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U.S. may sue Realtors on commissions
CNN ^ | May 9, 2005: 6:38 AM EDT | CNN

Posted on 05/09/2005 4:59:07 AM PDT by Koblenz

NEW YORK (Reuters) - U.S. antitrust regulators are preparing to sue the National Association of Realtors (NAR) over policies they believe will illegally restrict commission discounting and harm online competitors, The Wall Street Journal reported Monday.

The effort by the Justice Department and the Federal Trade Commission aims to protect buyers and sellers of homes and could help contain high real-estate costs in a booming housing market, the newspaper said.

(Excerpt) Read more at money.cnn.com ...


TOPICS: Business/Economy
KEYWORDS: brokers; commissions; fairtrade; govwatch; realestate; realtors
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Amen. While I am normally dismissive of anti-trust suits, getting a whole industry to fix laws in certain states to restrict competition is exactly the kind of action that should be taken in an anti-trust case. Realtors in Kentucky and Oklahoma, and elsewhere, have passed laws to restrict competition.

Six Percent is way too much to earn for home sale transactions. It amounts to thousands and thousands of dollars without putting a lot of effort into the transaction. In these days of the internet, it's time to let the market decide prices, not a cartel protected by state laws.

1 posted on 05/09/2005 4:59:07 AM PDT by Koblenz
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To: Koblenz
Six Percent is way too much to earn for home sale transactions.

From what I can see, real estate agents work pretty damn hard. They work seven days a week showing homes, and can work with prospects for months before making the sale (if they do at all). And if they do, they may have to split the commission with the listing broker.

When we were looking for a house, the agent took us to various properties every week from November to the following May, and then had to split the commission.

I think she earned that 6% very fairly.

2 posted on 05/09/2005 5:06:01 AM PDT by Maceman (Too nuanced for a bumper sticker)
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To: Maceman
I think she earned that 6% very fairly.

Maybe, but consider the case in the DC area, where there's such a demand for housing that properties sell the day they're listed. Do the selling and buying agents each deserve a legally-mandated 3% for that, or should market pressures be allowed to determine the price through competition?

3 posted on 05/09/2005 5:11:54 AM PDT by kevkrom (If people are free to do as they wish, they are almost certain not to do as Utopian planners wish)
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To: Maceman

Maybe true 20 years ago, but with home prices and demand the way they are today, 6% is alot of money for the amount of work required. Where we live, people are starting to simply demand reduced commissions or they just sell it themselves.


4 posted on 05/09/2005 5:12:45 AM PDT by VTCowgirl
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To: Maceman
rom what I can see, real estate agents work pretty damn hard.

I would agree with this. Agents work their butts off for nothing and buyers often feel no loyalty because it is often revealted that (gasp!) the agents are working for the seller. However, should an offer be made and accepted it is then the selling agent that has to hold the whole thing together by making sure that lawyers do their jobs and that inspectors get access to the house, the correct paperwork and insurance policies are available at closing. And should a deal fall through or at the last minute a buyer just decides to buy from another agent - the original agent who did all the work gets nothing.

5 posted on 05/09/2005 5:14:35 AM PDT by rhombus
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To: Maceman

I tend to agree. Selling is such an iffy thing. You invest a huge amount of time and personal energy on something that may fall through at any moment. However, if there is monopolization, it should be stopped. I am a very long time user of the 'Net (since before it was the 'Net), but there are some things you can't buy over the internet; you just have to see them in person.


6 posted on 05/09/2005 5:14:53 AM PDT by Clock King
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To: Koblenz
Economic protectionism, wherever it's being wrongly practiced in order to stifle competition, is just plain unAmerican!
7 posted on 05/09/2005 5:16:44 AM PDT by LowCountryJoe (50 states, and their various laws, will serve 'we, the people' better than just one LARGE state can)
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To: Koblenz
Here in Rockford, Illinois, the realtors want SEVEN PERCENT! That was understandable a few years ago, but they forgot to drop the rates when things picked up a bit. We bought some land in the country to build, and when we sell our house, we will do it ourselves (FSBO).

The main reason is NOT because of the commission, however. The local realtors' organization, Rockford Area Association of Realtors (RAAR), is always out in front FUNDING SCHOOL TAX INCREASE REFERENDA CAMPAIGNS! I suspect they want taxes to go up in order to create churn. Whatever the motivations, if that is how they spend their commissions, I want no part of it.
8 posted on 05/09/2005 5:19:48 AM PDT by sittnick (There's no salvation in politics.)
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To: kevkrom
legally mandated!? What if i wanted to offer a service to potential buyers and sellers where I only wanted 1% (I an upstart and I was willing to sacrifice higher percentage commissions for more volume in order to nab some market share.) If it was legally mandated, I'd have to offer a kickback after the transaction and call it a gift. Does making law to mandate a certain amount of sales commission sound like a genuinely good idea to you?
9 posted on 05/09/2005 5:21:40 AM PDT by LowCountryJoe (50 states, and their various laws, will serve 'we, the people' better than just one LARGE state can)
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To: Koblenz

Ah, it's an elegant dance party.... there may not be enough chairs, if you stop the music and remove some of the chairs. Hello....crash.


10 posted on 05/09/2005 5:21:44 AM PDT by pointsal
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To: Koblenz

We negotiated 5%--in NYC no less, and probably could have done better. I don't need the nanny state to help me, and neither do you.


11 posted on 05/09/2005 5:23:56 AM PDT by montag813
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To: pointsal

Brokerage commissions for stock transactions have fallen significantly since the internet. Yes, there are still high priced brokers for those who want their hand to be held, but there are also low cost no-frills brokers. Why can't we have the same decision for homes?


12 posted on 05/09/2005 5:24:19 AM PDT by Koblenz (Holland: a very tolerant country. Until someone shoots you on a public street in broad daylight...)
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To: montag813

When we sold our house in Riverside, CT, we negotiated 1% + 3%. 1% to the listing broker, 3% to the seller's broker. Our listing broker admitted he basically would do nothing but put the house in the MLS, which cost a few hundred, and hold an open house for brokers, which took a couple of hours. He took a snapshot of the outside of our house for the MLS. His take: $6,850. But it was better than paying three times that. Our house took two weeks to sell, and the first weekend, there was a foot of snow, and no one could come to the house. Second weekend was Christmas. House sold between Christmas and New Years a year and a half ago. Would have sold in days if not for the weather and holidays...


13 posted on 05/09/2005 5:27:10 AM PDT by Koblenz (Holland: a very tolerant country. Until someone shoots you on a public street in broad daylight...)
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To: Clock King

Having been in the business for many years....sometimes an agent is overpaid and sometimes underpaid...but most offices have a situation where 20 percent of the agents make 80 percent of the commissions. It's just the nature of the critter because most companies use the shotgun approach to having agents....have as many as you can because each has the potential to bring in business even when they really don't work full time.. I doubt if there is any where in the country where a home seller can't negotiate a commission...but just as almost everything in our country...you get what you pay for..your choice.


14 posted on 05/09/2005 5:27:19 AM PDT by RVN Airplane Driver (Thanks America for not slapping us in the face again.)
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To: montag813
We negotiated 5%--in NYC no less, and probably could have done better. I don't need the nanny state to help me, and neither do you.

I think many agree with this. The thread took a turn when some implied real estate agents don't work hard for their money.

That being said, nothing should preclude anyone from making any deal they want or from doing the work themselves.

15 posted on 05/09/2005 5:29:01 AM PDT by rhombus
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To: Maceman

Dear Maceman,

I don't have a problem with Realtors charging the commission they can get in an unrestricted open market. I don't have any problem with Realtors making a ton of money.

But in an unrestricted open market where housing values have soared, you get a lot of Realtors who are willing to work for less than 6% commission. A whole lot less.

Around here (outside of Annapolis, MD), $300K for a house is down-market. A realtor who focuses on the upper half of the market can list houses for $400K, $600K, $800K all day long. And they sell. One house sold last month in my neighborhood in one day. I think they got $675K. Another took nearly a whole week. But they were only asking about $610. When you do the math, a Realtor who sells 25 homes a year (not that tough a mission) at 6% at an average of $500K per house is generating $750K in commissions.

There's a Realtor around here who has been selling in this region for decades and decades, and he offers full-service brokerage services for 4.75%. What's that doing to his commission? He's reducing gross commissions to about $600K on the above example.

And he's saving the typical homeowner about $6K on the commission. Which is not a small piece of change.

As housing prices have soared, the fixed costs of selling houses haven't risen proportionately. If a Realtor spent $3K marketing a house when it was worth $300K, he still is probably spending about $3K to market the house now that it's worth $600K. And, because Internet marketing is now more important than other forms of marketing, and it's cheaper, his fixed costs for marketing the house have probably fallen a little.

So, the Realtor's costs have fallen a little in absolute terms, a lot in relative terms, and thus, some Realtors are passing at least some of the savings along to consumers. And other Realtors are feeling the price pressures, and thus keeping their commissions moderate.

And that's how it should be. Because of market conditions, because prices have risen so high, and the houses right now are selling so quickly, there's price competition among Realtors. I remember not too many years ago, Realtors often asked, and got, 7% commissions.

Now, no one even mentions in a whisper anything over 6%, and there are lots of good, reputable, long-time Realtors, especially those making good use of the Internet, who are charging less than 6%. And on the side, a lot of the six-percenters are quietly giving back some part of their commissions to get listings.

That's good old-fashioned competition.

Realtors should not be permitted to change laws in a way to undermine that competition.


sitetest


16 posted on 05/09/2005 5:30:19 AM PDT by sitetest (If Roe is not overturned, no unborn child will ever be protected in law.)
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To: Koblenz
"Amen. While I am normally dismissive of anti-trust suits, getting a whole industry to fix laws in certain states to restrict competition is exactly the kind of action that should be taken in an anti-trust case."

I hope you make the same contention about accounting, lawyering, and medical practicing, as well.

17 posted on 05/09/2005 5:34:14 AM PDT by tahiti
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To: tahiti
"Amen. While I am normally dismissive of anti-trust suits, getting a whole industry to fix laws in certain states to restrict competition is exactly the kind of action that should be taken in an anti-trust case."

I hope you make the same contention about accounting, lawyering, and medical practicing, as well.

I would also expect to hear no complaints about free-trade, outsourcing and evil Walmart.

18 posted on 05/09/2005 5:39:01 AM PDT by rhombus
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To: Koblenz

Actually, realtors are not the monopoly guild I'd go after first with anti-trust laws. After all, they have market competition from homeowners willing to advertise and show their own property.

Still it's a good precedent: but how about all the other state-licensed professions for which 'reasonable and customary fees' are inflated, and there is no effective competion because it is considered 'unethical' to advertise fees so customers/clients/patients can shop for the best deal?

If a profession benefits from state actions which create a monopoly guild by precluding effective competition, the profession's fee structure should be regulated, not by floors as in this obvious case of corrupt legislation, but by ceilings. The old principle that monopolies created by state action for the public good (utilities) should have their fees regulated, because they are not part of the free market in which prices find a level acceptable to both buyer and seller, needs to apply to professions as well.


19 posted on 05/09/2005 5:39:08 AM PDT by The_Reader_David (Christ is Risen! Christos Anesti! Khristos Voskrese! Al-Masih Qam! Hristos a Inviat!)
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To: LowCountryJoe
Does making law to mandate a certain amount of sales commission sound like a genuinely good idea to you?

No. That was my point.

20 posted on 05/09/2005 5:46:44 AM PDT by kevkrom (If people are free to do as they wish, they are almost certain not to do as Utopian planners wish)
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