which they must operate,
the incidence of severe violations may also be reduced. This may explain
why there are so few disciplinary actions per 1,000 licensees in West Virginia
than in surrounding states.
When compared with the levels of disciplinary
activity maintained by surrounding states, the Commission takes fewer disciplinary
actions. West Virginia consistently maintains a lower level of disciplinary
activity in proportion to the number of licensees in the State. At the
same time, West Virginia's Real Estate Commission receives fewer complaints
than corresponding agencies in surrounding states. While the Commission
takes fewer disciplinary actions per 1,000 licensees than surrounding states,
this may be the result of a determined and proactive enforcement effort,
since the investigator employed by the Commission conducts 300-400 compliance
reviews among licensed brokers annually.
Issue Area 2: The Commission
Should Limit Future Expenditure Increases in Response to Falling Revenues
and to Maintain its Self-Sufficiency.
Expenditure patterns for the Commission
have changed considerably during the period from FY 1994 to FY 1999. As
Table 4 illustrates, total revenues have decreased slightly, but steadily
each year. At the same time, total disbursements have risen sharply each
Real Estate Commission Revenues and Disbursements
|FY||Total Revenues||Total Disbursements||Excess Revenues Over Disbursements|
Increases in expenditures have resulted,
in large part, from new staff members and increased salary expenses during
the period examined. An education director, an investigator, and a secretary
were hired after the Legislature approved staff increases in 1993. A ruling
from the Human Rights Commission later required the Real Estate Commission
to increase the salary level of one employee. It must be recognized that
during 1999, the last year examined in this review, expenditure levels
were greatly reduced from the previous year, but were slightly more than
in 1997. This indicates that the growth in expenditures was the result
of the hiring of new staff and unusual circumstances, particularly in 1998.
Declining Numbers of Licensees
Table 5 illustrates the decline in the
numbers of real estate brokers and salespersons currently licensed and
in the number sitting for examinations. Since FY 1994, the total number
of licensees has fallen by almost 1,000 or nearly 10%. The number of applicants
sitting for the salesperson examination in FY 1998 (802) was 22% fewer
than in FY 1994 (1,028). Given the historical trend towards decreasing
numbers of licensees and the fact that the fewest number of applicants
over the period studied sat for exams in FY 1999, the Real Estate Commission
should be prepared for further decreases in total revenues. The Commission
should, therefore, take steps to ensure that the historic trend towards
sharply increasing expenditures does not continue in future years.
Numbers of Current Licensees and License Applicants
|FY||Total Licensees||Broker Examinations (% passed)||Salesperson Examinations (% passed)|
|1994||9,476||97 (39%)||1,028 (65%)|
|1995||9,367||108 (44%)||956 (62%)|
|1996||9,198||70 (51%)||1,020 (48%)|
|1997||9,094||50 (48%)||841 (71%)|
|1998||8,787||64 (52%)||802 (58%)|
|1999||8,533||62 (63%)||691 (71%)|
The Commission has Adequate Funds for
the Needs of the Immediate Future
An examination of the funds currently maintained
by the Commission in the State Treasury indicates that while annual license
fee revenues continue to fall, the budget surplus maintained in previous
years has enabled the Commission to save a considerable amount of money.
At the end of Calendar Year 1999, the Commission had a cash balance of
nearly $955,000 in its Real Estate License Fund. The Commission, therefore,
has a comfortable reserve of funds available to it for management purposes.
This provides flexibility when presented with unexpected expenses such
as the costs of legal representation which the Commission had to incur
in FY 1998. It will also permit the Commission to operate with the current
schedule of license fees for several years, even if the Commission's expenditures
somewhat exceed revenues. These excess funds should not, however, be viewed
as a permanent solution to the long-term decrease in license fee revenue.
As was mentioned earlier, the Commission's
expenditures were reduced to $404,439 during FY 1999, which was nearly
the same amount as in FY 1997, after rising considerably to $504,257 in
FY 1998. If expenditure levels remain constant in future years, as it appears
they may, the danger posed by decreasing revenues will be greatly reduced.
Although the Commission currently
has adequate funds to compensate for possible budget shortfalls over the
next few years, it would not be wise to allow the growth of expenditures
to routinely exceed revenues. If this trend were to continue, eventually
a license fee increase would be required, when the excess funds currently
held by the Commission were exhausted. Careful planning and management
of the Commission's budget at the present time may avert a future crisis.
Expenditure patterns for the Commission
have changed considerably during the period from FY 1994 to FY 1999. Total
revenues have decreased slightly, but steadily each year. At the same time,
total disbursements have risen sharply each year. Since FY 1994, the total
number of licensees has fallen by almost 1,000 or nearly 10%. This has
led to a corresponding decrease in licensure revenue.
At the end of Calendar Year 1999, the Commission
had a cash balance of nearly $955,000 in its Real Estate License Fund.
This reserve of excess funds permit the Commission to operate with the
current schedule of license fees for several years, even if the Commission's
expenditures somewhat exceed revenues. These excess funds should not, however,
be viewed as a permanent solution to the long-term decrease in license
fee revenue. If the growth in expenditures continues, eventually a license
fee increase will be required.
The Commission should take measures
to limit the growth of future expenditure levels in response to falling
Issue Area 3: The Commission
Has Developed an Easy to Use Web Site With Links to a Wide Range of Information
Relevant for Real Estate Brokers and Salespersons.
In addition to containing the West Virginia
license law and administrative regulations, the Web site has links to general
information on the Commission including its authority with respect to the
filing of complaints and directions to the Commission's office and the
testing site. The public is directed to contact the Commission in order
to obtain complaint forms as they are not available on-line. The Web site
also provides links to information necessary for obtaining a license such
as exam application deadlines and testing dates as well as a description
of testing procedures. Another set of links provides information on pre-licensing
education and continuing education requirements, as well as education providers.
Downloads available include application forms needed by different classes
of licensees, as well as other forms needed by licensees. The availability
of these documents on-line greatly facilitates licensees' adherence to
the various reporting and documentation requirements of the Code.
The Commission has clearly sought to make maximum use of the Internet to
provide information to its licensees.
The Commission should continue to maintain
the wide range of information and documents currently available on its
The Commission should enhance its web site by adding a printable complaint form to it.
1. During FY 1998, a claims disbursement of $55,184 was incurred. This legal action associated with this disbursement is on-going. This situation, coupled with unusually large information systems disbursements of $32,850 largely account for the increase in total disbursements for this year.