[photopress:images.jpg,full,alignright] The big news today, according to Inman, is that the Judge has ruled against the National Association of Realtor’s motion to dismiss the suit against them by the Department of Justice.
I don’t think this is a surprise. In fact, had the Judge ruled otherwise, it would have been a great disappointment. A lot of time and money has already been spent by both sides, and much more money will be spent before all is said and done. Had the motion been dismissed, all of those public funds spent, would have been for naught. And that can’t be a good thing.
My only concern about the whole thing, is that the DOJ doesn’t know enough about what they don’t know, to achieve the best results for the public at large. Lots of fishing expeditions, but what will they achieve, when all is said and done. It clearly would be best for all concerned if NAR would just “get real”. But that is not likely to happen. So the chips will fall where they may, in the end. My worst fear is that it will end up like the AT&T breakup. My worst fear will likely be the end result, the way things are going so far.
Ardell
Your worst fear “will likely be the end result, the way things are going so far.” How are things going?
Russ
What will be the worst result? They’ll make MLS public and every realtor will simply exit the business because you can’t make money when information that you pay money to create and is your livelyhood is given out for free. What else can the DOJ do? Or I should say, what are they trying to accomplish?
Oh, never mind. Just read the summary and I guess it’s all about brokers who try to opt out of internet MLS listings. I agree with the public here. We should have one big country-wide MLS system where every broker is required by law to list the home on there. That would be awesome.
My worst fear is the same as it is with many suits. The only ones who will win anything when all is said and done, are the lawyers. Lots of money spent, long dragged out and expensive strategies and no real improvement when all is said and done. Public monies spent to support the DOJ’s suit. Realtor monies spent to defend the suit.
My position? While I’m not a big fan of David Barry, he does have one thing right. The unbundling of the MLS from NAR control period, is the answer. Fighting over the “opt out” provision isn’t going to do much of anything. All business models should have free access to the MLS without having to join NAR at all, and local competitive forces should govern, not a trade association.
How’s it going so far? The DOJ is trying to get NAR to govern the MLS “more freely”. The answer is for them not to “govern” the MLS at all. If all MLS systems were like ours here, NAR would not have control over the MLS, just control over Realtors and their actions. That is how it should be.
Why should all business models have free access to the MLS? If Realtors/subscribers pay for the MLS, then they should be able to restrict entry. I think this is a different question than the Exclusive Agency/Exclusive Right to Sell Argument.
David Barry is doing what everyone is free to do. He is setting up a competitive enterprise which should succeed or fail on its own merits. The gov’t should not interfere in a competitive enterprise.
What would happen if the MLS were just to shut down? Who would fill the void?
To try to stretch the argument, if one were to set up a business that became hugely successful, with many different owners/participants, should anybody be able to be a part of this business?
I will agree with your sentiment that regardless of the outcome, the attorneys may be the big winners.
Um … seriously? Mandate participation?
Ardell,
You are a member of an MLS that is owned by the brokers not NAR. As I always say people should be careful what they ask for. If anyone thinks the companies that are making millions and millions of dollars a year in this trillion dollar industry are going to bend over without a fight they are nuts.
The game will change in the near future how Im not sure. Most of the rules in the current mls system are there to help the small companies not the large companies. If the mls system as we know it today goes away all those rules go with it. I see the like minded brokers working together to build a coop systems between them to share data both publicly and privately. If you are not going to play with the big boys you may not see a listing until it sales and you may not even know it was for sale.
If I was one of the big 8 brokers in the NW here’s what I would do.
1) I would as a group exit the mls if they would not change the rules.
2) Create a coop that all brokers are part owners. Any Broker can join but they have to follow the strict rules.
3) I would build a robust intra/extra net system for listing data
4) License a key box system
5) Enforce the following rules.
a. The only place listing data could be displayed is on a brokers website. No sending data all over the net.
b. Only way to access all the listing data is to be working with a participating broker. Username & password required.
c. Minimum Standard of service clearly defined.
6) Plus many more
There is an expense to getting a listing and marketing a listing. There is also an expense to showing, representing and selling a home. People should be able to get whatever ROI they can from their investment.
By the time the DOJ gets to trial the industry wont even look like it does today.
As far as David Barry goes all I can say is what a joke. If anyone thinks there is going to be a national MLS they are drinking some contaminated cool aid. Just think about how many people work for the local associations and how many jobs would be lost. The number 1 reason regionalization has been going so slow is due to the fight the employees of the small associations have mounted because if the merge happens they will be out of work. If you think these big execs with a million + a month revenue are going to hand over the keys to their office without a fight you are also drinking David’s cool aid.
Real Estate is Local ……………………
Problem Allen, is that on one hand NAR wants to pretend to be the keeper of the public best interest, and run commercials about their public oriented integrity and ethics. And then on the other hand they are the trillion dollar industry who “won’t bend over without a fight” who protects its members, and not the public at all.
The pretense that NAR represents the best interest of the public and should control the mls’s in the Country, is about to be shot down…or not. They can’t have it both ways. “Oh, we pretend to consider what is in the public’s interest, but really we are just covering our own Member’s butts.”
Even here on RCG, we have seen the public thinking that “the system” owes something to the public at large. Some kind of public fiduciary duty. Some kind of public trust. We both know that is not the case.
As to David Barry, I agree…and yet…he is correct on one point, being a Member of NAR should NOT be a pre-requisite to any business model’s success. Innovative models exist here more than any other place in the Country, because they CAN, and that is proof that the DOJ is absolutely correct.
It is a mess because NAR will not open the doors to all types of business models. It is a mess because NAR puts Realtor interests over the best overall solution for the public and real estate companies. Are they right to protect their own? Sure. But they pretend to be bigger than that, and more conscienscious than that.
Jim,
You say “Realtors/subscribers pay for the MLS”. And there is the problem in a nutshell. Subscribers to the MLS and Realtors, should not be synonymous. Redfin and MLS only options and Innovative Models, should not have to conform to “Realtor” standards, only “MLS membership” standards…there is a huge difference. One is the keeper of the high commission structure, the other is the keeper of the data…they should not be one in the same.
Ardell,
How did your MLS come to be controlled by the brokers, as opposed to others which are controlled by NAR?
Tyler,
First, love your promo piece “Real Estate as God intended”. Fabulous!!!
Second, excellent question. I don’t really know how NWMLS came to become “Broker owned” vs. “REALTOR/Board of REALTOR” owned. We are not the only one in the Country, but it is a rarity. Maybe Russ knows that answer.
The issue regarding who owns the mls needs to be projected out. Brokers and Realtors are almost synonymous with regard to rules they would impose. The real key is that IF you did not have to be a member of the Board of Realtors to sell real estate, than there would in fact BE fewer Realtors, and the stronghold would weaken.
There is no question but that the Realtor stronghold creates an anti- trust situation. As Allen points out, expecting them to bend over is out of the question. So releasing the stronghold becomes the only effective answer.
Right now, in a Board Owned MLS environment, someone can get a real estate license without being a member of NAR, but can’t get mls access or a Supra key…that needs to change. Right now if a company is a Realtor member, every single agent MUST be a member, so it is not a truly “voluntary” organization. That needs to change also. In many, you can’t even write contract except on a “Board Form”, so not being a Member of the Board is just not possible, or practical anyway.
If Membership were indeed voluntary, the anti trust invironment would dissipate naturally. Let every licensee truly decide whether or not to be a member of NAR. Let every licensee be able to thrive without being a member of NAR. Release the MUST BE a member of NAR to function…and you would have a free market.
Sorry Ardell,
NAR makes no qualms about it. NAR’s missions statement is and has been for years.
Mission
The core purpose of the NATIONAL ASSOCIATION OF REALTORS ® is to help its members become more profitable and successful.
NAR’s Mission and vision Statement
I don’t see one reference to the consumer in their mission statement.
Allen,
Apparently you are not watching the commercials on TV 🙂 Nor reading the public oriented material regarding the Code of Ethics that can be found on the web.
You’ve got it very right Allen. It’s all about THEM. But they try to promote themselves as being all about CONSUMERS. Not fair play.
Ardell,
You say “Not Fair Play
Allen,
You do realize that NAR has been permitted to be a “self governing body” for almost a hundred years, because they agreed somewhere down the line to play fair…or do you?
Can you name one other group, that affects consumers so greatly, that has been allowed to be a self governing body? Time for that to stop…you prove that by your comments…and the DOJ must stop it.
The original concept was that Realtor’s objectives and seller’s objectives were one in the same. But now that buyer’s have rights too, the government needs to step in and change a few things.
The airline industry tried to fight opening their data access for years (the GDS systems) and lost. Consumers won.
Major League Baseball (MLB) has run into similar trouble with anti-trust laws for quite some time, and Congress keeps threatening to revoke their exemption. But for now MLB has managed to play nice periodically (free agency, steroid policies, etc.).
If the NAR would do the same, perhaps the DOJ would drop the suit. But so far all the NAR has shopwn is bunker-mentality.
I predict the NAR will lose this suit. Even if they don’t, they’ll still lose in the long run, because of their anti-consumer mentality. Consumers clearly aren’t sold on the idea that RE agents salaries should rise and fall directly with the price of the house their selling/help find. As more of the work of finding homes is shifted to technology, and more of the back-end work is streamlined, there’s simply no legitimate argument for saying the transaction costs should go up/stay the same.
I’m not one that believes buying a house is like buying a book, plane ticket or car, but the days of 6% commission being the only RE model are clearly numbered. The NAR can either get on board and help full-service Realtors innovate their way into continued business growth, or fight a losing battle and go down as “the bad guys” while consumers find other professionals to help them buy and sell homes.
jcricket,
Why does everyone key in on “6%”? Doesn’t it make a difference if the sale price is $150,000 or $950,000? It does to me, but I can’t seem to get anyone to come with me except Greg Swann 🙂
Ardell,
I don’t key in on 6%. I key in on whatever I feel my time is worth and what the local market will accept. Now THAT’S a quality move away from anti-trust issues, eh?
To the bigger issue, the heart of the MLS regardless of who owns it is the offer of co-operation on compensation. As I had it explained to me today, the Sun Cities (retirement communities in unincorporated areas of the county) used to have their own MLS. It was board owned but board membership was fairly thin – it was the Sun City brokers who essentially held control.
I agree with one of the earlier comments that it’s the smaller shops that will be damaged.
I’ll take it a step further and say free trade will be curtailed, to the detriment not only of the small shops but the consumer. Let’s say C21, Re/Max, Realty Executives and maybe John Hall and West USA got together to form their own MLS, and the purpose of this MLS was to share listings and offer co-operation on compensation.
Where do the smaller offices fit in? Where does the consumer who wants access to more than these companies’ listings go? Are they really going to keep calling brokerage after brokerage looking for a home, or will they settle for the selection they say, especially if that selection comprises a substantial portion of the market?
Now if everyone in Maricopa County came together and dediced to take the system out of the board’s hands, so be it. I couldn’t care less where I get my access; I just need my access. And in the grand scheme, it would mean more to be a REALTOR if I didn’t have to be one to access the MLS.
Forced national MLS participation is a joke – not from the brokers’ perspective but from the homeowners. A listing agreement is a contract between seller and listing broker. We follow whatever their instructions are, logical or not. You can’t mandate a seller participate in an open MLS if they choose not to do so. They have every right to do or not do whatever they choose, within Fair Housing guidelines.
Okay, I’ve rambled enough.
Ardell – I’m aware that you negotiate commission, but Marlow Harris, recently called another agent advertising 4% commission a “scab”, so perhaps that will give you an idea of why people fixate on the 6% number.
Take another profession – law. Some lawyers charge $50/hour, some can demand $600. That’s not what bothers people about lawyers, because most customers understand the qualitative difference. And, outside of class action lawyers, it’s almost always a per/hour fee, so it’s directly tied to how much work is getting done.
My supposition is that people know that the “transaction costs” for literally everything else in our lives has fallen. However, real estate transaction costs have risen. In fact, they’ve risen a lot, because the transaction costs are a % of the house price. Despite advances in technology & increased competition, housing is more expensive to buy and sell than ever (and I’m not just referring to the purchase price). Put in economic terms – when capitalism is wringing the excess out of every other industry, why should RE be any different?
When you consider, for example, the sellers’ market of the last few years, there is simply no way you convince consumers that it is twice as hard to sell a house in 2006 as it was back in 2000. More specifically, that agents are doing twice as much work. As some others have pointed out, none of the rest of us have gotten 100% raises over the same period of time, and some of us have been doing twice as much work.
While I’m open to the idea that higher priced homes are possibly harder to sell (or require different skills), I doubt it’s 10x as hard to sell a $1m home compared to a $100k home. However, I’m fine with you charging whatever your clients will bear. I’m even fine with Windermere setting a 3% commission rate for all its agents, as long as they’ll work with Redfin or A-B-C agency or the John L. Scott agent who only charges his clients 2%. It’s the collusion and price-fixing mentality (so clearly demonstrated in Marlow’s comment) that gets people riled up.
If you wanted my opinion on how to fix this – brokers/agents should just setup flat fees for various packages of service. If I want someone to show me 100 homes and handle everything for me, I’ll pay $10,000 (or whatever). If I want to do it all myself and you only have to show me 1 home and write one offer, I should be able to pay only $2,000 (much less of your time), and everywhere in between. Convince me the $10k package with you is worth more than doing it on my own and I’ll pay it. Otherwise, why should I pay such high fees?
(PS. This comes from someone who loves his traditional, full-service, RE agent, and would use him again at 3% commission.)
I DO like you Cricket. You have a good perspective.
Actually, from my perspective, there just is no set fee. Why is that so hard? We are all taught from day one that “All Commissions Are Negotiable”. Sometimes my fee is in fact 3% for my side of the fence. Sometimes that’s too much money and I cap it, the same way agents expect a cap on what THEY pay their Broker.
I just don’t get why agents can’t seem to understand “fair” when it comes to the consumer, BUT they clearly “get it” when the Broker has his hand out to them. No agent would pay their Broker what they expect consumers to pay. Every Broker has flexibility in what they charge agents…so how come flexible isn’t an option when it comes to the consumer? Seriously, if an experienced agent had to pay their Broker $40,000 on one single sale…they’d freak out! But the same guy will turn around and expect a consumer to do, what he would not himself do.
Makes no sense whatsoever to me. I do use 3% as a rule of thumb and then work up and down from there. You need to start some place. To me there is no 6%, as that would mean I have both sides. The last time that happened, in escrow now, I just gave the buyer his 3% and I kept 2% for the seller side. Great transaction. Everyone’s happy.
This isn’t rocket science. You are either fair, or you aren’t. You are either greedy, or you aren’t. You either work hard for your money, or you don’t. How can anyone take a whole industry in the entire Country, and pretend one fee fits all and every situation? That can’t possibly make sense to anyone.
Ardell,
Thanks for taking a peek at my site!
jcricket,
I agree with your last comment. I believe one of the defining characteristics (if not THE defining characteristic) of our post-industrial society is choice. We live in an age of choice. Consumers encounter choice in every facet of their lives, and real estate agents should be free to offer choice without fear of being ‘blacklisted’ by ‘traditional’ agents.
Personally, I think that if an agent provides service to such a degree that consumers are willing to pay 6% (or more), then more power to that agent. He/she is doing a wonderful job and should keep up the good work!
There will always be people who are willing to pay for the ‘full package’ for whatever reason, while there will be others who are just looking for specific services. I think the industry gets a bad name, in part, from that second group of people who only want to pay for ‘some’, but feel forced into paying for ‘all’. Give them the option (without any stigma attached to their choice), and they can no longer complain about Joe Realtor who’s charging 6% (and making good money doing it).
I just think the market should sort these matters out. I also think that if you’re a good agent, you shouldn’t have to fear change too much…
By ‘good agent’, I mean one who’s honest, authentic, and puts the needs of her client before her own… (I DON”T mean good as in ‘makes a lot of money’ – although one usually flows from the other).
Good comments, Tyler.
Loved your “without any stigma attached to their choice”. I recently sold a house that was, before me, one of the “innovative” business model’s listings. I can’t help but wonder if t was blacklisted…but I guess it could have been my “staging genious” 🙂
Why don’t “they” get that stigmatizing listings of certain companies IS anti-trust activity? It’s shameful…truely.