Use the data to improve your business through knowledge of the latest trends and statistics. . at 169 (discussing the timing of disclosure of agency relationship in many states as having been changed from "first meaningful contact" to "as soon as practical but no later than the writing of an offer," and how this can give rise to procuring cause issues). 1991). 320. In my own experience, I have already lost listings to brokers who have offered to take the listing at a lower brokerage fee. Transaction-level data on commission rates and fees are not publicly available, but broad national aggregate data suggest that commission rates and fees move in tandem with housing prices. Further, this theory suggests that because agents compete profits away by incurring additional expenses to provide these services, rather than lowering their commission rates, they operate at inefficiently high cost levels.221, Hsieh provided empirical evidence at the Workshop consistent with competition in the brokerage industry occurring primarily in non-price dimensions. In March 2005, DOJ filed a civil antitrust lawsuit against the Kentucky Real Estate Commission, alleging that its regulations prohibiting Kentucky real estate brokers from offering rebates restricted competition and caused consumers to pay higher prices for real estate brokerage services.244 The lawsuit was settled on July 13, 2005. "255 Another panelist who was an officer in an early VOW operator noted that his company gave a 1 percent rebate to buyers, but explained that rebate prohibitions "immediately slammed the door [in] certain states for [his company]. See, e.g., STEVE SAWYER, LOCAL REAL ESTATE MARKET COMPETITION: EVIDENCE AND INSIGHT FROM AN ANALYSIS OF 12 LOCAL MARKETS 3 (2005), available at http://www.realtor.org/publicaffairsweb.nsf/Pages/Sawyer05?OpenDocument (noting existence of "micro- markets" within metropolitan areas. Stay informed on the most important real estate business news and business specialty updates. REAL ESTATE RES. Mary Ethel Kabisch, Administrative Assistant, Litigation III Section, John R. Read, Chief, Litigation III Section 202-307-0468 or John.Read@usdoj.gov, CHAPTER II: THE INTERNET'S ROLE IN REAL ESTATE BROKERAGE, CHAPTER IV: OBSTACLES TO MORE ROBUST COMPETITION, Competition provides American consumers lower prices, better quality services, and greater choice. The question raised is whether this cooperating broker is a subagent of the Seller based on the Seller's listing and the MLS system, or an implied agent of the Buyer based on the actions of the agent in "representing" Continued from page 1 In particular, in light of the evidence presented above regarding the relatively limited competition among traditional brokers on the price dimension, innovators should not be discouraged by industry policies or government regulations from offering more flexible commission rates. 284. A listing broker who has already agreed to pay a commission to a cooperating brokerin the MLS, for exampleshould fill out the Ratification of Fee box. For sellers, this may mean setting their own sales price and relying on the wide online exposure of MLS listings rather than broker effort to market their home, and hiring an agent only to list their home in the MLS and for assistance in closing the transaction. at 1082. In the residential real estate industry, competition is vitally important because buying or selling a home is one of the most important financial transactions a consumer will ever undertake. Two other companies together operate a program that rebates up to $3,000 for the sale or purchase of a home, which can yield a combined maximum rebate of $6,000 when a customer buys one property and sells another through the program when he or she moves. at 114; Farmer, Tr. at 46 (49.6% of sample paid 6%, while 27.9% paid 7%). 275. Whatley, Tr. This document is available in two formats: this web page (for browsing content), and PDF (comparable to original document formatting). The final part of the Report offers conclusions and recommendations. 317. at 152 (speaking for Cendant, and stating that "we believe that consumers . Christopher P. Adams, Bureau of Economics In states without minimum-service requirements, a consumer typically can choose an MLS-only package as the lowest price/lowest service level option.275 Minimum- service provisions eliminate the option of buying an MLS-only package, or any other individual service.276 Fee-for-service brokers in minimum-service states must include the enumerated additional tasks in any package of listing services they provide, which often requires the broker to charge a higher price due to the increased costs and time commitments associated with each transaction.277, To illustrate how minimum-service requirements eliminate choice, consider the example of a consumer who is selling his or her home for $271,263 (the average sales price of a home in 2005).278 A consumer who lived in a state without a minimum-service requirement could choose to purchase a basic MLS-only package from a flat-fee broker for about $7,282 ($500 for the MLS-only brokerage package listing fee plus a 2.5 percent commission for a cooperating broker). If a buyer asks a seller to pay part of the . MO. 161. at 14. See Weicher, supra note 167, at 121 ("Goolsby and Childs find that the commission rate declines about 0.06 to 0.11 percentage points for each $10,000 increase in home price, e.g., from 5.90 percent to 5.84 or 5.79 percent."). 18. refer to the transcript of the Workshop. AM. "154 A study of real estate transactions obtained from the Lincoln, Nebraska, MLS reported that although homes in the sample were listed by fifteen brokerage firms, "[t]wo of these firms listed 75% of the properties in the sample, with the remaining listings fairly evenly distributed between the other thirteen firms. Cf. NAR's President-Elect has stated: Hearing, supra note 1, at 18-19 (testimony of Pat Vredevoogd-Combs, President-Elect, NAR), available at http://financialservices.house.gov/media/pdf/072506pvc.pdf. See supra Chapter I.B. Id. Section B describes the nature of competition among brokers and views about the current state of competition presented by Workshop panelists and commenters. (Amended 05/10), While offers of compensation made by listing brokers to cooperating brokers through MLS are unconditional (except where MLS rules create specific exceptions as specified elsewhere in this policy statement), a listing brokers obligation to compensate a cooperating broker who was the procuring cause of sale (or lease) may be excused if it is determined through arbitration that, through no fault of the listing broker and in the exercise of good faith and reasonable care, it was impossible or financially unfeasible for the listing broker to collect a commission pursuant to the listing agreement. See Whatley, Tr. 6 (New York University School of Law, New York University Law and Economics Working Papers 51, 2006); GAO REPORT, supra note 3, at 3, 12-13 (MLS may encourage price conformity by, for example, by requiring that each listing state the fee split that the cooperating broker will receive. at 89; American Bankers Association, Public Comment 10, at 3. Sirmans & Geoffrey K. Turnbull, Brokerage Pricing under Competition, 41 JOURNAL OF URBAN ECONOMICS 102 (1997). See infra Chapter IV. Acknowledging experience and expertise in various real estate specialties, awarded by NAR and its affiliates. 627 (2005); Steven D. Levitt & Chad Syverson, Market Distortions When Agents are Better Informed: The Value of Information in Real Estate (NBER Working Paper 11053, 2005), available at http://www.nber.org/papers/w11053. at 157. "157 Another panelist, a NAR economist, stated that in 2004 "253,000 [licensees] entered the market, became realtor members, and 127,000 dropped out, indicating that the market is fairly dynamic, that there's free entry, free exit. What is co-broking, and why does it matter? From its building located steps away from the U.S. Capitol, NAR advocates for you. 250. Michigan H.B. Olazabal notes that the subagency regime was not a creature of state law, but rather was a result of most MLSs permitting listing brokers to split commissions only with cooperating agents who agreed to be a subagent of the seller. 91. Goolsby & Childs, supra note 205, at 85. tit. According to NAR, the MLS has been especially beneficial to smaller brokers, because it "levels the playing field" on which brokers compete. 233. Hahn, Tr. On its face, the law is ambiguous as to whether it requires brokers actually to perform the service of receiving and presenting offers and counteroffers or simply requires them to make themselves "available" to their client to do so. LA. STATUTES. Perriello, Tr. DOJ, South Dakota Real Estate Commission Permits Real Estate Brokers To Offer Rebates And Inducements (Aug. 17, 2005), available at http://www.usdoj.gov/atr/public/press_releases/2005/210637.htm; DOJ, West Virginia Real Estate Commission Permits Real Estate Brokers To Offer Rebates And Other Discounts (May 4, 2006), available at http://www.usdoj.gov/atr/public/press_releases/2006/215961.htm. 193. (Amended 5/10), Note 3: Multiple listing services must give participants the ability to disclose to other participants any potential for a short sale. See William C. Goolsby & Barbara J. Childs, Brokerage Firm Competition in Real Estate Commission Rates, 3 JOURNAL OF REAL ESTATE RESEARCH 79 (1988). See Hsieh, Tr. Several panelists and commenters cited Real Trends estimates of commission rates. 301. 31. FINANCIAL ECON. The exact requirements vary by state."). RE57R07: Brokerage Relationships | Mass.gov State anti-rebate laws and regulations and their effect on price competition and consumer choice are discussed in Chapter IV.A.1 of this Report. at 235 ("there's relatively free entry into the profession and into the real estate brokerage business . The Agencies should continue to provide state legislators and industry regulators with information concerning the competitive consequences of state legislation and regulations that threaten to or already do restrict competition and consumer choice in the real estate brokerage industry, and take enforcement action in appropriate circumstances. Member recognition and special funding, including the REALTORS Relief Foundation. at 41. For example, a VOW operator may or may not also be a discount broker. Brokers can provide varying degrees of assistance to buyers, such as performing MLS searches for homes for the buyer or allowing a buyer on-line access to MLS data to perform such searches on his or her own.
