CS FOR HOUSE BILL NO. 169(FIN) "An Act relating to the educational requirements for certain real estate brokers, associate brokers, and salespersons with new or suspended licenses; relating to review of real estate transactions by attorneys or associate brokers; relating to the requirements for a real estate broker license and an associate real estate broker license; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. HEATHER NOBREGA, Staff to Norm Rokeberg, the bill's sponsor, stated that this bill would require newly licensed real estate professionals to undergo 20 hours of practical education courses, as determined by the Alaska Real Estate Commission, during the first year after they receive their license. The bill would also allow a real estate broker to retain an attorney or associate broker to assist in reviewing each real estate transaction before the transaction closed, as reflected in Sec. 12 page seven lines 25 through 28. This would assist larger brokerage firms with the onerous "duty" of having to review each file before it closes. 5:46:56 PM Co-Chair Green understood that in that case, the primary broker would still be responsible. Ms. Nobrega affirmed. Senator Olson asked regarding the current continuing education requirements. Ms. Nobrega responded that the current continuing education requirement is 20 hours every two years. That requirement would continue unaffected. The 20 hours of practical education that newly licensed real estate professionals must undergo during their first year of practice would involve such things as contract writing and client interaction. Currently, the broker assists with teaching the everyday practices. There is no established education guideline for new realtors, and each firm differs in its actions in this regard. PEGGY ANN MCCONNOCHIE, Representative, Alaska Association of Realtors, explained that a person endeavoring to receive their real estate license must undergo 20 hours of prescribed pre-licensing education. After receiving the license, the individual must take 20 hours of specified education courses and an additional 12 hours chosen from a list of course options developed by the Commission. Ms. McConnochie noted that 18 other states have adopted similar post-licensing legislation, boosted by the concern that the newly licensed realtors should "have actual practical education as to how to do the job they are supposed to do". The states that have implemented the post-licensing regulations have experienced a dramatic reduction in public complaints caused by the realtor's lack of experience. The industry has determined that this action would improve the industry overall. The new regulations would also require that an associate broker who upgrades to a broker take the 20 hours of practical education during their first year as a broker. Senator Olson ascertained therefore that the real estate industry is supportive of the legislation, even though taking the additional courses would incur an expense. Ms. McConnochie affirmed the industry's support of the additional education requirement. Co-Chair Green asked for confirmation that Legislators would not receive complaints from those affected by the legislation. Ms. McConnochie shared that 95-percent of the respondents to a survey of both long and short-term realtors that was conducted by the Alaska Association of Realtors "wholeheartedly" supported the bill. The other five percent indicated acceptance of the requirement. She shared that while she, a broker, had been initially concerned about having to provide the additional education to new licensees she is now convinced of its merit. "No phone calls will come your way." Co-Chair Green asked regarding the schedule of the post-licensing requirement, specifically if it would typically occur over two weekends. Ms. McConnochie responded that the schedule would be dependent on the needs specific to the licensee or an area as well as the instructor. The training could be delivered in a variety of formats, including via the Internet, in order to insure that new licensees had access to the required courses. The courses would require a minimum of three days. That time could be stretched out over several weeks. 5:51:59 PM Senator Stedman understood therefore that individuals would not be required to travel to a central location such as Anchorage. Ms. McConnochie stated that that is "correct"; there would be no desire "to burden people with the cost of a plane trip". The only requirement is that the education be received. The courses would be available throughout the State. She informed that in her role as an educator she has conducted training by correspondence. "Quality education would transpire no matter where the licensee practices." Senator Stedman asked for further information as to how the distance delivery would be accomplished. Ms. McConnochie expressed that there would be a variety of delivery systems, including "face to face" or correspondence courses. The licensee could choose the method they preferred. Senator Stedman understood that each real estate office would continue to be limited to having one broker. Therefore, he understood that other brokers in that office would be deemed associate brokers. Ms. McConnochie affirmed. She noted that while there could only be one broker, there could be any number of associate brokers. Rather than setting up their own real estate office, these individuals have chosen to associate with another broker. The allowance of only one broker would assure that there was one person responsible for the proceedings at that particular office. 5:53:56 PM Senator Stedman opined that there is a difference between 20 hours conducted in a classroom setting and 20 hours conducted via correspondence. Ms. McConnochie understood Senator Stedman's position because, in her role as an educator, she has conducted both face-to-face and correspondence formatted courses. The Real Estate Commission would be responsible for developing, reviewing, and approving the courses. As she also serves as chair of the Commission's education subcommittee, she shared that the subcommittee is developing "matrixes for the Real Estate Commission" that would enable them to determine what hands-on material should be addressed in, for example, a Contracts class. This effort would assist in developing a program that would meet the spirit and purpose of the statutes and regulations. 5:55:25 PM Senator Stedman noted that there are national firms that could provide continuing education correspondence courses for a variety of professions. Those firms utilize computerized test forms. He asked whether such firms would be utilized or whether the Commission would develop its own program. Ms. McConnochie stated that the Commission would be developing its own program. Individuals could not enroll with a national company to meet the 20-hour requirement, as the goal would be to develop a program specific to the needs of, for instance, the real estate market in Juneau. National courses would not address issues associated with the various parts of the State. For instance, the Juneau course would address such local issues as avalanche or hazard zones, and a course in Fairbanks would address issues related with ice conditions. In general, continuing education courses would "assume" that one would already possess the basic knowledge of the field. Therefore, the effort would be "to improve upon those skills" and provide a "better class" of realtors. This would further protect the public. Senator Stedman asked for further clarification regarding the frequency of the 20-hour requirement proposed in this bill. In addition, he asked whether the requirement would apply to all licensed realtors. 5:58:06 PM Ms. McConnochie clarified that all licensed realtors must take 20- hours of continuing education courses every two years. This legislation would specifically require that, within the first year of a new realtor acquiring his or her license, they must take an additional one-time only 20-hour post-licensing practical education course. This would also be a requirement were a licensed realtor to upgrade to an associate broker position or were an associate broker to upgrade to a broker position. The industry's belief is "that everything changes" and it is the industry's "responsibility to keep up on new information" in order for provide quality service to clients. Senator Stedman asked for confirmation that all brokers, regardless of how long they had their broker's license, must undergo continuing education courses every two years. Ms. McConnochie affirmed that there were "no exclusions". All licensed realtors, associate brokers, and brokers must take 20 hours of continuing education courses every two years. Senator Olson asked regarding the cost of the course. Ms. McConnochie responded that the cost could not be determined until the program was developed. "A variety of different types of courses" would be anticipated. Major brokerage firms in large communities such as Anchorage and Fairbanks would likely provide "in-house post licensing education". How much or whether they would charge their agents is an unknown. The price would depend on what the market would bear, and what the licensees would be willing to pay. The bill would allow the Commission to have until January 1, 2006 to develop the program. This time would be sufficient. 6:00:34 PM Senator Hoffman ascertained that the 20-hour course would not be a pass/fail type of program. 6:00:49 PM Ms. McConnochie responded that the State's Real Estate Commission currently requires that an individual must pass a correspondence course with at least a 75 percent or better test grade; testing in a face-to-face course is determined by the instructor. The Commission's education subcommittee would be recommending to the Commission that, in order to pass the practical post-licensing course, the individual must demonstrate the ability to complete the work taught. Co-Chair Wilken moved to report the bill from Committee with individual recommendations and accompanying fiscal notes. There being no objection, CS HB 169(FIN) was REPORTED from Committee with previous zero fiscal note #1 dated April 6, 2005 from the Department of Commerce, Community and Economic Development. 6:02:01 PM