Steven Pearlstein of the Washington Post hit the real estate cartel with a one, two punch today writing a hard-hitting column entitled, Realtors Aghast At Notion of Competition, then hosting an hour online discussion where consumers — 84% of whom feel that real estate agents are overpaid according to a recent CNN/Money poll — underscored the importance of the DOJ and FTC’s “laudable campaign to bring price competition to one of the last outposts of cartel-like behavior.”
After more than a decade of advocating industry reforms it’s a pleasure to have the press championing the cause and for Pearlstein to respond to my question during his chat:
Does the negotiate your own fee, “bring your own broker” (BYOB) compensation plan you suggest in the final paragraph of your column require the uncoupling of the traditional two-sided real estate commission? That seems to be the glue that holds the MLS together and commissions artificially high. How do consumers as a group or individual buyers and sellers get there from here?
Well, that’s the $64,000 question (or should I say the $60 billion one, which is what brokerage fees were in the U.S. last year). I think it will require some changes in state and federal laws (such as on whether brokerage fees can be financed), professional codes of conduct and a change of heart at the National Association of Realtors. If there is no change, however, the system will eventually change on its own as Internet brokers gradually increase their market share and lower prevailing commission rates.
Will Pearlstein and others in the press follow-up with more coverage? Will consumer advocacy groups, like the Consumer Federation of America, once again champion commission reform particularly the ability for buyers and sellers to finance fees outside the traditional two-sided commissions? With their support, new groups like the National Association of Real Estate Consultants can move the industry towards a tipping point where “The next major revolution in real estate,” as the former chief economist of the National Association of Realtors once predicted, “will be fee-based services replacing the blanket commission pricing that has dominated the industry for so long.”