WSJ published an opinion piece today by Jack Ryan and Jonathan Friedland, proprietors of REX, a real estate brokerage. While competition in real estate is welcome and healthy, accusations founded upon a lack of knowledge and/or false logic should not go unanswered.
Let’s set a few things straight for your readers:
“It seems almost quaint that 10 years ago the Justice Department had to fight to open up the real estate market so buyers could find homes online without the help of an agent. Now, sites like Zillow and Homes.com are commonplace, but they couldn’t have thrived without the department’s intervention.”
The DOJ settlement was specifically about companies in the brokerage business. Zillow and Homes.com are not in the business of brokerage. This is a critical fact that a brokerage should understand.
“While agents no longer routinely drive their clients around for consecutive weekends showing them homes, their fees remain as high as ever.”
Where to start? Agents very regularly drive their clients around for weeks or even months showing them homes today. This is simply unquestioned by those in the residential brokerage business.
Moreover, real estate brokers understand that finding the right property is one small portion of the services an agent provides. Agent services include property valuation/comparison, contract writing, negotiation, management of vendors, inspections, escrow, finance, and title processes, intermediate contract adjustments, moving logistics, and much more.
On fees: discount/varied pricing models have existed since the invention of the personal computer. Consumers choose what works best for them.
“So how do Realtors keep fees so costly? Through skillful Washington lobbying and local boards of Realtors, which control some 750 separate multiple listing services across the country. “
There are approximately 600 MLSs today, some run by local associations, some as large regional conglomerates, and some with no Realtor affiliation whatsoever. Their business models and ownership are as varied as brokerage models are today.
“These minicartels are still up to their anticompetitive tricks. Boards of Realtors mandate that if any member of a brokerage firm belongs to a service, every agent at the firm must be a dues-paying member as well—a potentially unconstitutional requirement in light of the Supreme Court’s 2018 ruling that government unions can’t exact fees from nonmembers.”
MLSs are private, voluntarily-affiliated marketplaces. They allow brokerages to join with one or more agents at a time, in many cases. There are different rules within different MLSs, and they are all striving to grow membership base—competition at its best.
“Each of these agents, in turn, is required to hand over customer data to the multiple listing service and prohibited from sharing it with nonmembers.“
Consumers ask their agents to share their information with other agents for ease of showing/selling, but not advertise it publicly. This is a service, not a hindrance.
“Homeowners are required to hire a buying agent if they employ a selling agent through a multiple listing service—a potentially illegal tying arrangement under the Sherman Anti-Trust Act that keeps buying agents paid though they offer almost no useful services.”
Opinions should be differentiated from demonstrably unfactual statements. Homeowners have many different options with their commissions. One of the most common forms of payment is hiring a listing agent and setting a listing commission. A portion of that listing commission may be offered to any buyer’s agent who can bring a buyer and close a sale. This not required, though, as the listing agent may sell the home directly to a buyer.
Buyers’ agents offer a multitude of services that consumers value. Consumers are free to work with their own agent, or go it alone. The vast majority understand the value and use an agent.
“Technology like Zillow is here to stay, no matter what Realtors do. But they’ll work hard to slow down innovative technologies and business models that undercut their cartel. Consumers over the past decade have grown comfortable conducting even the most sensitive transactions online, from banking to executing legal documents.“
Zillow’s biggest customers are real estate agents–they’re building its strength. Agents use innovative technologies every day to improve their clients’ transactions. Brokers experiment with new and dynamic business models every day–just look at the vast number of choices consumers enjoy today and the plethora of pricing models that have existed for decades.
The authors are correct that technology is here to stay in the real estate industry. With the contributions of machine learning and artificial intelligence, let’s hope that we create greater human intelligence and more informed conversations to benefit the industry—professionals and consumers alike.
Sam DeBord is Managing Broker/VP of Strategic Growth for Coldwell Banker Danforth, Past President of Seattle King County REALTORS, and 2019 NAR President’s Liaison for MLS and Data Management. He writes for WSJ Marketwatch, Inman News, REALTOR Magazine, and the Swanepoel Trends Report.