12 AAC 02.530 (2) makes an exception to individual licensees being required to carry the policy if their broker maintains insurance coverage for all licensees underneath them.
What this effectively does is it makes large companies, often national franchises and members of the Realtor Association, non-impacted from the new regulations because they already have the coverage. The statute that was to go into effect six years ago, never had a bid on the policy because the pricing was unrealistic. The argument at that time was that the individual coverage expectation would be less than $200 a year. It effectively reduced resistance to the new statute because the statute did not go into effect if no master policy was available. With the adoption of SB 158 that is no longer true.
The negative impact will be for small companies or brokers who are sole proprietors. Because there are so few carriers offering coverage in Alaska, the price will be very expensive. The price may be so expensive for small brokerages that they will be forced to join large companies, basically Realtor companies or go out of business. This will have a negative impact on consumer choice, and the options available to Alaska consumers.
While the Real Estate Commission meeting this Wednesday may discuss the policy limits and price per licensee, it does not change the requirement that all licensees have Errors and Omissions insurance by January 1, 2018, whether there is a group policy or not. That statute enacted this last legislative session, SB 158, was done without fanfare. The damage to small brokerages and their ability to keep their costs low has already been done, awaiting the implementation date.
Many brokers we have spoken to are upset by this development because it may put them out of business. Some of these brokers are not actively working with clients but maintain their license to manage their own portfolio. This new statute may make operating a small brokerage financially unfeasible, and some brokers who have maintained their license for their own real estate investments, will decide to let their license lapse because they're not technically required to have one.
In an additional move that will restrict the opening of new brokerages, real estate broker training has been doubled to 30 hours effective January 1, 2017. The problem is that time is growing short to implement the new curriculum in time for the statutory increase in hours of training. Because the public notice has not yet occurred on the suggested hours, which will be a regulatory change, it is likely we will not be able to implement the new curriculum by the January 1, 2017 deadline.
Given the timeline for notification of the regulatory change, the timelines that are then allowed for the attorney general's review, after the real estate commission has approved the regulation, and the timeline the Lt. Gov. has to sign those new regulations, we may be looking as late as May before the first courses are offered.
Someone wanting to open their own company may face not only increases in training requirements, but effective January 1, 2018 there will be a further restriction in opening up a brokerage that will require three years experience as a licensee.
We are currently researching carriers and pricing for E&O coverage in Alaska. We will be sending our own survey to brokers and licensees and are happy to make the results public.
So we are looking for feedback regarding who the current providers of E&O coverage in Alaska. If you have any information regarding rates, phone numbers, or contacts for viable E&O coverage options please forward that information to me at firstname.lastname@example.org. Also if you have interest in receiving the results of the survey send me an email.
Because of the potential cost increase to small brokerages, additional business models may evolve. In order to stay in business some small brokers may have to consolidate because of the cost impact. A large company that is not a Realtor or MLS company may be formed to keep costs low. This would allow licensees that are relatively inactive to maintain their license without prohibitive costs based upon joining together, in order to get a group policy they can afford. Let me know if you would be interested in this type of company and whether Realtor or MLS non-membership or both would be your preference
Mandatory E&O insurance is still 15 months away. Broker training requirements are increasing January 1, 2017. There are licensees today that want to get their brokers or associate broker's license before the education requirements change. To support this need in the industry we are scheduling multiple broker upgrade classes. We are offering the courses both in Fairbanks and Anchorage. Additionally, our on line course is very effective and can be done at any time.
It's important to keep in mind that the broker class curriculum is defined by statute and regulations. It is not a how to pass the test class, but rather is curriculum the Real Estate Commission in the past has felt important for brokers to know. We know that many people have lost their prelicensing materials to study for the broker exam. In order to help our students pass the exam, we have included significant test preparation resources at no additional charge in our broker training program.
It's important to understand that not only must the class the taken prior to the end of the year, in addition the test must have been passed successfully, and the application to move from salesperson to broker or associate broker must be submitted prior to the end of the year.
On an additional more positive note, the speakers are lining up for this year's Maui Asset Protection and Growth Conference. It goes far beyond what we have done in the past and brings in additional speakers to address business growth, outsourcing, branding and much more. Successful authors on business growth, New York Times best-selling authors, and Tony Robbins branding expert will all be providing an incredible classroom experience. Once again the Anderson group will be providing courses on asset protection, tax savings, and business credit.
The conference has opened up to non-real estate professionals both in Alaska, the lower 48 and globally.. Others are paying over $900 for this conference but the Alaska real estate professionals are being given special pricing for a conference of only $550 with significant discounts for hotel rooms and dining at the Sheraton Maui Resort and Hotel that is being marketed globally. The networking will include international participants and promises to be the most exciting Maui Asset Protection and Growth Conference ever.
For more information on this year's conference call Cheryl at 563-3086.