A few months ago we reported on testimony given before a subcommittee of the
House Financial Services Committee, largely targeting the National
Association of Realtors for what was termed anti-competitive activities.
Detractors - and they outnumbered supporters, charged that real estate brokerage
is self-regulated with the rules set by brokers themselves and that the industry
had acted to restrict use of multiple listing services, unfairly set commission
structures, and to undermine less-than-full service real estate agents.
The anti-competition theme was one that Congressman Michael
Oxley, Chairman of the parent committee, had been riffing on for some time;
requesting a study on NAR practices by the Government Accountability Office
(GAO) in 2005, results of which were also presented in testimony at the hearings.
Those testifying in support of the anti-competitive
included representatives of from government agencies such as the
Federal Trade Commission, The Department of Justice, and GAO and industry critics
such as discount realty agents and on-line real estate competitors (Redfin and
Lending Tree) and, while they were pretty hard on NAR, the Consumer Federation
of America was brutal. They had telegraphed their message a week or so earlier
with a press release headlined "CFA Congressional Testimony Calls Real Estate
Brokerage System Cockamamie."
So much for subtlety.
Shortly after the hearings we reported on those testifying for and against
NAR (only NAR and a rep from RE/MAX testified for the defense) although the
association was not formally in the dock - and asked for your comments.
We also said that we thought the CFA remarks, which went far beyond anything
else said in the hearing, were worth a separate discussion. We are now, belatedly,
returning today to your comments which were numerous and in the new few days
to the remarks made before the committee by CFA.
Reader comments were divided pretty evenly between those supporting NAR and
the current system and those complaining about it and those criticizing and
justifying the present commission structure. While we had asked respondents
to identify themselves as real estate agents, loan managers, consumers, etc.,
few did, but boy but they did vent. Many comments covered several topics but
we have tried to group them by category. Most have been edited for reasons of
space, clarity, and spelling.
On Realtor's professionalism and service:
I'm a consumer reporter whose stories air in 80 cities nationwide. I recently
did a series on the NAR, Justice and FTC. Realtors really need to stop insisting
their services have value. The issue isn't that you don't provide value: what
you have to explain is how sometimes you earn 20 grand for 40 hours of work.
Until you can, this issue won't go away. Period.
Real Estate is very hard work. You help your clients and you receive a
commission. If your client decides to not buy or sell, you don't get paid and
you have expenses to pay too. Would you work for free? Why should I pay for
the MLS when consumers get for free? This is like you paying for your car and
letting me drive it for free.
Realtors like Loan Officers (good ones) do much, much more work for their
commission than the average client, person or crusading government official
realizes. So "large" commissions are often earned. But having said
that, what is so sacred about "6%"? Let the Market correct all this.
Does anyone really understand the services that a realtor provides?? As a loan
officer I also want to see the realtor commission structure protected and do
believe that there are "bad apples" in the real estate business. However,
I have seen too many homeowners attempt to sell their home themselves, waste
time, resources, added stress and then get "screwed" in the end.....It's
no wonder that 83-87% of "For Sale By Owners" end up listing their
An attorney wrote: Several of my clients have been financially harmed by
unethical Capital R - Realtors. Realtors must be required to adhere to professional
ethics, NOT to an ethical code established by them (NAR). Self-regulation never
If you think Realtors are overpaid then I would like to see some of you
work in our profession for a month or two. Try listing a home and getting it
sold. See how when you break down the amount of hours you worked that listing;
you end up making a very small hourly rate. Nights, weekends, days, holidays
... you're always selling. Need I remind you that commissions are negotiable?
In metro NJ/NY we're getting 4% and we're working day and night to move our
MLS is a monopoly no different than the phone companies used to have and
the cost of selling a home is far too high in relation to the value of the service
provided. Away with protectionism, MLS must be opened up to innovative new services.
I WANT to use a broker to buy. But in my state I can't get into even a
watered down version of the MLS to scan large numbers of properties over a wide
area. Instead I'm stuck with Realtor.com which is nearly useless and slow.
In the industry as a whole, the realtor is the only one that is self-regulated
and it isn't working. Realtors have been allowed to grossly overstep their boundaries
in the finance and title end and their overall knowledge is minimal in these
areas. They fear no consequences from their own governing body. In this state,
the realtor gives a buyer a printout of properties and the borrower is on his
own unless he sees one he likes and the seller pays 6% for that.
The fact about MLS's is that the Realtors maintain a complete inside listing
that is only available to fellow Realtors. It is an IP address and you need
specific information to enter. The MLS here in Portland Metro is owned by Prudential
Real Estate Affiliates. That is monopoly.
The issue of commissions, however, elicited the greatest response:
The flat fee MLS model is exploding because consumers are asking for alternatives
to 6%. Add in excise tax and escrow fees and the cost of selling your home can
be over 8% with a traditional realtor! The total average commission in Europe
is 1.5 to 2%. Somehow the agents over there have figured out how to survive
I have been selling real estate for over 15 years at what is considered
to be a "discount" rate (5%) with complete full service including
MLS. My business has evolved nicely. However I still encounter many potential
clients who chose to pay 6-7%. They perceive that there is something that the
other realtor is doing that I don't. Look around...the choice to pay less has
been ignored for years.
95% of Realtors are under qualified (I am being polite) and vastly over
paid. I applaud any effort to limit real estate commissions.
People must remember that realtor commission structures were formed when
homes were selling for much less... like 100-200K. So, 6-8K in commissions were
tolerable considering the cost of advertising, etc.... Today the same home sells
for 400-600K. Is 30K+- really a fair price to pay for services provided? MLS
is the only thing remaining that props up that commission structure. NAR will
defend its use to the death.... but nothing lasts forever.
As a licensed realtor, I understand the services that are provided, and
in many cases, these services are overpriced by traditional real estate commission.
Price fixing? Depending on the homes value and the amount of marketing, agents
should commission themselves accordingly.
RE agents are para-professional attorneys that specialize in RE. If you
think RE agents are expensive, please hire an attorney. That's the way is used
Comments were still coming in weeks after our three part series on the hearings
appeared. The articles and full range of comments are available here:
Part 3: House Real Estate
Hearings - Prosecution Rests And Defense Steps Up
Part 2: NAR Takes
A Lickin From Competitors
Part 1: Oxley
Hearings Investigate Real Estate Competitiveness
The Changing Real Estate Market
Please feel free to continue posting your comments below.