DOJ Settles With NAR - Both Sides Winners!
Tuesday May 27, 2008
At least both sides say they are winners in the settlement of the three year lawsuit the Department of Justice brought against the National Association of Realtors. The suit challenged several practices, mostly related to VOW's or Virtual Office Websites and how brokers could opt out of display of their listings.
The two sides say:
- NAR: "This is clearly a win-win for the real estate industry and the consumers we serve."
- DOJ: "The Department said the settlement will enhance competition in the real estate brokerage industry, resulting in more choice, better service, and lower commission rates for consumers."
- NAR: "The revised policy continues to protect the rights of sellers who do not want their property or their property's address displayed on the Internet, and also protects sellers from having false information about their listings appear on the VOWs of a member of the MLS."
- DOJ: "Under the terms of the settlement, NAR will repeal its anticompetitive policies and require affiliated multiple listing services (MLSs) to repeal their rules that were based on these policies. NAR will enact a new policy that guarantees that Internet-based brokerage companies will not be treated differently than traditional brokers."
- NAR: "The response to VOWs hasn't been great because consumers can find sites throughout the Internet on which to gather information without having to register their name and contact information," says Mark Lesswing, NAR's chief technology officer. "
- DOJ: "Delivering listings via the Internet enables customers to control their search process and educate themselves about the real estate market in their area on their own schedule. These VOWs have allowed brokers to be more productive, and some VOWs have passed these efficiencies on to consumers in the form of lower commission rates to home sellers and rebates to home buyers."
Here is the NAR press release, and here is the DOJ statement. Don't you just love it when everybody gets what they want?
Comments
The recently announced court settlement between the Justice Department and the NAR is certainly a step in the right direction, but it’s not enough. It’s clear that removing the collusion that prevented fair competition will drive innovation, but the industry needs wholesale restructuring.
Don’t get me wrong, I’m all for a fair day’s pay for a fair day’s work. As I see it, part of the problem with realtor commissions is that charging a percentage of the sales price does not directly reflect the amount of time and effort that went into marketing and selling a particular home (this goes both ways - often it’s big windfalls for little effort and sometimes realtors actually lose money on smaller lengthy transactions).
I would like to see a fee-based structure where home sellers could select a’ la carte the types of marketing services that are right for them. Realtors would certainly be able to recommend the services that they believe are most appropriate based on past success.
While this approach may not be attractive to many realtors (especially those who are accustomed to the great windfalls), it would be great for consumers. And, most importantly, it’s fair to everyone.
Let’s face it… there are too many realtors. The arguement that the average realtor doesn’t earn “that much” money doesn’t negate the fact that many realtors earn more than they’re worth. Another problem with the real estate sales industry is that there are very little barriers to entry. Just about anyone can take a test and claim they are a real estate expert.
Bringing sanity to the real estate sales industry through a fee-based structure would weed out those that don’t want to work to provide real service and value. In addition, it would encourage further automation and technology to drive additional efficiencies into the process. We’d end up with a lot fewer agents/brokers, but each would sell a lot more properties. The average selling fees would be much lower, but with the increased per agent volume, those that successfully competed on service would earn more than they do today.
Consumers would keep more of their home equity and receive better service.