First of all we need to look at who controls the real estate world. Lobbying is a big part of the business of the National Association of Realtors®, the California Association of Realtors®, and other state and local Association of Realtors®. Realtor® representatives lobby every political person that they can in order to control how the real estate system works. Some of this lobbying has worked really well.
The Department of Justice has and is currently concerned with the lack of competition in the real estate field. Of course, NAR continues to assure the DOJ that there is adequate competition. The DOJ looks at the cost of real estate commissions now, and the costs of real estate commissions years ago. Unlike most service industries, the price has continued to go up, or at least the percentage charged has stayed the same.
In a world where technology improves things and helps prices go down, the real estate business seems to be unable to accept the changes. The brokerages’ claim to believe that there is plenty of competition. Their evidence: more agents come into the market all of the time. However, most of the big brokerages remain the same. Most operate on the same model, and the industry as a whole, appears opposed to change.
The discount brokerages frequently save their buyers and sellers money by rebating part of the real estate commission to their client. This is illegal in 13 states. Undoubtedly, due to the success of the lobbying arm of the Realtors® Association.
To keep discount brokerages out, some MLS boards have required potential members to submit character references. MLS’s have tried to require that brokers operate a local physical office, limiting the ability of Internet based companies to operate in the area.
In some areas, tradition brokerages have informed discount brokerages that they will only pay them a reduced commission on split-commission transactions.
Attempts have been made set a minimum level of service standard, regardless of what the buyer or seller want from an agent.
And the non-spoke understanding between agents not to show homes with a commission lower than the standard rate continues.
The biggest current issue is the NAR’s desire to keep banks out of real estate. Why? The banks will come in and change the model. They will offer their agents salaries with bonuses. They will take the situation from one of independent contractor to one with supervision and control. Why will the banks do it differently than the brokerage firms? Because of liability issues. And because the current model doesn’t work for the long term development of a viable residential real estate department. If the banks are both making the loans and selling the properties, they must make sure that there is no conflict of interest and that everyone is being treated fairly.
Brokerages need to change the model. However, since the large brokerages cover their costs primarily by monthly fees, they are not interested in limiting the number of agents coming into the business. And because the public is in the dark about the poor quality of service and expertise that many agents give their clients, there is no public uproar.
Real estate agents no longer hold the key to the information about what homes are on the market. With the Internet, the public now has access to many of the listings. However, as traditional brokerages cling to the traditional idea of doing business, it is possible that some of these brokerages may opt out of the traditional MLS which is where the public gets it’s information. In fact, there are currently threats and attempts to do this now. Some are threats by the large brokerage firms, others are attempts among agents to start a new way of listing and selling property. A new way to keep the information out of the public’s hands.
In reality, the information about sales on the MLS are withheld from the public. It is in public record at the county recorder’s office. The fact that the MLS continues to keep this information from the public is due to their desire to serve their clients, the real estate brokerages. By limiting the information the public receives, the brokerages continues to keep some level of control over real estate information.
Since agents believe that the information is primarily where their value is even the amount of information provided currently on the Internet is more than most agents would like. As the information has gotten out of the hands of the brokerages, the brokererages have tried to find additional ways to maintain their power over the information.
In addition, the National Association of Realtors®, and all state and local Associations, make their income from the number of agents who pay dues. Since NAR’s dues are paid at the beginning of the year, for the entire year, NAR doesn’t care if agents stay for one month or six. As long as there are new agents coming into the business, NAR is collecting dues. If new agents were to stop or slow down on entering the business, this will impact NAR. And these are the people who are lobbying the legislatures to avoid change.
© 2007 Judy Kane
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