All Rights Reserved. See, e.g., Lewis, Tr. Other studies have examined REAL Trends data and have made the same observations about patterns in commission rates, housing prices, and brokerage fees. CENT. A consumer who lived in a state with a minimum- service requirement, however, would not have that option available. For example, within the Washington, DC metropolitan area, there is little or no competition among buyers, sellers, and real estate agents across the micro-markets of Montgomery County, MD, Fairfax County, VA, and southwest Washington, DC). While the Internet clearly has had a significant impact on the real estate industry, one Workshop panelist, an economist, opined that the real estate brokerage industry has not experienced the types of technology gains benefiting consumers that have been seen in other service industries, such as making airline and other travel reservations and buying and selling stocks.126 Several factors may be limiting wider use of the Internet. Reppert, Public Comment 294, at 1. See Farmer, Tr. Commission/Cooperative Compensation Offers, Section 1: Information "152 In Mid-America Real Estate Co. v. Iowa Realty Co., the court found that one company accounted for over 50 percent of all residential real estate transactions in Des Moines, Iowa, (when FSBO sales are considered) or approximately 60 percent of all sales completed through the local MLS in Des Moines.153 In a study of the State College, Pennsylvania, area, researchers found that "the largest brokerage firm maintained 31% of the listings and 30% of the sales. Some commentators have argued that buyers may have the misimpression that their brokers' services are free. 302. 2 of the MLS antitrust compliance policy. 226. A .gov website belongs to an official government organization in the United States. 125. Finally, this Chapter addresses gaps in consumer knowledge that may exist despite the extensive information now available on the Internet. Although many brokers who specialize in the fee-for-service option are not affiliated with major national brokerage chains, some brokers who are affiliated with such chains offer fee-for-service or flat fee brokerage options.76 Although brokers using these models have existed since the 1970s, industry participants told GAO that the Internet has allowed such brokerages to grow in numbers and size in recent years, in part because they can market their services to a larger population of buyers and sellers.77. 71. Chapter 3 Flashcards | Chegg.com In this manner, brokers can take advantage of their superior knowledge of market conditions by steering clients away from home listings that otherwise match the criteria identified by the consumers, but provide lower financial gains for the broker than other homes.133, Home buyers' increasing use of the Internet may limit brokers' ability to steer buyers away from discounters' listings without their knowledge. The data are usually proprietary and not readily available to the public or to academic analysts. 103. Most MLSs require that a member broker, upon acceptance of a listing, enter the listing into the MLS database within a short period of time, e.g., twenty-four to seventy- two hours. ANN. "185 Consistent with this observation, none of the Workshop participants or commenters provided data on commission rates or fees.186 To our knowledge, REAL Trends is the only source that publishes commission rate data. Workshop panelists reported how some MLS rules discriminate against brokers who enter into exclusive agency listing agreements, which provide that the broker is entitled to compensation only when the home is sold by an agent, and not in the event the home seller sells the home on his or her own.309 This is the type of agreement used in most fee-for-service transactions. See NAR, CODE OF ETHICS AND STANDARDS OF PRACTICE OF THE NATIONAL ASSOCIATION OF REALTORS, STANDARD OF PRACTICE 17-4 (effective Jan. 1, 2006), available at http://www.realtor.org/mempolweb.nsf/pages/code. 186. 30, 2000). There are a variety of options available to buyers and sellers from full service agents to very limited service agents with a wide variety of fee structures. This person is not necessarily a licensed attorney. Proponents of minimum-service requirements typically argue that these requirements purportedly: (1) protect consumers; and (2) protect brokers. First, it appears that many consumers are not fully apprised of their marketplace options. 124. Code of Ethics, NAR's Constitution & Bylaws, and model bylaws for state & local associations. For example, Realogy through its franchises and wholly-owned brokerages claims to have "participated in approximately one of every four domestic homes sold through a brokerage in 2005. Even if some of the proffered justifications for minimum-service laws were valid, there appear to be far less restrictive ways to address them ways that preserve the benefits of competition for consumers than implementing minimum-service requirements to address them. A cooperating brokeris a selling agent who assists another broker by finding a buyer. 238. associate A sales agent or a broker license holder who is associated with a broker. For a discussion of the positive network effects associated with MLSs, see 13 HERBERT HOVENKAMP, ANTITRUST LAW 2220b4, 2223b3 (2d ed. In recent years, the Agencies have become aware of actions taken by state legislatures, industry regulators and private actors that have the effect of restricting competition in the real estate brokerage industry. 1983 FTC STAFF REPORT, supra note 9, at 31. Most brokers have agents working for them and they collect a portion of those commissions in exchange for providing office space, marketing, and other overhead. As such, these obstacles have received particular attention from the Agencies. A comprehensive review of the empirical research conducted in the real estate brokerage industry is beyond the scope of this Report. 145. Royce de R. Barondes & V. Carlos Slawson, Jr., Examining Compliance With Fiduciary Duties: A Study of Real Estate Agents, 84 OR. Some MLSs also withhold such datafields as the detailed description of the home or the property disclosures. A cooperating broker does not assume compensation from the listing firm. In the most common of the three, an "exclusive right to sell" contract, the listing broker receives a payment if the home is sold during the listing period, regardless of who finds a buyer for the home.20 In an "exclusive agency" agreement, the listing broker receives payment if any broker finds the buyer, but does not receive payment if the seller finds the buyer.21 In an "open listing," a broker has a nonexclusive right to sell the home and receive payment, but other brokers or the seller may also sell the home without any payment to the listing broker.22, The broker who works with the buyer is often referred to as the "cooperating broker" "or "buyer's broker. One broker described the competition that he faces as follows: "In about 95 percent of the leads I get, I have competition from at least one other Real Estate Agent, and on listing appointments, I am often competing against [two] to [three] other Agents, and I lose quite a few [to] those who list with lower commission rates. 274. The MLS allows broker- members to search and filter homes based on detailed criteria, including property and neighborhood information, offers made on the home, prior sales history, and days on the market.44 In addition to the database of currently available homes, an MLS maintains a database of homes sold through the MLS. Competition among brokers based on service to consumers includes a wide range of possibilities. . Although this section reports a variety of statistics that purport to measure "market share," this Report makes no attempt to define a relevant antitrust market for this, or any other, analysis. 201. See also NAR, Public Comment 208, at 12 (comment) ("[NAR] does not conduct research on commission rates out of concerns that the research results have the effect of setting a 'focal point' for practitioners to set their commissions."). 177. 75. Each policy had the effect of discouraging brokers from using exclusive agency listings. A-00-CA-154 JN, 2000 WL 34239114, at *4 (W.D. Id. CODE tit.24 2973, FLA. STAT. STATUTES 339.780(7)(1)-(3). For example, the most recent NAR survey of home sellers and buyers found that the majority of home sellers contact only one listing agent before hiring one to assist with the sale of their home.129 Further, there is evidence that some consumers of brokerage services are not necessarily aware that commission rates are negotiable.130 This may be especially true of buyers who pay for their brokers' services indirectly via the purchase price of the home.131 Although some Workshop comments suggest that consumers' awareness of their ability to negotiate over the price and terms of brokerage services is increasing,132 perhaps due to the increasing numbers of discount brokers that have entered the industry over the past few years, some consumers do not negotiate over commission rates. 280. United States v. Colgate & Co., 250 U.S. 300 (1919). Patrick J. Roach, Deputy Assistant Director, Bureau of Competition 30, 2000). If a home buyer finds a discounter's listing on his or her own that appears to be a good match, a broker likely will either have to show the home buyer the discounter's listing or explain why he or she will not.135, In addition, consumers also may be unaware that when they pay their broker a commission based solely on a percentage of the sales price at closing (as most do today),136 the broker's financial incentives are not necessarily aligned with the consumer's. The degree of rate uniformity we found clearly is inconsistent with a market characterized by the particular kind of vigorous competition common in many other markets."). William Blumenthal, General Counsel See Hearing, supra note 1, at 30 (statement of Rep. Richard H. Baker, member House Comm. See also Perriello, Tr. NAR's 2006 Survey estimated that FSBOs account for about 12 percent of home sellers, with an additional 5 percent of sellers first trying the FSBO route, but then retaining a broker to complete the sale.99 NAR's 2005 data estimated FSBOs at approximately 13 to 14 percent, and noted that this number has been steady since 2001, and is lower than it was for the 1990s: 19 percent in 1991; 17 percent in 1993; 15 percent in 1995; 18 percent in 1997; and 16 percent in 1999.100, II.
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