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

October 21, 2005

realtors and legislators are selling you out

Filed under: pre-06-2006 — David Giacalone @ 2:45 pm

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.
house for sale neg 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.”
MichiganN 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.
MichiganG 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
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.
house for sale 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?
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
Quiet Enough (Red Moon Press, 2004)









house neg


8 Comments

  1. Good post.

    Comment by Anita Campbell — October 24, 2005 @ 12:06 am

  2. Good post.

    Comment by Anita Campbell — October 24, 2005 @ 12:06 am

  3. I would like to know if there are any realtors dealing with houston apartment complexes? I was researching to purchase an apartment.

    Comment by Houston Apartments — November 3, 2005 @ 5:58 pm

  4. I would like to know if there are any realtors dealing with houston apartment complexes? I was researching to purchase an apartment.

    Comment by Houston Apartments — November 3, 2005 @ 5:58 pm

  5. Dear RA,  I’m sorry, but I have no information about the Houston market.  I would think a few minutes with the Houston Yellow Pages — in print or online — would help you locate brokers who deal in apartments (if you mean condominiums or cooperative units to purchase, look for those terms).  Good luck.

    Comment by David Giacalone — November 4, 2005 @ 8:05 am

  6. Dear RA,  I’m sorry, but I have no information about the Houston market.  I would think a few minutes with the Houston Yellow Pages — in print or online — would help you locate brokers who deal in apartments (if you mean condominiums or cooperative units to purchase, look for those terms).  Good luck.

    Comment by David Giacalone — November 4, 2005 @ 8:05 am

  7. […] david giacalone – October 12, 2006 @ 12:22 am · Viewpoint, News Items The management at shlep was too busy preparing for liftoff, on Sept. 3, 2006, to pay sufficient attention to the New York Times article ”The Last Stand of the 6-Percenters?.”   Nonetheless, we want to bring it to your attention, now, because it highlights the battle being waged by real estate brokers and agents (realtors) to deprive home sellers and buyers of the benefits of unbundling, price discounting, and the information-access potential of the internet.   Although most sellers and buyers still hire real estate agents, neither are required to do so, and there are self-help materials available to guide the do-it-yourselfer through this process, or make it possible to do some of the tasks traditionally performed by brokers.  Of course, you have to be able to find an agent willing to unbundle his or her services and take on discrete tasks at a lower price.  [See the Nolo.com articles Do You Need a Real Estate Agent to Sell Your House? and Should I Hire a Real Estate Agent or Lawyer When Buying a House?]  That’s nice, you might say, but why is a website focused on self-help law focusing on this topic?  The answer is that realtors have been trying (successfully in several states already) to get laws passed that would make significant unbundling unlawful.  Here’s how I explained the situation last year at f/k/a, in the posting “Realtors and Legislators Are Selling You Out“: 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 an 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. […]

    Comment by shlep: the Self-Help Law ExPress » Blog Archive » realtors fight unbundling (and pols help them) — October 12, 2006 @ 12:26 am

  8. If you or anyone else is interested in locating some of the real estate broker’s who are offering the flat fee services that are triggering these minimum service laws, check out my Flat Fee MLS blog.

    Comment by Flat Fee MLS Marketing — February 3, 2007 @ 8:51 pm

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