SUMMARY OF: A Sunset Review of the Department of Commerce, Community, and Economic Development, Real Estate Commission, July 3, 2007.

Purpose of the Report

In accordance with Title 24 and Title 44 of the Alaska Statutes (sunset legislation), we have reviewed the activities of the Real Estate Commission (REC or commission). As required by state law, the legislative committees of reference shall consider this report during the legislative oversight process to determine whether the commission should be reestablished. Currently, AS 08.03.010(c)(19) states that the commission will terminate on June 30, 2008, and will have one year from that date to conclude its administrative operations.

Report Conclusions

In our opinion, the Real Estate Commission is serving a public purpose and has demonstrated an ability to operate in a satisfactory manner. The regulation and licensing of real estate professionals provides necessary public protection in the buying and selling of residential and commercial properties. The commission carries out its responsibilities to educate both the public and licensees in a professional, competent, and efficient manner. Additionally, active investigation of complaints and licensure actions, when appropriate, provides assurance that licensed professionals are competent and ethical.

In accordance with AS 08.03.010(c)(19), REC is scheduled to terminate on June 30, 2008. Under AS 08.03.020, the commission has one year after its termination date to administratively conclude its affairs. We recommend the legislature extend the commission’s termination date to June 30, 2016.

Findings and Recommendations

Prior Audit Recommendation No. 1

The legislature should consider amending the statutes related to the Real Estate Surety Fund (RESF) to provide more complete, effective, and efficient consumer protection to claimants.

In the prior sunset review we recommended: 1) the maximum claim limit for individual and aggregate claims reimbursed by the RESF be increased; 2) modify the appeal notification requirements of licensees involved in a claim from a “need to locate and notify” to “making a good faith effort to locate” the licensee; and 3) mobile home transactions be subject to RESF claims when licensed real estate professionals are involved.

This recommendation was partially implemented. Individual claims for reimbursement were raised from $10,000 to $15,000 and the appeal notification standard, for licensees involved in RESF claims, has been changed to making a good faith effort to locate.

We recommend that the legislature consider raising the maximum aggregate claim amount as well as making mobile home transactions subject to RESF claims when licensed real estate professionals are involved.

Recommendation No. 2

The director of Boards and Commissions, Office of the Governor, should verify board members satisfy all statutory requirements prior to being appointed.

During 2007, a board member was appointed to the commission without meeting the professional experience requirements outlined in statute. Alaska Statute 08.88.041(a) requires brokers and associate brokers to be licensed in Alaska for at least three years before being appointed to the commission. This board member was an associate broker for less than two years prior to his appointment.

Recommendation No. 3

The division should increase licensing fees to eliminate the commission’s current operating deficit.

As of May 31, 2007, the commission had an operating deficit of $147,211. The deficit is caused by revenues not covering all of the commission’s expenditures for a two-year licensing period. Alaska Statute 08.01.065(c) requires fees, for an occupation, be set at a level to approximate the related regulatory costs.