Report Accuses Traditional Brokers Of Defrauding Consumers

Consumer Federation of America details discriminations against non-traditional brokers

According to a recent report published by the Consumer Federation of America, nontraditional real estate brokers have seen an increase in business in the last ten years while traditional real estate brokers have seen a decline.

The report says that The Wall Street Journal reported a decline of home sellers using traditional real estate brokers by 4% between 2002 and 2005. During the same period, the report says, the percentage of sales involving nontraditional brokers increased by 9%.

These are pretty significant figures considering the hurdles that nontraditional brokers have had to jump just to attract business. The report goes on to detail those hurdles, which include:

Delays in the membership application process of local realtor associations
Prohibitions on using "MLS" in association with services offered
Restrictions on information allowed to list on websites
Forced segregation of listings, resulting in reduced exposure
Discrimination against nontraditional broker listings
Outright property listing refusals
Denial of property owners to use "For Sale By Owner" signs
Refusal to show homes where brokers receive less than 3% commission split

This, of course, is just the short list. There are plenty more violations of fair trade and in some cases the Department of Justice has got involved to enforce antitrust legislation. This was the case in a lawsuit recently settled against the National Association of Realtors.

Some flat fee brokers have reported harassment and ridicule by traditional brokers and even disparaged by state regulators. The abuse of flat fee brokers has not just been within the real estate industry either. One Texas newspaper refused to run ads by nontraditional brokers fearing that there would be a backlash by traditional brokers in their coverage area.

The report does offer solutions to the discriminatory practices and aims at creating a more fair playing field, which will benefit consumers. The suggestions made in the report include a call for state and federal regulators to:

intervene in antitrust practices to institute fair play
act in a timely and impartial manner to solve disputes
prevent frivolous acts of anti-competitive behavior among traditional brokers
study the markets for bias against nontraditional brokers

The report also encourages consumers to play a role in creating a more competitive environment by shopping around for better prices and negotiating with real estate professional regarding their services and fees. We couldn’t agree more.