Monday, May 09, 2005

Relief for Home Buyers and Sellers - Maybe

The Wall Street Journal reports that the Justice Department is about to bring an anti-trust suit against the National Association of Realtors. Link. (subscription required)
In a widening push to promote price competition in sales of residential real estate, government antitrust enforcers are preparing to sue the National Association of Realtors, alleging that its policies will illegally restrict discounting of sales commissions and put online competitors at a disadvantage.

The move, the latest effort by the Justice Department and the Federal Trade Commission aimed at protecting buyers and sellers of homes, could help take some of the sting from high real-estate costs. It comes as a hot housing market has caused prices to surge, sharply boosting income for brokers and sales agents, whose commissions typically amount to 5% to 6% of the sale price. [...]

The Justice Department is expected to charge that the NAR, in a proposed 2003 bylaw, illegally adopted practices intended to stifle Internet-based rivals and discounters, according to lawyers close to the case. These competitors often charge commissions below the traditional 6% that is divided between buying and selling agents. [...]

The government is also targeting industry-backed efforts to get state legislatures and real-estate boards, which set licensing standards, to enact regulations that in effect protect full-service real-estate agents and their commissions. Some brokers offer fixed fee-for-service, or menu, pricing that can lower consumers' costs, and others rebate a portion of the commission.

It's about time. The Internet affords us great savings in many areas, most notably travel and stock trading. With real estate, it has given us a little greater ability to look things up, but even that is limited. As for commissions, forget it. Realtors have a monopoly over access to the Multiple Listing Service, and they guard that monopoly jealously.

The Internet has allowed greater visibility for "For Sale by Owner" sales, but this is still miniscule. If the NAR monopoly is not broken, the FSBO market may grow to a significant one, but most people would prefer the convenience of dealing with a broker, and their preference would be a discount broker. Let's hope that this suit will allow such discount brokers to exist in meaningful numbers.


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