Tag: NAR

New Realtor Rules- Were they consequential for consumers?

CNN brings readers up to date on the antitrust lawsuit against the National Association of Realtors. The plaintiffs were granted $418 million last summer, not a small amount of cash. Once all the legal bills were paid, the 500 petitioners received an estimated $900.

So, did all that work and expense result in a new way of doing business?

“Paperwork has changed, and I think some really good things have happened in the way most of us discuss commissions upfront with our buyers and sellers,” said Brita Kleingartner, a Realtor in Los Angeles. “But I don’t think that business has changed in any way.”

With mortgage rates hovering around 7% for the last six months and average home prices across the US continuing to rise, the new rules, which took effect in August, had spurred hope that commissions paid to real estate professionals would plunge, making homebuying and selling less expensive for average Americans. Last year, TD Cowen Insights estimated that the new rules could cause fees paid to Realtors to fall by 25% to 50%.

Instead, commissions have remained largely unchanged since August, according to a study released this month by real estate platform Redfin. For relatively lower-priced homes that sold for under $500,000, Redfin found that the average commission has increased since the rules took effect.

As I predicted a year ago, how business is done has not changed. The lawsuit alleged a problem that did and does not exist. How do we know? Watch the consumers and what they do. If they choose not to employ two realtors (one to represent the seller and one to represent the buyer), if they decide to pay them at a different rate, then their pull in the market generates a change. If consumers, despite all the layer’s fees, publicity, and exposure, continue to desire representation by a professional licensed agent, then the market rate is being met in an open and non-coercive environment.

Is all this activism worth it? I wish someone would keep track. A legal battle of this size is expensive. Plus, the plaintiffs who were encouraged to participate spent valuable time on this versus other aspects of their lives. It tapped into some of their family capacity for civic participation. Could other causes within their immediate circles better deserve their efforts? Very possibly.

Many feel a moral superiority by fighting the good fight. But when the fight goes to show that the monsters were but mist off a lake on a cold fall morning, then one must count up the expense of it all and do an analysis.

NAR settles- Are Realtors thrown under the bus?

Nope.

There have been several interesting if not colorful headlines in the news
since NAR settled a lawsuit last Friday. The issue under dispute is whether the
posting of the payout commission to the selling broker (the agent who
represents the buyer) is a key point of collusion amongst Realtors to set fees.  For historical reasons, the commission is based on a contract with sellers at the
time of listing, so there is a need to advertise that amount reliably. Hence,
it’s posted on an industry-supervised service.

Some people appear to believe that the agreement to not post the payout on
the multiple listing service, so that all professionals in the industry may see
what it is openly and transparently, is the same as eliminating half of the
work the profession currently carries and half of the commission. If we say it
isn’t so, and they agree not to publish it where it has always been published,
then poof! it’s gone.

Here are some things to keep in mind. The profession of bringing parties to
the table in a real estate transaction has existed in its present form for more
than one hundred years. It has always been an open process that accommodates
parties who wish to represent themselves. There is a very low bar to entry into
the profession as there is a small educational commitment and a few thousand
dollars in fees. There have always been people of all stripes coming into the
profession and trying new models of doing business. There have been menu
systems, where clients just pay for pieces of the work to be done. There have
been low-fee models. There has been full access to list a home on MLS and post
your fee for the selling broker. The real estate business is an open, low-entry
profession in which an entrepreneur can jump in and offer any type of
combination of features for any type of pricing structure to the public.

And people have. Over and over again.

The tech companies were sure they had hit a gold mine and built out a
network of information services nationwide. The clients loved it and told all
their realtor friends in and around 2010 that they were soon to go the way of
travel agents. While we sat in their homes holding them open to the public on a
Sunday afternoon, they nodded away at their future vision. While we spent
entire Saturday afternoons running them through half a dozen homes, they told
us they were going to order up their home over the internet and do all the
paperwork electronically.

But a dozen years later more people use Realtors than at any other time in
the last twenty years.

What’s interesting is a lot of people who don’t believe that there is a
market (that impersonal churning of groups of buyers and sellers who
voluntarily make choices) for real estate services, are pro-market. It’s hard
to understand how these critics believe in all other markets but not in paying
a fee for representation in one of the largest purchases the average individual
makes.

There is no collusion. There is no monopoly. There are no barriers to entry.
The market has continually supported the real estate profession all on its own,
despite persistent attempts to challenge it. For that reason, I have no reason
to believe that this will stop simply because a payout needs to be posted in a
new spot.