Is it bad if everyone else does it too? What if you're one of the best?

Realtors are the subject of another balanced-but-critical New York Times article today. This time it’s for a whole host of lobbying-related fair market-blocking activities.

Frankly, I don’t have a lot of sympathy for banks, but the strong-arm tactics of the National Association of Realtors described in the article make banks look like victims of injustice. The story meanders away from bank-blocking tactics to easier to explain subjects, like the federal suit brought against the National Association of Realtors for locking low-cost realtors out of many listings. It appears the government (a very pro-business administration, at that) wants to create a level playing field:

When the suit was filed, J. Bruce McDonald, a deputy assistant attorney general, said, “Our job is to ensure that one group of competitors doesn’t tell some of its members they can’t compete in a certain way and undercut the level playing field.”

The defense:

Ms. Janik warns that major changes to the multiple listing services could cause large nationwide brokerages to pull out of the system and establish their own private listings. That, she said, would be a far greater threat to small firms.

So what’s the story? As I understand it, the progressive (egads!) North West MLS does not allow brokers to selectively block listings from competitors sites, which is what the realtors say they have a right to do. And, as far as I can tell, Windermere and the other monsters still list their houses with the NWMLS. Why? Because listing on the MLS allows way more potential buyers to see their houses and, sorry FSBO lovers and separate MLS creators, having more potential buyers increases the speed and price at which your home sells. Also, it would be extraordinarily two-faced if they first said “don’t do For Sale By Owner (FSBO) because you won’t get the exposure that you would get with a full-service brokerage” and then said “list with us even though only we’re going to intentionally reduce the visibility of your property to only buyers who talk to our agents.”

If anything, the Justice Department’s suit should keep realtors in business longer. If the system is open just enough that innovators and alternative pricing models will use it, they keep people in the fold and maintain some pricing power. If the system is locked down, innovators will tend to create MLS replacements systems until one of them succeeds.

Realtors: a PR campaign is in order. Your organization is blocking open markets left and right in order to enforce a 5-6% commission structure. The reputation of the National Association of Realtors is headed toward car salesman and lobbyist territory and when other folks find themselves having monopoly-like pricing power, they spend some of that money on goodwill (see: Microsoft). When other organizations find themselves in this making lots of money, not very popular pickle (for good reasons or bad), they also advertise on NPR (see: ADM, Exxon, Walmart).

On a side note, why haven’t I heard of the sell-your-home-get-a-Toyota model?

“Because the industry functions as a cartel, it is able to overcharge consumers tens of billions of dollars a year,” said Stephen Brobeck, the federation’s executive director. “Consumers are increasingly wondering why they are often charged more to sell a home than to purchase a new car.”


6 thoughts on “Is it bad if everyone else does it too? What if you're one of the best?

  1. Galen asks: “Is it bad if everyone else does ‘it’ too? What if you are one of the best?”

    The Department of Justice suit against NAR is a very complex issue, which, I will follow and explain at length in my own blog. But let me raise a couple of key points for general edification in laymen terms.

    There is absolutely nothing wrong with the consumer getting what he wants. There is absolutely nothing wrong with the consumer having many options with regard to the price he or she might pay for Buyer Agent services or Seller Agent services.

    While we in the State of Washington, may not have to worry about the issue at hand, because our NWMLS is not owned by the Board of Realtors as it is in much of the Country, we have other forces to be reckoned with. There is a misperception that real estate licensees sell houses. We do not sell houses for a living. We represent people for a living. That is required of us by law even moreso in the State of Washington than in many other states.

    Under our State Law, a real estate licensee is obligated to represent consumers as the default, without the consumer needing to invoke the question “Will you represent me?”. When a seller wants to be a “glorified FSBO” and garner ONLY mls exposure, a sign in front of his house and a keybox, the licensee is not necessarily relieved of his legal obligation to represent that consumer in a fiduciary capacity.

    It is certainly OK for a consumer to “trade down” to a minimal service for a minimal price. But the State will have to “catch up” with this option by changing the Disclosure Laws and required Disclosure of Agency Laws pamphlet given to consumers, to incorporate this option. States have the role, duty and obligation to protect consumers from being “their own worst enemy”, if you will. At present we are one of the only states in the Country that offers full, fiduciary service as the default.

    As long as the Courts continue to hold the licensee liable for being the advocate of and full fiduciary agent of the consumer, the options will continue to favor the consumers’ protection rather than his money. Fiduciary is a big word and I have represented consumers in a “fiduciary capacity” for 35 years or so in both the fields of real estate and trust and investment services. Fiduciary means I always to what is best for you, without regard WHATSOEVER, to what’s in it for me.

    One simple example, and then I will go to the office to “represent” a buyer client. We recently fired a real estate licensee. She was bemoaning the fact that we told her to show her client a property that was $200,000 less than that buyer’s max affordability. It was a great bargain and perfect for that buyer client. The agent complained that “she would make less money” if the buyer bought a lower priced property. We tried for about three weeks to impress on the agent that her duty was to help the buyer get the best property at the best price, WITHOUT REGARD TO WHAT SHE, THE AGENT, WOULD MAKE ON IT. We could not get our point across. We could not persuade her to “come from the right place” in her mind and heart. We fired her.

    That being said, we offer all services at all prices. Someone can say, I don’t need full fiduciary services, I just want the mls and a lockbox and minimal service. They can pay any price they want, as long as they understand that they are “trading down”.

    So the answer to your question, Galen, is it “bad” for everyone else to do “it” too? I ask you, what is “it”?

    P.S. Go Sonics!

  2. I left the title unclear intentionally. Is the NAR especially good at legislatively strong-arming those who might compete with them? Are they good at passing market-breaking laws? Or are they good at keeping margins for agents high (and costs for consumers high too)?

    But that is beside the point – my point was that the NAR is responsible for stiffling competition in their industry. They block low cost agents from showing the full MLS results in many areas and are now blocking banks from remotely competing with them. It is the NAR, not the courts or the lawmakers, that is blocking consumer choice.

    I’m not sure that representing the fiduciary interests of a customer is directly in conflict with low-cost alternatives or with banks offering real estate “solutions” (although I’m not sure those solutions would be that popular in the end).

    I’m glad to hear that you fired the agent who was reluctant to show a lower cost property to her client. I fear, however, that the incentive of a commission-driven paycheck strongly encourage this behavior, no matter how forcefully the industry encourages agents to look out for the best interests of their clients.

  3. Pingback: Seattle’s Rain City Real Estate Guide » Updates - NAR and Zillovania

Leave a Reply