See Yang & Yavas, supra note 154, at 23 (1995) (reporting that only 12 percent of listings in the State College, PA MLS in 1991 were sold by the listing broker); 1983 FTC STAFF REPORT, supra note 9, at 37 ("approximately 66 percent [of sales] involve more than one broker"). Practice all cards. See United States v. Realty Multi-List, 629 F.2d 1351, 1370 (5th Cir. Further, by stating up-front the compensation being offered to a cooperating broker, the MLS can reduce the costs associated with listing brokers having to negotiate separately with each potential cooperating broker.55 As a result, the use of an MLS can substantially reduce transaction costs.56, The efficiencies associated with use of an MLS in the real estate industry are well documented in the real estate, legal, and economic literature57 and in court decisions.58 In the seminal case, United States v. Realty Multi-List, Inc., the Fifth Circuit described the various benefits offered by an MLS.59 First, the MLS reduces the "obstacles brokers must face in adjusting supply to demand: market imperfections are overcome in that information and communication barriers are reduced, along with the easing of the built-in geographical barrier confronting the buyer-seller relationship. He anticipated that some firms would specialize in specific parts of real estate transactions allowing consumers to choose what fits their needs. In such a case, the subagent works with the buyer as a customer but owes fiduciary duties to the listing broker and the seller. See NAR, Public Comment 208, at 15-16; Delcoure & Miller, supra, at 15. As one study explains: Thomas J. Miceli et al., Restructuring Agency Relationships in the Real Estate Brokerage Industry: An Economic Analysis, 20 J. 279. Proponents of this argument state that this outcome is more likely to occur with a fee-for- service listing than a traditional listing because the person soliciting buyers is the home seller who is not regulated as a real estate licensee and thus has less concern about attempting to solicit clients who are already represented. Unfortunately, as one author recently noted, "There is not much empirical evidence on commission rates. 116. It is a standard question now. 328. "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. "); Salinger, Tr. See Perriello, Tr. "); see also, e.g., Reifert v. South Central Wisconsin MLS Corp., 450 F.3d 312, 317 (7th Cir. For example, consumers can use the Internet to research brokers,109 mortgage and lending options, 110 and recent home sales and home valuations in their community.111 Consumers also can find information about schools, crime, and other variables related to home purchase decisions through a host of online sources, including websites hosted by their municipalities. Hahn observed that such specialization and dividing of real estate services into smaller parts could result in "substantial gains for consumers." This Report, however, does not draw on any non-public information gathered during investigations conducted by the FTC or DOJ or obtained through litigation brought by the Agencies. As the FTC and DOJ have explained in letters to several states, minimum-service requirements harm consumers in two ways.274 First, minimum-service requirements frustrate consumer choice by reducing the options available to consumers in the marketplace; consumers who would otherwise choose a lower-cost fee-for-service option are harmed if they can no longer choose their preferred option because it does not comply with state minimum-service requirements. Id. For example, in states allowing rebates, some brokers operate business models pursuant to which they rebate up to one-third or one-half of their commission to their buyers. The Real Estate Board of New York has guidelines on broker ethics especially as it relates to the commission fee. 23, 27-28 (1995). Fees, measured in constant 2006 dollars, are based on median home prices so as to represent what a typical consumer would pay in real estate commissions to sell his or her home. See id. Resources to foster and harness the grassroots strength of the REALTOR Party. The complaint against Realcomp alleges that it engaged in anticompetitive conduct by prohibiting information on exclusive agency listings and other forms of nontraditional listings from being transmitted from the MLS to public real estate websites. The Agencies' review of fee-for-service broker websites indicates that most offer at least two tiers of service and the complete array of traditional services at a reduced commission. But with more and more agents competing to close transactions, the average number of transactions per agent will decline. at 225-26. See GAO REPORT, supra note 3, at 13-14, 21. Why do commission rates appear to be so insensitive to market forces? The Agencies should continue to provide state legislators and industry regulators with information concerning the competitive consequences of state legislation and regulations that threaten to or already do restrict competition and consumer choice in the real estate brokerage industry, and take enforcement action in appropriate circumstances. Counsel, Texas Real Estate Comm'n. 179. In one case, ForSaleByOwner.com sued the State of California for enacting a law purporting to require it to become licensed as a broker, alleging that this action violated the First Amendment because the California statute in question specifically exempted newspapers from licensing requirements.306 The court held that California's disparate treatment of newspapers and FSBO websites ran afoul of the First Amendment: B. Section C presents the available data on actual commission rates and fees. The "New" Chapter 452: Defining Real Estate Broker Practice Commission "fees" are the total dollar amount paid by consumers for real estate brokerage services. 36. at 83. Prudential Real Estate purchased eRealty. 59, 858-312 (West 2006). 246. 061-0267; Monmouth County Ass'n of Realtors, Inc., FTC File No. See Thorburn, Tr. The aim of antitrust law is to preserve competitive markets. 233. "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. The full transcript is available at http://www.ftc.gov/opp/workshops/comprealestate/051209transcript.pdf and http://www.usdoj.gov/atr/public/workshops/rewagenda.htm. 44. . VA CODE 54.1-2132(C) (effective July 1, 2007) ("A licensee engaged by a seller in a real estate transaction may, unless prohibited by law or the brokerage relationship, provide assistance to a buyer or potential buyer by performing ministerial acts. at 235 ("there's relatively free entry into the profession and into the real estate brokerage business . Even though an agent's commission increases with the price of the home, he or she likely retains no more than 1 to 2 percent of the sales price (after paying the cooperating broker and the agent's brokerage firm).137 Therefore, the agent may be less willing than the consumer to take the risks associated with getting a higher sales price, such as waiting for what might be a better offer and perhaps having to do additional work.138 Likewise on the buy side of the transaction, the broker may be less interested than the consumer in negotiating the lowest possible sales price because a lower sales price translates into a lower commission for the broker, likely requires additional work, and may increase the risk that the transaction falls through with no commission paid to the broker. In contrast, in 1997 only 2 percent of recent home buyers had first located their home on the Internet. See MiRealSource, Inc., FTC Dkt. Although these IDX websites, as explained more fully below, provide critically important avenues for brokers to advertise their listings to potential buyers and their agents, these websites are not a substitute for the MLS. at 1369. Today, real estate agents and brokers are changing the way they operate and are increasingly incorporating the Internet into their business models in a variety of ways, such as offering potential buyers the option to view full, detailed multiple listing services ("MLSs") online, using websites to gather "lead" information on potential customers, and using the Internet to match home buyers and sellers. These authors also considered whether commission rates within the Baton Rouge market responded to market-wide changes akin to housing booms and busts. Blann, Public Comment 250, at 1. Growth in home prices was relatively flat through most of the 1990s and real commission fees did not surpass their 1991 levels until 2002. See AEI-Brookings Paper, supra note 3, at 19. Finally, some have argued that the cooperating full-service broker risks not being compensated because the home seller might complete a deal directly with the buyer. Although the terms may vary by state, there are two principal categories of real estate brokerage professionals: "agents" and "brokers." However, just because members of a MLS have a pre-existing agreement in place does not mean that all listing agents will play ball. REAL Trends publishes nationwide average commission rates. Additionally, because evidence to date has not shown that minimum-service requirements benefit consumers, any harm they cause is almost certain to greatly outweigh any benefit they might produce. See supra notes 117-118 and accompanying text. 320. See NAR 2006 SURVEY, supra note 4, at 74 (69% of sellers contacted only one agent; 74% of sellers found their agent through either a referral or a prior relationship with the agent). 051-0065; Williamsburg Area Ass'n of Realtors, Inc., FTC File No. c. Both a and b. d. Neither a nor b. b. their broker. See, e.g., VA. CODE ANN. Id. 297. Competition among brokers is primarily local because real estate is fixed in a geographic location, and buyers and sellers often want some in-person interaction with a broker who has experience and expertise relevant to that particular location. "); Paulsen, Public Comment 364, at 1 ("If the public felt there was a set fee I would not be asked what my rate is to sell a house. Kunz, Tr. 288. Using that information, as well as Agency expertise, the almost 400 submissions filed in response to the Agencies' request for public comment in connection with the Workshop, and other available information, this Report has undertaken a careful examination of the real estate brokerage industry. For example, before the introduction of the Internet, consumers had to learn about homes for sale through real estate brokers, or through various offline marketing vehicles, such as yard signs, newspaper advertisements, or real estate magazines. PDF INTRODUCTION - McKissock Learning Detailed discussion of the ancillary services often provided in connection with real estate transactions was beyond the scope of the Workshop and, likewise, is beyond the scope of this Report. NAR and its affiliated Institutes, Societies, and Councils offer a wide selection of real estate training options. Complete listing of state and local associations, MLSs, members, and more. "253 Similarly, another panelist representing a major national brokerage franchise stated that "brokers and agents should be allowed the ability to freely negotiate transaction service pricing with their clients in any way they see appropriate. See, e.g., JustRealEstate.org, http://www.justrealestate.org (last visited April 20, 2007). Press accounts indicate that fee-for-service brokers have raised their prices or exited the market altogether in response to minimum-service laws. See Mark S. Nadel, A Critical Assessment of the Standard, Traditional Residential Real Estate Broker Commission Rate Structure, 23, American Enterprise Institute-Brookings Joint Center for Regulatory Studies (Oct. 2006), available at http://www.aei-brookings.org/publications/abstract.php?pid=1119. In addition, in response to an FTC questionnaire, respondents from Colorado, North Dakota, Vermont, and Washington noted that complaints against limited service brokers were minimal or nonexistent. "142, Although nationwide market shares provide little information about local market concentration, national-level data do demonstrate that there are many brokerage firms and agents, and that most brokerage offices consist of a small number of agents. Repairs may be ordered by the lender as a condition for financing or requested by the home buyer after the results of inspection. ALASKA STAT. First, some fear that sellers using fee-for-service brokers foist additional work onto full-service cooperating brokers and jeopardize the transaction due to the sellers' inexperience. PDF Consultant's Legislative Report on Agency Relationships - Hawaii And by returning money to home buyers, rebates can also benefit home sellers, because buyers will have more to spend on the home as opposed to commission payments. 061-0087; Northern New England Real Estate Network, Inc., FTC File No. . Now more than ever, it is critical for REALTORS across America to come together and speak with one voice. 59. There are three principal types of listing agreements. Id. For example, if a cooperating broker secures a buyer for a transaction and can establish through arbitration that he or she was the "procuring cause" of the sale, then the listing broker is liable for the cooperative compensation.45, One panelist who is a real estate broker and past president of NAR described the MLS as "a broker-to-broker information exchange that provides an opportunity for cooperation and compensation.