Archive for Sunday, September 25, 2005

Discount Realtors unfairly unlisted

September 25, 2005


How much does it cost to sell a home? That's simple: Though Realtors' commissions are negotiable, you're virtually sure to pay 5 percent or 6 percent of the sales price - about $24,000 on a $400,000 home.

The real question is: How much should it cost?

That's simple, too: A lot less. Perhaps 1 percent or 2 percent.

Since there are more than a million real estate brokers in the United States, you'd expect commission rates to vary more than they do. Why don't some try to undercut their competitors, as discount stockbrokers have?

Some do. But they are shunned by their full-price brethren. And that's the subject of an antitrust suit the U.S. Department of Justice filed recently against the National Association of Realtors, the trade organization that dominates the industry.

The government claims NAR members unfairly block discount Realtors from full access to the Multiple Listing Service, the mother lode of homes offered for sale by brokers throughout a local area.

NAR rules have allowed brokers to prevent their own company's listing from being displayed on any or all of their competitors' Web sites.

The government claims this is meant to undercut a new breed of Realtor that operates primarily online and passes its cost savings on to sellers through low commission charges. If discounters cannot show buyers all the homes for sale in the area, buyers will use the full-price Realtors who can, the government says, calling the practice discriminatory and anti-competitive.

The same day the government suit was filed, the NAR modified its policy so that a broker cannot selectively withhold its listings from specific competitors. Instead, it can withhold from all or none. But there are exceptions, and the government said the new policy was not good enough.

If the government prevails, discount brokers likely would take a larger share of the business, giving sellers a low-cost alternative and perhaps forcing full-price Realtors to reduce their commissions.

The commission-based system is long overdue for change. It's absurd, for example, for a broker to charge $24,000 to sell a $400,000 home and $12,000 to sell a $200,000 home. Is it twice as much work? Unlikely.

The Realtors' association says the Multiple Listing Service is the property of its members, who should have the right to set their own policies.

But MLS listings are so essential to buyers and sellers that they should be subject to rules such as those that govern the stock exchanges. Those require that sellers' asking prices be available to all potential buyers, and that buyers' offering prices be available to all potential sellers.

This "transparency" is designed to encourage wide competition and the fairest prices for all.

The NAR's policy allowing members to restrict Web access to listings puts the members' interests ahead of customers'. As a seller, your chances of getting the highest price are better if your listing reaches the largest number of home shoppers possible.

Buyers, too, do best when they can see all the houses on the market, not just the ones their realtor wants them to see.

Many of the services traditionally provided by full-price Realtors are now available online for little or nothing. Calculators show buyers how much they can borrow, for instance, and it's easy to get data on such things as home prices and school quality in a given community.

For many sellers, full-price Realtors are worth the price, and those businesses have a right to charge whatever the market will bear. But it should be a fair and efficient market. The Justice Department is on the right track, trying to ensure the old-line Realtors compete cannot stack the deck against the innovative discounters.


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