But all I want is an MLS listing!

Posted by admin on January 4th, 2006

Yet another State considers Minimum Service Legislation

In another blow to consumer choice, the Idaho Real Estate Commission is considering a proposed legislation initiative that would require home sellers to purchase a bundle of real estate services if they want professional assistance from a real estate agent or broker.

Following in lock-step with state Realtor associations and  real estate commissions around the country, the Idaho real estate commission’s proposal effectively eliminates new business models that offer consumers the ability to pick and choose just the real estate services they want.

Why would a governmental body with the primary purpose of the protecting the consumer want to limit consumer choice and  increase the amount that consumers have to pay for real estate services? The answer lies in how real estate commissions and Realtor associations are comprised. Generally the majority of real estate commission members (and Realtor associations members) are traditional real estate brokers who own or work for companies whose businesses are being threatened by newer business models that offer reduced or limited services to consumers for lower fees.

Their ‘modus operandi‘, which has been effective in many states so far, has been to introduce legislation under the guise of "consumer protection". By enforcing so-called ‘minimum standards’ on real estate brokers, such as having to prepare, review and present real estate contracts and counter-offers, these laws eliminate the ability of the consumer to choose not to have those services if they so wish. And they effectively require real estate brokers to charge more for their services.

If, for instance, you just want to list your home in the Multiple Listing Service (MLS), you must not only purchase that service, but all of the other services enumerated by the "minimum service" laws. Without access to the MLS, demand for a property is lowered and, of course, demand affects the final sales price.

These laws have drawn the ire of the U.S. Department of Justice and the Federal Trade Commission, yet, once approved, federal agencies are unable to sue even if the laws are violations of federal anti-trust laws.

See Also

MLS, discount realty, limited service real estate, mls listing No Comments »

NAR Report Refutes Claims of Anti Competitiveness

Posted by admin on December 27th, 2005

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.

See Also

MLS, Real Estate, Realtor, discount realty, limited service, multiple listing service, real estate agent No Comments »

Real Estate Limited Service Loses Battle in Texas

Posted by admin on October 12th, 2005

“Consumer Protection” or “Industry Protectionism”

Brokers in Texas are facing new restrictions on the way they provide real estate services. No longer are limited service and MLS entry-only brokers able to offer an a la carte menu of services to consumers without restriction.

Because of the efforts of traditional Realtors who control the Texas Real Estate Commission and Texas Association of Realtors, legislators were convinced that the public needed "protection" in the form of stricter real estate requirements for real estate brokers.

Senate Bill 810 went into effect September 1, 2005 requiring real estate brokers to, among other things, present real estate offers directly to their customers. No longer do consumers have the choice of paying a real estate broker less for fewer services. Whether or not Texan home sellers want a broker to handle their real estate offer for them or not, they must now agree to allow the broker to present the offer (and, of course, pay for that extra service accordingly).

While the introduction of the new law was couched with the term "consumer protection" by it’s proponents, the obvious intent of these types of measures is protection of the interests of big brokers and their right to a traditional real estate commission of 5-7%. Limited service companies have made terrifc gains in the market over the past several years at the expense of traditional brokers.

So much so, in fact, that Realtor Associations in several states have called for and pushed through legislation on the unwitting public that requires them to pay for additional services they may not want or need. Aaron Farmer of Texas Discount Realty and Jack McLemore of BrokerDirectMLSTexas have both already raised their fees in response to the requirements of the new law.

It doesn’t seem like the consumer wins (or gets protected) when rates for real estate services go up in response to a new law and no benefit is derived.

See Also

Flat Fee MLS, discount realtor, discount realty, flat fee brokers, flat fee realty, limited service brokers No Comments »
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