Real Estate Industry

In recent years, the National Association of Realtors (NAR) has been under a lot of pressure from the Department of Justice (DOJ) regarding competition in the real estate industry. The report entitled: "Structure, Conduct, and Performance of the Real Estate Industry" fires back that residential real estate "closely resembles a perfectly competitive industry structure."

The report states that there are 2.5 million licensed real estate agents in the U.S. actively competing with each other for a piece of the real estate pie. Most agents work as independent contractors. Accordingly, "any collusion to set commission rates at the agent level is impossible." Any attempt by one firm or agent to artificially set rates at a higher level would automatically be met by resistance in the marketplace as other agents would simply undercut the competition in the clash for more business.

The report fails to address why commission rates seem to be consistently uniform throughout the country. And, what seems to allude the NAR is the entrenched anti-competitive behavior that exists from traditional brokerages towards newer discount and flat rate business models. Traditional brokerages offering bundled services for commissions ranging in the 5-6% range, almost without exception, form the leadership of NAR, state level Realtor Associations and local real estate commissions that control the rules and regulations affecting the industry. More importantly, these forces most often control the Multiple Listing Services (MLS) that provide the backbone of the residential industry.

Several key issues have been brought to the public’s attention over recent years by the efforts of the DOJ and Federal Trade Commission as well as Congressional Representatives Michael Oxley and Barney Frank. One, that the MLS is the "de facto" market for real estate within any given community. Two, rules that have been established by NAR and/or local REALTOR associations form a pattern of discrimination against discount and limited service companies. Three, that left to their own devices, there is little incentive for NAR leadership to discourage anti-competitive behavior among traditional agents against their discount and limited service competitors.

While the most recent NAR report makes salient points regarding the overall competitiveness of the real estate industry, it fails to address the concerns of those who would offer innovative business approaches to an industry steeped in inefficiency. There seems to be no attempt by NAR to discover if, in fact, discrimination is taking place against newer business models and whether or not such discrimination is anti-competitive or anti-consumer. With "ostrich with its head in the sand’ aplomb, the party line is that no problems exist within the real estate industry and no outside (read DOJ) pressure is needed.

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