WASHINGTON — June 20, 2006 — The Consumer Federation of America (CFA) called a news conference yesterday to call the real estate industry a “brokerage cartel,” and it offered recommendations for change. But the CFA issued a strangely similar report 15 years ago, and the National Association of Realtors® (NAR) claims the new one ignores many industry changes since then, including the competitive environment of the Internet.
NAR President Thomas M. Stevens responded quickly after the CFA issued its latest report. “It’s clear and evident that (CFA) don’t understand the real estate business,” Stevens said. “Real estate is probably one of the most competitive industries out there.”
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In the current report, the CFA claims the real estate industry structure harms consumers by charging high commissions regardless of experience; by working with buyers and sellers as facilitators rather than fiduciary agents; and by first pushing self-listed homes or homes listed by their broker, which the CFA calls the “double dip.”
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The current report says that the real estate has five elements that restrict competition:
• Seller-paid commissions that discourage discounts out of a fear that associates won’t show homes below a certain commission level.
• Discrimination by brokers against new business models, such as Internet-only real estate firms.
• Unregulated MLS systems that restrict information access to consumers and nontraditional brokers.
• First-time homebuyers that don’t educate themselves about the buying/selling process.
• State real estate commissions made up primarily with practicing real estate brokers, which allows the industry to regulate itself.
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But rather than stifling competition, Stevens counters that the industry has grown more competitive rather than less. And he notes that real estate associates constantly put themselves at financial risk, listing and showing homes to clients when, at times, the deal never goes through and they make no money.
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As proof of recent changes, NAR produced the CFA’s 1991 report that called for changes within the real estate industry, with an analysis of improvements made since then. For example, the Internet has opened the MLS since most home listings can now be found online, making at least two earlier recommendations obsolete. And with buyers’ agents the fastest growing niche in real estate, any criticism of one-sided representation is also moot, says NAR.
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Even though the real estate industry has gone through dramatic changes in the past 15 years, NAR notes, it does agree with one recommendation offered by CFA, which says, “Home buyers and sellers must increase their understanding of the value of these services, the necessity of comparison shopping and their ability to negotiate with agents or to act as their own agents. Only then will residential real estate markets become truly competitive.â€
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“No argument that there is work to be done,” NAR responds. “Seventy-four percent of sellers and 64 percent of buyers still talk to only one professional before making a decision.”
***As always, the latest in Real Estate News as it pertains to Spring Hill Real Estate, Brooksville Real Estate, Weeki Wachee Real Estate, Hernando Beach North Real Estate, Hernando Beach South Real Estate, and Hudson Beach Real Estate. – Brought to you by Hernando Luxury Homes, Your Luxury Real Estate Leader in Hernando County, Florida and Pasco County, Florida.
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