f/k/a archives . . . real opinions & real haiku

Realtors like receiving that large, uniform commission — usually 6

or 7 percent of the purchase price — every time they sell a home.

Therefore, they dislike discount brokers, and particularly those who

unbundle services and let home sellers pay a flat fee for each

service or option package. Of course, if the realtors conspired together

to exclude, punish or otherwise disadvantage cut-rate or fee-for-service

brokers, they would violate the antitrust laws.

However, realtor associations have found a sword against discount brokers and a shield against the antitrust laws:  They’ve been successfully lobbying state legislators, who have dutifully enacted so-called “minimum service laws” (in the name of consumer protection, of course), which require brokers to provide a broad set of services, regardless of whether the consumer wants or needs them.  Because trade associations can lobby without violating the antitrust laws (under the Noerr-Pennington doctrine), and they receive “Parker“ or State Action immunity from the antitrust laws for conduct that is required under a state law, consumers in many states have no antitrust protection against minimum-service laws, and now face fewer choices and higher fees when they sell or buy a home.

Oklahoma passed a minimum-services law in June, and its realtors seem to be maneuvering for regulations that are even more restrictive than the statute (“Antitrust officials watching minmum service real estate laws,

Inman News, Oct. 19, 2005). Texas Gov. Rick Perry signed such a law in June,

effective Sept. 1, 2005, causing alternative brokers having to increase their prices and remove some options (“Flat-fee brokers adapt to new real estate law,” Inman News, Oct., 12, 2005). Alabama joined the consumer sell-out in August — with realtor clout demonstrated by a 35 – 0 vote in the Senate and 95 -1 vote in the House.  (States snub Justice Department’s antitrust complaints (Inman News, Aug. 10, 2005).    Ohio and Wisconsin are currently considering similar laws.

Although consumer advocacy efforts by the Federal Trade Commission

and Department of Justice, in each of the above states, have proven fruitless

(e.g., their Letter re Texas legislation earlier this year), the agencies submitted

a Letter this week (Press Release, Oct. 20,2005) to the state Senate in the

newest battle ground – Michigan.

The FTC/DOJ Letter to Michigan legislators gives this background (at 4):

“It is becoming increasingly common for home sellers and home buyers to want some, but not all, of the traditional brokerage services.  For example, some sellers might want help advertising their homes, but want to negotiate the sale price themselves.  Such consumers might prefer to pay a real estate professional only for the service of listing their homes in the local MLS [multi-

ple listing service] and placing advertisements in local media.  Other consumers might find a buyer without assistance, but would like to hire a real estate professional to assist them with the negotiation of the sales price or with the paperwork required to close the transaction.  The marketplace is evolving in response to these consumers.  Real estate professionals who are willing to provide a customized subset or menu of a la carte services have emerged in Michigan and throughout the country.  These “fee-for-service” or “menu-driven” business models are currently legal under Michigan law and typically enable consumers to save thousands of dollars because the consumers pay only for those services they want.”

The legislation proposed in Michigan (HB 4849) would require brokers acting

“pursuant to a service provision agreement creating an exclusive agency relationship” to,

at a minimum,provide (a) marketing services for the seller in the manner agreed upon in the

agreement; (b) the acceptance of delivery and presentation of offers and counteroffers; (c)

assistance in developing, communicating, negotiating, and presenting offers, counteroffers

and related documents, until agreement is reached and all contingencies satisfied; (d) assis-

tance necessary to complete the transaction under the terms specified in the purchase

agreement; and (e) furnishing and completing the legally-required closing statement.

FTC Chairman Deborah Platt Majoras noted:

“Consumers should have a choice in the level of real estate

services that best meets their needs. . . The bill likely would

take away lower-price choices and also likely increase the

prices of full-service real estate services.”

Thomas O. Barnett, Acting Assistant Attorney General in charge of the DOJ’s

Antitrust Division, added: “Consumers deserve to receive the full benefits of

competition – greater choices and better services – in order to meet their real

estate needs.”  In their joint submittal, the agencies point out that there is no

evidence that options available in the current broker marketplace has caused

consumer injury.

The f/k/a gang wants to add that consumers always face some  “emptypocketsS”

level of potential risk, when they purchase lower-priced products

or services, but they should be allowed those choices, subject to

a strong showing that the risk is unacceptable.  That is especially

true in situations, like here, where consumers have such varied needs

and capacities (for example, many Americans are capable of drafting

their own fact sheets, and printing them at-home, and of talking price

with potential buyers).  Furthermore, there is a very real risk that any

mandated package includes unneeded services sold at an articifially

high price.

As Mark Ijlal mentioned at his weblawg last week, many parts of

Michigan can expect to face housing market slumps in the near future, due to

the troubles of companies like Delphi and Ford, which will bring countless layoffs

and immeasurable uncertainties.  If Michigan’s Realtors have their way, those

forced to sell their homes at the bottom of the market will have fewer ways to

save money on brokerage services.  But, they can feel so good about all that

extra paternalistic protection, courtesy of their smiling Realtors.

moving day

the other men

in her life

John Stevenson

Ken Wallis, chief legal adviser to Alabama’s governor, explained, it “was just a

no-brainer” to approve their state’s new real estate law, because “The average

seller has to have additional assistance in a transaction.” Wallis added:

“There are 100 things that the average seller does not know, and

somebody’s got to help them with it. It’s no different than paying a

doctor’s fee or a dentist’s fee. You’ve got to have those services and

the public benefits from having a good agent or broker to handle their

transaction for them. The governor’s interest in this matter was deciding

if the law was in the best interests of the public.”

On the behalf of the helplessly grateful residents of Alabama, we thank you, Gov.

Bob Riley.

I know the realtor trade groups have lawyers working to get these laws

passed. And legislative and executive branch counsel are kowtowing to the Realtors.

Are any lawyers doing anything to protect the rights of home buyers and sellers?  Or,

is the Bar so paralyzed by its own dependence on anticompetitive guild tactics (such

as barring non-lawyers from performing real estate closings), and so blinded by its

own addiction to standard contingency fees, that it is embarrassed to come to the

assistance of consumers who have no lobbying clout and no political action committees?

• Note: On Nov. 8, 2005, the American Antitrust Institute
  is holding a “Symposium on Competition in the Residential
  Real Estate Brokerage Industry.”

updates:

(Nov. 8, 2006)Ssee our brokers, commissions, renovations. written

after attending the above-referenced AAI Symposium.

(Jan. 15, 2006): Lobbying to Sell Your House, NYT, by Glen Justice,

Jan. 12, 2006  [via Matt Homann

one last look

through the old apartment

a dry sponge

since you moved

just a road

I don’t go down

her eyes narrow,

seeing for the first time

my little home

John Stevenson

Quiet Enough (Red Moon Press, 2004)