Access to the VOW and its listings search features is limited to prospective buyers or sellers who have entered into an agreement with the VOW operator that includes a terms-of-use agreement.80 The VOW permits clients to search the database at their leisure until they are ready to contact their broker for assistance in viewing the home, making an offer, etc. 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. Why do commission rates appear to be so insensitive to market forces? Review your membership preferences and Code of Ethics training status. There is some overlap between the categories because certain business models fit into more than one category. See Tenn. Admin. 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. See, e.g., Massachusetts Bd. 102. States require real estate brokers and agents to be licensed. It's a tragic story where nobody wins, especially the consumer."). 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. See, e.g., GAO REPORT, supra note 3, at 16. Until the 1990s it was common for the cooperating broker to be a subagent of the listing broker, working on the seller's behalf.29 During the 1990s, most states revised their laws to allow buyer representation, and at the same time NAR revised its policies, eliminating seller-subagency as a condition of participation in the MLS.30 Today, after a decade of agency law reform across the country, it is more common for the cooperating broker to owe fiduciary duties solely to the buyer.31 In some states, however, a cooperating broker may be a "transaction" broker who has limited fiduciary duties to both the buyer and seller and whose role is to assure that the transaction proceeds smoothly.32 In all states, brokers are required to disclose to buyers the type of relationship that exists so buyers know whom the cooperating broker represents, although the timing of this disclosure varies by state.33, Once a buyer makes an offer on a home, the listing broker may help the seller evaluate offers and formulate counteroffers and may negotiate directly with the buyer or buyer's broker. Whatley, Tr. For example, the head of a major real estate brokerage franchise stated that "while we have no reason to believe that the states' motives [in adopting minimum-service laws] are anything but well-intentioned, neither Century 21 nor our parent company, Cendant, believes that minimum standards legislation is truly necessary. 63. 229. The authors use a sample of 669 single family home transactions covering the first nine months of 1986 obtained from the Lincoln, Nebraska MLS. One broker described the competition that he faces as follows: "In about 95 percent of the leads I get, I have competition from at least one other Real Estate Agent, and on listing appointments, I am often competing against [two] to [three] other Agents, and I lose quite a few [to] those who list with lower commission rates. 43, available at http://www.lrc.ky.gov/record/06RS/SB43.htm. For a review of the literature on such research, see Jonathan Dombrow & Geoffrey K. Turnbull, Trends in Real Estate Research, 1988-2001: What's Hot and What's Not, 29 JOURNAL OF REAL ESTATE FINANCE AND ECONOMICS 47 (2004); John D. Benjamin, G. Donald Jud & G. Stacy Sirmans, What Do We Know About Real Estate Brokerage?, 20 JOURNAL OF REAL ESTATE RESEARCH 5 (2000). REAL Trends publishes nationwide average commission rates. In addition, consumers likely would benefit significantly from additional knowledge about the range of options available in brokerage services and fees. Commenters and participants in the real estate brokerage industry report steering behavior. 287. 187. Fee-for-service brokers offer home sellers the option to purchase less than the full bundle of services traditional brokers provide. National, state & local leadership, staff directories, leadership opportunities, and more. The aim of antitrust law is to preserve competitive markets. Structural Features of the Real Estate Brokerage Industry. See Farmer, Tr. . REAL ESTATE FIN. 144. Some consumers may not be aware of the range of alternatives available to them when hiring a real estate broker, including the types of business models available and the negotiability of fees, for both home buyers and sellers, and/or may not understand the duties owed by their broker. Without full and timely disclosure a customer may reveal sensitive information, such as the buyer's maximum offer or the seller's minimum price, to a broker who is actually representing the party on the other side of the transaction. Dwyer, Public Comment 55, at 1. NAR argued that its VOW policies do not violate the Sherman Act because they merely empower individual brokers to opt out and therefore "restrain" nothing. 71. NAR, Home Buyer & Seller Survey Shows Rising Use of Internet, Reliance on Agents (Jan. 17, 2006), http://www.realtor.org/press_room/news_releases/2006/hmbuyersellersurvey06.html. 69. In the twenty-five years since the Realty Multi-List case, the Agencies have brought a number of antitrust cases involving anticompetitive effects associated with an MLS. "249, DOJ also investigated rebate bans by the South Dakota Real Estate Commission, the West Virginia Real Estate Commission, and the Tennessee Real Estate Commission. Continuing education and specialty knowledge can help boost your salary and client base. Because brokers usually set the rules for each others' participation in the MLS by agreement, it is possible for one dominant group of brokers to establish MLS rules that favor them and disfavor other brokers who compete in a manner that they dislike. The FTC's last report on real estate brokerage, twenty-three years ago, stated: Some claim that things have not changed.166 Some commenters observe that the relative inflexibility of commission rates coupled with rising home prices has caused consumers to pay more in commissions, and that if brokers competed more on commission rates, commission fees would be lower.167 Moreover, citing consumers' increasing use of the Internet in real estate transactions and the substantial savings that the Internet has brought to consumers across numerous service industries168, some commenters maintain that the Internet should also be reducing the costs of providing real estate brokerage services.169, In its comment, the American Bankers Association ("Association") observed that "[one] would expect to see variations in brokerage commissions across geographical regions as the supply and demand varies dramatically across the United States, but little if any variation exists. 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."). NAR is widely considered one of the most effective advocacy organizations in the country. Id. at 32. 67. 475.278, OHIO CODE 4735.621, OKLA. STAT. at 89; American Bankers Association, Public Comment 10, at 3. According to the author, "[t]he [HUD-1] data clearly reveal systematic variation in the actual home brokerage commission rates according to the three variables examined. 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. 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. See GAO Report, supra note 3, at 19-20. Founded as the National Association of Real Estate Exchanges in 1908. 221. See Letter from DOJ to Oklahoma Representatives and Senators (Apr. 284. . What is a subagency relationship? eRealty was a licensed brokerage and employed licensed agents.84 It provided the ability to search MLS data online to bona fide buyers who had registered for a password, monitored the MLS, and reported to its clients when any listing came up that fit a profile that the client had pre-established.85 In this way, the VOW model allows consumers to substitute their search effort for that of a broker: eRealty also would "communicate instantly through email or any device [clients] needed to assist [them] with scheduling of appointments and the whole scheduling of the transaction all the way through to close. at 169 (discussing the timing of disclosure of agency relationship in many states as having been changed from "first meaningful contact" to "as soon as practical but no later than the writing of an offer," and how this can give rise to procuring cause issues). vol. 302. A representative of a self-described "alternative real estate brokerage company" reported: "I have had agents tell me personally they have been instructed by their broker not to show our properties. Brokers and agents (hereinafter, "brokers")15 usually are more informed about the local real estate market and the process of a real estate transaction than most home buyers and sellers.16 This informational advantage derives from two sources. (1) Accepting delivery of and presenting to the client or customer offers and counteroffers to buy, sell, or lease the client's or customer's property or the property the client or customer seeks to purchase or lease; (2) Assisting the client or customer in developing, communicating, negotiating, and presenting offers, counteroffers, and notices that relate to the offers and the counteroffers until a lease or purchase agreement is signed and all contingencies are satisfied or waived; and, (3) Answering the client's or customer's questions relating to the offers, counteroffers, notices, and contingencies.260, Currently, Alabama,261 Idaho,262 Illinois,263 Indiana,264 Iowa,265 Texas,266 and Utah267 have minimum-service laws that require licensees to perform tasks similar to those specified in Missouri's law.268 Further, Kentucky,269 Michigan,270 Mississippi,271 and New Mexico272 recently have considered but not adopted minimum-service requirements.273. If a buyer asks a seller to pay part of the . See also FTC OFFICE OF POLICY PLANNING, REPORT OF THE STATE ACTION TASK FORCE (Sept. 2003), available at http://www.ftc.gov/os/2003/09/stateactionreport.pdf (analyzing state action immunity doctrine). In an address at the beginning of the Workshop, (then Acting) Assistant Attorney General Thomas Barnett observed that minimum-service laws and regulations can be viewed as no different from states passing a regulation that says: "When I walk into McDonald's and order a hamburger, I'm told that I also have to buy some french fries, because the state has decided that it might be deceptive or misleading or bad if I only got the hamburger, paid for it and didn't realize I wasn't going to get the french fries." 299. 86. See Michael Carney, Costs and Pricing of Home Brokerage Services, 10 JOURNAL OF THE AMERICAN REAL ESTATE AND URBAN ECONOMICS ASSOCIATION 331 (1982). Contact the Webmaster to submit comments. 91. Meet the continuing education (CE) requirement in state(s) where you hold a license. 15. 212. NAR, HANDBOOK ON MULTIPLE LISTING POLICY 50 (2006). As a result, inflation-adjusted commission fees per transaction appear to follow closely movements in home sales prices. 3:05CV188-H (filed Mar. IDX datafeeds can also be less complete than the full MLS listings database because each MLS determines which datafields to include in the IDX datafeed. 217. Several states, including Delaware, Florida, Ohio, Oklahoma, Tennessee, and Wisconsin, have less restrictive laws that allow the client to decide whether he or she wants the listing broker to perform such services. 76. You can post color photos. Id. See also Perriello, Tr. DOJ, South Dakota Real Estate Commission Permits Real Estate Brokers To Offer Rebates And Inducements (Aug. 17, 2005), available at http://www.usdoj.gov/atr/public/press_releases/2005/210637.htm; DOJ, West Virginia Real Estate Commission Permits Real Estate Brokers To Offer Rebates And Other Discounts (May 4, 2006), available at http://www.usdoj.gov/atr/public/press_releases/2006/215961.htm. The Nevada legislature is considering a bill to allow consumers to waive the minimum- service requirements established by the Nevada Real Estate Commission, all of which is part of a package recommended by a minimum-service task force the Commission established. 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. As such, these obstacles have received particular attention from the Agencies. at 41. 56. 4. "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. According to the U.S. Census, the median home sales price in Baton Rouge in 1992 was $73,600. "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. For example, recent Realogy data indicate that between 2002 and 2006 Realogy's average commission rate declined about 7 percent while the average sales price for the homes they sold increased about 30 percent. STAT. 251. AM. at 114; Farmer, Tr. 50. . See, e.g., J. HOWARD BEALES & TIMOTHY J. MURIS, STATE AND FEDERAL REGULATION OF NATIONAL ADVERTISING 7-19 (1993). The real estate brokerage industry has been characterized by cooperation among brokers and agents for well over a century, going back to the first real estate boards and MLSs.321 Under the MLS system, listing brokers rely on cooperating brokers to procure a buyer in the majority of transactions.322 The emphasis on cooperation continues today, as reflected in statements made at the Workshop and in public comments filed with the FTC and DOJ. The increased ease with which home buyers and sellers can perform tasks that once were the exclusive domain of real estate agents and brokers likely has been an important factor in the increased demand for innovative, non-traditional real estate brokerage services.4 In fact, the Internet has surpassed the yard sign as the most important marketing tool to reach consumers.5. "112 A panelist described the Internet as "a very highly effective marketing tool as well as a tremendous information resource and communication tool. Academic opportunities for certificates, associates, bachelors, and masters degrees. 2004) (providing a general description of the ForSaleByOwner.com business model). Whatley, Tr. Workshop panelists reported how some MLS rules discriminate against brokers who enter into exclusive agency listing agreements, which provide that the broker is entitled to compensation only when the home is sold by an agent, and not in the event the home seller sells the home on his or her own.309 This is the type of agreement used in most fee-for-service transactions. While many consumers may be willing to perform search tasks themselves, they may be more likely to continue to rely on brokers for assistance related to the transaction process because it involves expertise derived from broker experience.125 For buyers, this may mean performing much of their early search by themselves online and contacting a broker only after they have become familiar with market offerings and are ready to start placing offers on homes. 128. 176. at 20. Panelists representing traditional brokers acknowledged that the listings information provided via an IDX datafeed is limited. of Realtors v. E-Realty, Inc., No. One panelist observed that "[brokers] are cooperative with the competition in ways unheard of in any other industry that I know of. "256, One panelist noted that, given the clear benefits of rebates to consumers, it is "hard to find a good articulated defense" of rebate prohibitions.257 Proponents of such provisions claim that they protect consumers from false and misleading offers of rebates and help ensure that consumers choose brokers on the basis of the quality of the service, rather than price. at 81 n.1. 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. Some have argued that subagency was created by members of NAR in order to restrict access to the MLS. However, that dynamic may not operate as well in industries, like real estate brokerage, where many consumers have significant limits on their knowledge, thus making it easier for competitors to steer business away from new or maverick brokers, or to otherwise withhold necessary cooperation, without the knowledge of their customers. The final part of the Report offers conclusions and recommendations. MLSs are the primary source of home listings information because they contain real time information on virtually every home listed for sale in a given area, except FSBO homes. at 4. "); White, supra note 47, at 2 ("[A] more competitive outcome would surely mean that average fees would be lower than they are today and that 'the 6% (or 7%) commission' would be unlikely to remain as the modal fee. 293. 116. The "New" Chapter 452: Defining Real Estate Broker Practice
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