Using Technology to Make Real Estate More Competitive
Those of you with an interest in NAR’s expiring consent decree, there is an event organized by Information Technology and Innovation Foundation you may be interested in next month in Washington DC:
Technological innovation has made it cheaper, easier, and faster to buy and sell most products. However, the real estate industry has firmly resisted disruption, successfully lobbying for state laws banning commission rebates, preventing the public disclosure of residential sales prices, and requiring consumers to purchase real estate services that they may not want, as well as blocking third parties from accessing listing data. These practices have allowed the industry to preserve the long-standing fixed commissions for brokers even as home prices have climbed much faster than inflation.
In 2005, the U.S. Department of Justice brought an antitrust lawsuit against the National Association of Realtors for its anti-competitive policies that were designed to exclude lower-cost online real estate startups from competing with traditional brokers. This lawsuit resulted in a 10-year settlement that prohibited local MLSs from enacting rules that limit competition; however, this agreement expires this year.
Join ITIF for a panel discussion about the challenges and opportunities to increase competition in the real estate industry through technological innovation, and the role that policymakers can play in using technology to make home ownership more affordable.
Moderators and Panelists:
Daniel Castro (moderator)
Ben Clark (broker)
Jessica Drake (attorney, Federal Trade Commission)
Ralph Holmen (Associate General Counsel, National Association of Realtors)
David Kully (Partner, Holland & Knight)
Brian Larson (Senior Business Consultant, Larson Skinner PLLC)
Where and When?
THURSDAY, APRIL 5, 2018 – 1:00 PM TO 2:30 PM EDT
Information Technology and Innovation Foundation
1101 K Street NW
Suite 610A
Washington, DC, 20005
Sam DeBord
Posted at 08:07h, 17 MarchDaniel Castro is a smart guy, but that pitch is nonsense, much like the last piece on MLSs by the same folks, which Redfin’s Glenn Kelman put in its place: https://www.redfin.com/blog/2017/12/a-tragedy-of-the-commons.html
There are no fixed commission rates, they’ve gone down, on average, in many markets, and there are dozens of different commission models available to consumers.
Realtors have opened up pending and sold listing data to consumers nationwide. A few states have blocked sold data, but that’s not a Realtor effort.
Which services are Realtors requiring consumes to purchase?
Daniel Castro
Posted at 04:13h, 20 MarchSam, see the DOJ’s list of states that have minimum-service requirements (https://www.justice.gov/atr/competition-real-estate-brokerage-industry#IVA2). For example, Alabama passed a law requiring a certain minimum level of service for all brokers. You can even see some brokers pushing this fact. For example, see Crawford Realty of Alabama which states (caps in original), “IT’S IMPORTANT FOR YOU TO KNOW that in our MLS®, the entry-only listings offered by some companies are illegal in Alabama…” Or Idaho, where the director of government affairs for the Idaho Association of Realtors was the one who led the push for the state’s minimum service law.
I’d love to get comprehensive data on commissions paid over the last few years, but I don’t see a lot of brokers offering up that information.
Sam DeBord
Posted at 09:46h, 20 MarchThis is good info, Daniel, but my problem is with the pitch. Realtors aren’t requiring consumers to purchase anything. They can go FSBO, put their home on Zillow themselves, etc. The fact that 8 states have minimum service requirements for brokers just means that consumers who choose to use a broker will get someone providing a minimum service level. There is no pricing standard.
The idea that consumers can’t get exposure on their own in a Zillow world doesn’t hold up. What they might also want, and pay for if they so choose, is professional representation and the benefits of an organized cooperation and compensation system provided by the MLS.
Daniel Castro
Posted at 11:15h, 20 MarchTo clarify, the DOJ says that 12 states have minimums service laws with no option to waive the extra services. 8 additional states (total of 20) have minimum service laws, but allow consumers to waive the extra services. And, as noted, at least in Idaho, it was the Association of Realtors that was leading the charge to get these types of laws put in place.
Sam, I didn’t think it was actually that contentious that minimum service laws reduce consumer choice. That is, almost by definition, what they do. To say that that there is no pricing standard is a bit disingenuous. If pizza restaurant owners lobbied the state for a law that required pizza restaurants to only sell 20 inch pizzas, there would be no pricing standard, but surely that would raise prices for people who only wanted to buy pizza by the slice.
Or put differently, why not let consumers buy whichever combination of services they want? Why pass laws requiring them to buy a certain minimum?
Sam DeBord
Posted at 14:00h, 20 MarchGood points, Daniel, two different issues here: the marketing pitch vs. the actual policy. My stated concern was the marketing of the event, “the real estate industry has” (overgeneralization), “requiring consumers to purchase” (overstatement), “preserve the long-standing fixed commissions” (not so).
I don’t want to get too far into the weeds on the policy (your wheelhouse, I’m just a marketing guy), but minimum standards exist in other professions as well, limiting choice, but ensuring some service level. The tradeoff of choice/cost/consumer experience with a licensed professional we could debate, but it’s bigger than pizza.
This is also a cliche/oversimplification, but “You could pay your barber to do your surgery, is that a good choice to have?” You’re already allowed to buy/sell a home without representation. Some states have decided that if you voluntarily take the step to hire a licensed broker, there should be minimum standards of service. Some haven’t. There’s no industry-wide forcible sale of services to consumers.
Daniel Castro
Posted at 14:14h, 20 MarchFair enough. We’ll plan to discuss the nuances here during the event.