The Ministry of Justice is implementing reforms in the real estate brokerage industry, including the development of ethical rules and potential alterations to how brokers are trained. This is in direct contradiction to the previous intention of removing brokerage from the ministry’s supervision. Currently, the Division for Regulation of Professions and the Registrar of Realtors are responsible for supervising real estate brokers.
In a recent survey conducted by the Ministry of Justice, public satisfaction with the brokerage industry was examined. While apartment buyers expressed overall satisfaction with broker conduct, apartment renters had criticisms. The ministry believes that power imbalances often result in brokers collecting fees from tenants rather than apartment owners. Additionally, some customers feel that brokers do not provide valuable services. The intended reforms aim to address these issues.
Despite the addition of 20,000 brokers passing brokerage exams over the last five years, the number of registered brokers with the Ministry of Justice has significantly decreased recently. At the beginning of the month, only 20,000 brokers held active licenses, down from 8,500 from the end of Q1 and 6,000 from the end of last year. The drop is due to brokers not paying the annual license fee, symbolizing a crisis in the industry with fewer transactions in recent years. In 2019, the Ministry of Justice attempted to remove various supervisions and restrictions on the brokerage industry to transfer supervision to the Consumer Protection Authority. However, this was met with opposition, and the Minister of Justice did not implement the section of the law allowing the development of ethical rules. The current reforms demonstrate that the government is still hesitant about deregulating the industry.
The real estate brokerage industry is before a significant change: the Ministry of Justice is promoting a number of reforms, including the formulation of ethics rules, and possibly also changing the way brokers are trained. The move comes in complete opposition to the intention to remove the brokerage industry from the ministry’s supervision several years ago. Today, real estate brokers are subject to the supervision of the Division for Regulation of Professions in the Ministry of Justice, headed by Amir Haran, and of the Registrar of Realtors Eti Moyal.
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Recently, the Ministry of Justice examined the level of public satisfaction with the brokerage industry. In this framework, satisfaction questionnaires were distributed among the public, and from the responses it was clarified that while apartment buyers generally feel satisfied with the conduct of the brokers, the main criticism comes from the apartment renters.
The Ministry of Justice believes that part of the issue lies in the fact that most of the power lies with the apartment owners, which encourages brokers in the demand areas to waive brokerage fees, and collect them from the tenants. However, there are also quite a few cases where brokers advertise apartments, but the customers do not feel much value in the service provided to them. The reform is intended to answer this.
A very sharp decrease in the number of intermediaries
Despite the fact that in the last five years about 20,000 people who passed the brokerage exams have been added to the real estate brokerage industry, in recent years the industry has suffered a sharp decrease in the number of brokers registered with the Ministry of Justice.
At the beginning of the month, the industry counted about 20,000 brokers with an active license, a decrease of about 8,500 compared to the end of the first quarter of the year, and of about 6,000 at the end of last year. This, after many brokers chose not to pay their annual license fee until the end of last month, which led to its cancellation. This is a dramatic decrease of about a quarter in the personnel status of the active brokers, and the lowest number of brokers since 2017.
Just last year, a record number of 8,890 people took the brokerage exam; About 70% of them passed the exams, but only 3,883 paid the license fee. The rest of those who passed the exams, preferred not to pay the fee, and perhaps postpone its realization until better days in the industry, which is currently suffering from a crisis. We note that they have the option of delaying the payment for several years, during which the exam results will be recognized for the purpose of obtaining the license.
The Chamber of Realtors and the Ministry of Justice see the main reason for the large dropout in the crisis that the real estate industry is going through, which is mainly reflected in the small number of transactions registered in it in recent years.
It is estimated that the first quarter of this year amounted to only about 6,500 transactions, a drop of more than 40% compared to the first quarter of 2022. “Those who are in the market now are only those who must buy or sell apartments,” the chairman of the Chamber of Realtors Itzik tells Globes Levi.
An unsuccessful attempt to cancel the regulation
The mediators’ law, formulated in 1996, deals with the issues faced by mediators, their work and their relationships with their clients, and it marks an important turning point in the professional and ethical levels of the profession. Until that year, any person may engage in mediation, and no supervision was applied to him, and mediators were not required to have a license. At the time, the brokerage industry suffered from a rather poor image, and attracted many complaints.
In 2019, the Ministry of Justice initiated the cancellation of most supervision and restrictions on the brokerage industry, including the certification tests for real estate brokers, and sought to transfer the supervision of apartment brokers from the Ministry of Justice to the Consumer Protection Authority.
Dover was in a real revolution in the industry. At the time, the Ministry of Justice estimated that the regulation could be reduced, but the debate on the issue was so heated, since quite a few argued on the other hand that it was the regulation that contributed to the improvement in the industry over the years, and that the volume of real estate transactions required the Ministry to continue monitoring it.
Finally, the former director general of the Ministry of Justice Eran Davidi, who served under Gideon Sa’ar in the position, turned the wheel back and stated that this was a step that was not correct at the time, among other things because the Consumer Protection Authority does not have effective enforcement measures in this matter.
At the time, the demand in the real estate market was also very high, and therefore they believed that the supervision of the industry should be continued, especially with regard to rules of ethics in the brokerage industry. However, the section of the law that allows the Minister of Justice to establish rules of professional ethics regarding the behavior and professional duties of real estate brokers has not yet been implemented .
Today, things are still far from being closed, and it is still difficult to talk about reforming the industry. It does show a considerable improvement since the brokers’ law, but the change of attitude in the ministry shows that it is still not enough, and that the government is still afraid of releasing it from the arms of regulation.