NAR, Public Comment 208, at 6 ("In a few markets, some firms may have a larger than usual market share, but market shares are known to change measurably from one year to the next."). Id. 226. CODE 43-23-11.1 (2006). 061-0087; Northern New England Real Estate Network, Inc., FTC File No. The subagent owes all the same fiduciary duties to the principal that the principal's representing broker owes. "); Austin Bd. 168. 303. In those investigations, however, the Agencies have not found evidence sufficient to establish an agreement jointly to steer clients away from or boycott a particular rival and have declined to bring an antitrust case. Whether youre a new agent or an experienced broker you have access to a wide array of resources designed to help you succeed in today's market. Although consumers benefit to some extent from all of these forms of competition, the available data suggest that brokers may compete less on price than would be expected in a competitive market. While there have been many positive developments in the residential real estate industry, there are some indications that consumers are not enjoying all of the possible benefits of competition in the real estate brokerage industry. at 172 ("There are no barriers to entry in our industry . Advocates for minimum-service requirements also claim that when one side of the transaction is a home seller who is a party to a limited-service listing agreement rather than a traditional full-service broker, cooperating brokers who represent buyers may face special risks. 6. Each survey participant who had sold through a broker was asked the commission rate that had been quoted by the broker. If the cooperating broker is a buyer/tenant representative, the buyer/tenant representative must disclose suchlike information to their client before the client makes an offer to purchase other lease. 202. Austin Bd. Specifically, both studies find that homes owned by agents sell for more than other homes, even after controlling for housing characteristics that are likely to affect prices. Another gap in consumers' knowledge albeit one that does not necessarily affect competition in the real estate brokerage industry may be that consumers are not fully informed as to what, if any, duties they are owed by their broker. Including Legal, Agent & Broker, and Property Rights Issues. NAR, Public Comment 208, at 5 ("An agent can obtain a broker's license, usually after having been in business for several years, and passing a broker's license exam. See id. 167. As one broker- panelist explained, in addition to real estate brokers, many other actors are necessary to assure a successful closing, including the mortgage lender, the insurance agent, the home inspector, the termite inspector, the surveyor, the appraiser, the closing attorney (in some states), the title company, and the escrow agent.35 According to this panelist, the seller's broker and the buyer's broker "will work together to make sure that all parts of the transaction are facilitated appropriately," including "working through the transaction itself, meeting the home inspector, helping the seller and/or the buyer understand what the results of the inspection were, overseeing repairs, making sure that things that are necessarily time-sensitive get responded to in a time-sensitive manner."36. However, the authors' statistical results suggest commission rates are relatively inflexible.213 This result is consistent with the findings based on Real Trends data described above: as home sales prices have increased since 1991, commission rates have declined, but not in proportion to increases in home sales prices. NAR 2006 SURVEY, supra note 4, at 37. at 149. 71. Tex. Cooperating broker who is an agent of the listing broker but not strictly a subagent of the seller. In litigating its case against Realcomp, the FTC staff will seek to prove that this group of competitors should be prohibited from engaging in such conduct to the detriment of consumers. Second, requiring buyers' brokers to disclose the potential for dual agency to the seller (and obtain a waiver) would eliminate the danger of undisclosed dual agency. The FTC investigated and issued complaints against these exclusionary practices, obtaining several consent orders.317. NAR 2006 SURVEY, supra note 4, at 34. Subagency offers are typically communicated to cooperating brokers via the MLS. NAR 2006 SURVEY, supra note 4, at 44. PDF Consultant's Legislative Report on Agency Relationships - Hawaii As a member, you are the voice for NAR it is your association and it exists to help you succeed. See Barry, Public Comment 19, at 57 (reporting that, because the public sources of property listings never show the commission offered by the listing brokers, buyers are unaware that their agents have screened out listings with lower commission offerings); WOODALL & BROBECK, supra note 14, at 5 ("home buyers will not have access to this information about the splits, so they cannot check to see whether their broker is steering them away from houses carrying lower splits"); White, supra note 47, at 5 n.13 ("in a milieu where there is a great deal of uncertainty as to which house will best fit the demands of a buyer and which buyers are true prospects for a seller, it may be difficult for the client to determine that her agent is steering in a disadvantageous way"); 1983 FTC STAFF REPORT, supra note 9, at 75 ("Because many buyers think they are seeing all the properties a broker or salesperson knows to be on the market, the practice of steering coupled to the general practice of denying consumers direct access to information from a MLS may mislead buyers."). 28. Learn how to properly use the logo and terms. See also AEI- Brookings Paper, supra note 3, at 12 (access to the MLS is a "potential bottleneck" in the large positive impact that the Internet could have for home buyers and sellers). Define cooperating broker. Commenters using this form highlighted local competition between individual agents as an outstanding example of rigorous competition to which the rest of the economy should aspire. Therefore, a real estate broker must keep confidential any information that may weaken a principal's bargaining position. A few brokers surveyed supported eliminating the rebate ban, recognizing some of the procompetitive benefits that repeal of the ban would foster. Although neither commenters nor Workshop panelists presented evidence to explain the cause of relatively inflexible rates, this phenomenon has meant that the price that consumers paid for brokerage services rose considerably during the recent run-up in housing prices. Some states protect parties' interests in this situation through "designated agency," under which different agents within the brokerage firm are "designated" separately to represent the buyer's and seller's interests in the transaction. . A-00-CA-154 JN, 2000 WL 34239114, at *4 (W.D. Instead, their fiduciary duty and their allegience lies with the listing agent. The potential negative impacts of steering are not likely to be as pronounced when brokers discount to home buyers via rebates because listing agents do not have the same incentives or ability to steer that cooperating agents have. . Mar. See http://www.remax-cahi.com/esource/marketingmaterials/2005realtrends500.pdf; and http://www.realtrends.com/past_newsletters.asp?article=newsletters/2005_04_6.htm. 9. ASS'N 519 (1992); Crockett, supra note 51, at 213. 130. Although the terms may vary by state, there are two principal categories of real estate brokerage professionals: "agents" and "brokers." The FTC challenged similar conduct in the past. AEI-Brookings Paper, supra note 3, at 5. Such entities are likely to gain financially from increased entry into the brokerage industry. Although this section reports a variety of statistics that purport to measure "market share," this Report makes no attempt to define a relevant antitrust market for this, or any other, analysis. "291 Further, a discount broker also noted that requiring minimum services runs contrary to the concept of fiduciary duty: Consistent with these panelists' comments, the Consumer Federation of America issued a report in June 2006 addressing competition in the real estate industry.293 This report criticized minimum-service laws, contending that they "discourage competition" by "making it difficult for internet-based or other limited service firms to function."294. where the REALTOR is an agent oder subagent, the obligations of a fiduciary. REAL ESTATE FIN. Its data are derived from a survey of the top 500 brokerage firms in the country and a group of rising firms just below the top 500. In response to these investigations, the South Dakota and West Virginia Real Estate Commissions rescinded their regulations prohibiting rebates, thereby enabling consumers in those states to receive more benefits of competition.250 The Tennessee Real Estate Commission voted to suspend its rules and is in the process of rescinding them entirely.251, No Workshop panelist who commented on rebate bans found any justification for them. Pursuant to the state's administrative proceedings, the Tennessee Real Estate Commission scheduled a public hearing regarding the rebate ban's final repeal for May 2007. 328. See Amended Complaint at 5, United States v. Nat'l Ass'n of Realtors (N.D. Ill. Oct. 4, 2005). Furthermore, given that the targeted selling price will impact the time the asset stays on the market, the agent's desired time on the market may diverge from that of the seller."). "158 He noted that between 1998 and 2005, while the number of home sales increased about 50 percent, the number of NAR members increased about 67 percent.159, Some commenters stressed the ease with which one can become an agent. 187. Structural Features of the Real Estate Brokerage Industry. See Steve Sawyer et al., Redefining Access: Uses and Roles of Information and Communication Technologies in the US Residential Real Estate Industry from 1995 to 2005, 20 J. Use of MLS Rules to Disadvantage Competitors. For example, one realty company offers a 1% cash back rebate program for home buyers; another offers rebates worth up to $2,250 in the form of HomeDepot or American Express gift cards; and another offers to pay moving costs of up to $1,500 to consumers who buy particular properties. A real estate sales agent may be employed by: a. any member of the public. See Hearing, supra note 1, at 30 (statement of Rep. Richard H. Baker, member House Comm. Perriello, Tr. See, e.g., Glenn Roberts, Jr., "Secret Agents" Quietly Offer Real Estate Rebates, INMAN NEWS, Mar. Although the specific data fields on each listing are determined by the individual MLS, they typically include detailed descriptions of the homes for sale, the asking price, the offer of compensation that will be paid to a cooperating broker who finds a suitable buyer,43 and the name of the listing broker. 1992). Thus, consumers who purchase the MLS-only package, but later feel they need more assistance with their transaction, typically can obtain it from their broker for an additional fee. One commenter, the owner of a discount brokerage franchise, reported that he has "not experienced any discrimination by agents in the showing or selling of our properties"333. They should also avoid enacting such laws, rules, and regulations in the future. Cf. See U.S. Census Bureau, Median Sales Price of Existing One-Family Homes by Selected Metropolitan Areas, available at http://www.allcountries.org/uscensus/1202_median_sales_price_of_existing_one.html. Section C presents the available data on actual commission rates and fees. Brokerage entry appears to be more difficult than agent entry. 283. . One reason is that, if one firm refuses to cooperate with rivals for self- serving reasons when cooperation would have benefited customers, those customers ordinarily would punish the uncooperative firm by taking their business elsewhere. 272. Commission Issues - Texas REALTORS There were contrasting views among Workshop participants and commenters about the extent to which brokers compete on the price dimension. Fees, measured in constant 2006 dollars, are based on median home prices so as to represent what a typical consumer would pay in real estate commissions to sell his or her home. See Lewis, Tr. 233. Although these IDX websites, as explained more fully below, provide critically important avenues for brokers to advertise their listings to potential buyers and their agents, these websites are not a substitute for the MLS. See Amended Final Judgment and Order, United States v. Kentucky Real Estate Comm'n, Civ. See supra notes 117-118 and accompanying text. Id. Our review of fee-for-service broker websites reveals that consumers appear to have ready access to prices that fee-for-service brokers charge for additional services beyond the MLS-only option in advance of entering into a contractual relationship. The Workshop afforded real estate brokers, state regulators, and academics an opportunity to express their various views on competition in the real estate brokerage industry. Whatley analogized the real estate transaction to a play where each actor has a role and knows the script; the play would be disrupted if an actor were to enter at the wrong time or forget his or her lines. PATRICK WOODALL & STEPHEN BROBECK , CONSUMER FEDERATION OF AMERICA, HOW THE REAL ESTATE CARTEL HARMS CONSUMERS AND HOW CONSUMERS CAN PROTECT THEMSELVES (June 2006), available at http://www.consumerfed.org/pdfs/Real_Estate_Cartel_Study061906.pdf. Detailed discussion of the ancillary services often provided in connection with real estate transactions was beyond the scope of the Workshop and, likewise, is beyond the scope of this Report. 193 More specifically, approximately 53 percent were quoted a rate of 6 percent, while approximately 32 percent were quoted a rate of 7 percent.194 Factoring in after-the-fact reductions in prices (including rebates and gifts provided by the brokers), 78 percent of those surveyed were actually charged commissions at those rates.195 These results are comparable to those revealed in a sample of HUD-1 forms from the latter half of the 1970s collected by HUD for its own purposes, which showed that 77 percent of sellers were charged a commission rate of 6 or 7 percent.196 Although the average commission rates based on the HUD-1 forms varied across metropolitan areas, in eleven of the sixteen cities surveyed 80 percent or more of the commission rates actually paid were equal to either 6 or 7 percent.197, A 1982 study analyzed the relationship between commission rates and several variables, including the price of the home, whether the home was a new or existing home, and whether the sale involved cooperation from another broker.198 The sample data included 1,107 transactions drawn from seven cities in 1975, 485 transactions drawn from eight cities in 1978, 1,769 transactions drawn from eight cities in 1979 and 3,895 transactions drawn from all 50 states in 1979.199 For each transaction, data on actual commission rates paid were obtained from HUD-1 forms. Although a subagent cannot assist the buyer in any way that would be . A-00-CA-154JN, 2000 WL 34239114, at *2 (W.D. ."). 70 Fed. FSBOs often offer payment to a broker representing a buyer. "115, Industry-produced data appear to support this view. Commission "fees" are the total dollar amount paid by consumers for real estate brokerage services. Specifically, by requiring NAR-affiliated MLSs to adopt rules that will allow brokers to withhold their clients' listings from VOW brokers by means of an "opt out,"319 it enables traditional brokers to block their competitors' customers from having full on-line access to all of the MLS's listings. 133. In its complaint, DOJ alleged that NAR's policy was the product of collective action by NAR's members and offers no procompetitive benefit. It also identifies and describes certain types of nontraditional real estate business models, including: (1) full-service discount brokers; (2) fee-for-service brokers; (3) Virtual Office Website ("VOW") operators; (4) for-sale-by-owner ("FSBO") facilitators; and (5) broker referral networks. See Whatley, Tr. What is co-broking, and why does it matter? 1980). DOJ's lawsuit is pending in the federal court in Chicago, Illinois. refer to the transcript of the Workshop. Specifically, these panelists pointed to rules that keep exclusive agency listings from being uploaded to national real estate websites like Reator.com.310 Recent NAR data show that 77 percent of home buyers search the Internet for homes, and that 24 percent of home buyers first found online the home they ultimately purchased.311 Thus, online exposure appears to be crucial to marketing a home, and, to the extent that successful marketing tends to lead to a higher selling price and shorter time on the market, it is reasonable to assume that homes without such exposure are likely to take longer to sell or sell at lower prices. 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. Amber Buycks, Paralegal, Litigation III Section . The ability of novice entrants to attract clients relative to more experienced agents was not discussed at the Workshop and, likewise, is not addressed in this Report. The Agencies and industry regulators should assess the feasibility of an empirical study of the real estate brokerage industry. They do extensive research online. Competition among brokers based on service to consumers includes a wide range of possibilities. Mar. In the majority of transactions, the commission fee is determined by multiplying the commission rate negotiated in the listing contract by the home's actual selling price. See, e.g., Austin Bd. 205. Upon execution of this Lease by both parties, Lessor shall pay to said brokers jointly, or in such separate shares as they may mutually designate in writing, a fee as set forth in a separate agreement between Lessor and said broker(s). A home seller may consider any number of brokers before choosing one with whom to list the home, but NAR's 2006 industry survey notes that the majority of sellers contact only one listing broker.18 Once the seller has selected a listing broker, they enter into a contractual relationship called a "listing agreement" by which the broker agrees to market and sell the home in exchange for a set fee, typically in the form of a percentage commission. at 38-39; NAR 2006 SURVEY, supra note 4, at 48 (64 percent of buyers reported that they worked with an agent who represented their interests alone); see also Christopher Curran & Joel Schrag, Does it Matter Whom and Agent Serves? 57. See also Bunnell, Public Comment 146, at 1 ("Low barriers to entry and recalcitrance to change have created a situation where the status quo makes sense for none of the transaction participants. . A panelist representing several major national brokerage franchises noted that state rebate prohibitions deprive consumers of potential benefits available to consumers in states without prohibitions; rebate prohibitions also limit the competitiveness of real estate brokerages in those states where such prohibitions exist.252 This panelist's company has been working with state real estate commissions to repeal prohibitions on rebates, which the panelist characterized as "not necessary" and "antiquated. See also Blanche Evans, Remember the Alamo: Limited Service Dust-up Brings Out State's Rights Argument Against DOJ, FTC, REALTY TIMES, Apr. See PATRICK WOODALL & STEPHEN BROBECK, CONSUMER FEDERATION OF AMERICA, STATE REAL ESTATE REGULATION: INDUSTRY DOMINANCE AND ITS CONSUMER COSTS 3 (July 2006), available at http://www.consumerfed.org/pdfs/CFA_Real_Estate_Commissioner_Report.pdf. Lawrence Yun, Ph.D., Senior Economist, National Association of Realtors, Presentation at the Federal Trade Commission & Department of Justice Public Workshop: Competition Policy and the Real Estate Industry, Real Estate Brokerage Industry: Structure-Conduct-Performance, at 9 (Oct. 25, 2005) [hereinafter Yun Presentation], available at http://www.ftc.gov/opp/workshops/comprealestate/yun.pdf. But with more and more agents competing to close transactions, the average number of transactions per agent will decline. Drawing on commission rate data from the 1983 FTC Report and examining census data on commissions from the period of 1980 to 1998, Hsieh (and his co-author) found evidence suggesting that regardless of home selling prices, commission rates appear fairly stable around 6 percent over the relevant time period and across markets.222 Hsieh studied 282 cities over eighteen years and found that in cities with higher housing prices (and thus higher commission fees and higher profit opportunities for agents): (1) there are more real estate agents relative to the city's workforce; (2) these agents are less productive (measured by sales per agent or sales per hour worked); and (3) wages for agents are not higher than they are in cities with low housing prices. 59. As the name suggests, these laws and regulations enumerate specific tasks that a broker must perform for a client. 54.1-2131(E) (2007). One Workshop panelist, an economist, expressed concern about the effect of these compensation arrangements on competition and on consumers. "176 An agent who has been in the business for less than a year stated: "Realtors are competing fiercely on the price at which they will take listings. 19. 259. Sirmans, Geoffrey K. Turnbull & John D. Benjamin, The Markets for Housing and Real Estate Broker Services, 1 JOURNAL OF HOUSING ECONOMICS 207 (1991). 2004). The source of listings for many of these advertising websites is the MLS. So, given the fact that the Realtor membership has increased far more than actual home sales, it's not surprising that the median income has fallen."228. Based on weighted average sales price of new and existing homes in 2005 ($271,263), the buyer's broker's share of a $13,834 commission would be $6,917. For example, one Workshop panelist who owns a limited-service brokerage noted that in 2004 there were more than 3,500 complaints filed with the Texas Real Estate Commission against brokers and agents, but there has never been a complaint filed against a fee-for-service broker.286 This observation is consistent with what FTC and DOJ staff have learned in discussions with officials in other states.287 Evidence also suggests that home sellers are aware of the prices fee-for-service brokers charge for additional services before they enter into contracts with those brokers. at 74-75; Sambrotto, Tr. 316. "190, Data reported to the Securities Exchange Commission by Realogy, the largest brokerage firm in the United States, are consistent with these findings. The importance of the MLS as the primary source of information about homes currently for sale and prices at which comparable homes have sold is discussed in Chapter I.B. 156. See, e.g., Your Igloo Real Estate, http://www.yourigloo.com/ (last visited Apr. Some have suggested, however, that the industry has not yet experienced the sort of sweeping benefits to consumers in the form of cost savings and service enhancements that have been seen in other industries from the use of the Internet and other technology.101 This Chapter examines how the Internet has increased consumer access to information about real estate and how this increased access has in turn affected consumer behavior. 169. Id. Further, once a seller consents to a cooperating broker acting as a subagent, all licensees affiliated with that broker are that seller's subagent for the listed property. 2d 868, 872 (E.D. Without rebates, if the buyer's broker were simply to reduce his or her commission, the savings would go to the seller's broker, not to the home buyer. . The Agencies have responded to allegations of steering in two distinct ways, depending on whether the steering was unilateral or involved an agreement among incumbent brokers. See, e.g., Hsieh, Tr. A Report by the Weicher, supra note 166, at 121, reports that Sirmans and Turnbull calculated an average contract commission rate of 5.8% in Baton Rouge over the period 1985-1987. Stay informed on the most important real estate business news and business specialty updates. They can provide varying levels of service to sellers in marketing their homes, such as holding open houses more or less frequently. 150. Cal. at 68 (describing the option). A cooperating broker is a broker who is not the listing broker. In addition, there is no indication that the marketplace is incapable of addressing situations where cooperating brokers may face additional work to close a transaction.299 Cooperating brokers can make unilateral choices as to whether or not the compensation offered by the home seller through the MLS, as well as that offered directly by their buyer, is sufficient payment for the effort that may prove necessary to close a transaction. "97, According to NAR's 2006 Profile of Home Buyers and Sellers, 83 percent of home sellers who retained a broker used one who provided the traditional "full" array of services; 8 percent hired a broker who listed the seller's home in the MLS and performed few, if any, additional services; and 9 percent hired a broker to provide a broader array of services, but short of full-service.98, NAR data show that the number of FSBOs consumers who sell their homes without the assistance of a real estate professional has been declining. 166. 170. See Mark S. Nadel, A Critical Assessment of the Standard, Traditional Residential Real Estate Broker Commission Rate Structure, 23, American Enterprise Institute-Brookings Joint Center for Regulatory Studies (Oct. 2006), available at http://www.aei-brookings.org/publications/abstract.php?pid=1119. "A subagent is a cooperating agent who works for a listing broker-salesperson in the sale of a property. A remaining question, not resolved by Workshop participants or commenters, is why commission rates are relatively inflexible.229 Regardless of the answer, it is desirable that brokers have the freedom to offer a variety of price and service combinations to attract consumers. at 82-83. We do not have an answer to this puzzle."). See NAR, THE 2005 NATIONAL ASSOCIATION OF REALTORS PROFILE OF HOME BUYERS AND SELLERS 58 (2006) [hereinafter NAR 2005 SURVEY] (71% of sellers report that their agent attended the closing). "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]. REAL ESTATE & URBAN ECON. Hahn, for example, suggested that there may be a transition towards "a new era" in the industry in which real estate firms will develop and use a variety of different business models. 061-0268; Realtors Ass'n of Northeast Wisconsin, Inc., FTC File No. Throughout this Report citations to "Tr." See United States v. Nat'l Ass'n of Realtors, 2006 WL 34344263 at *14 (N.D. Ill. Nov. 27, 2006), available at http://www.usdoj.gov/atr/cases/f219800/219889.htm. Rebates are an important form of price competition under the traditional structure of real estate transactions because the seller and seller's broker, not the buyer's broker, determine the amount of the buyer's broker's commission via the listing agreement. The MLS then makes these data available to all brokers who are members of the MLS.42 By listing information on a home in the MLS, a broker can market it to a large set of potential buyers. 280. Michigan H.B. Chapter IV addresses obstacles to a more competitive market environment, including government-imposed impediments, MLS rules that can cause anticompetitive effects, and the importance of broker interdependence. 243. "142, Although nationwide market shares provide little information about local market concentration, national-level data do demonstrate that there are many brokerage firms and agents, and that most brokerage offices consist of a small number of agents. If a listing broker fails to pay a cooperating broker, the cooperating broker can bring a "procuring cause" dispute against the listing broker through the MLS arbitration mechanism. 273. This can occur if the broker fails to disclose such information to the client as legally required.
Royal Virginia Golf Course Closing,
Denver County Court Warrant Search,
Robert Newman Parents,
Adam Miller Director,
Patient Transporter Salary Northwell Health,
Articles A