FTC working to break up Realtor monopolies.

I saw this statement put out by the FTC this morning and thought it was pretty interesting. In a nutshell a Realtors group in Michigan discriminated against discount brokers by not including discount brokers listings on their public website and also hiding the discount brokers listings from their own brokers by default in the local MLS database.

Personally I think this is a step in the right direction, many people only use full service brokers because of the monopoly they have through MLS and the extra competition should be good for the market.

FTC said: FTC Rules Michigan Realtors' Group Reduced Competition, Harmed Consumers by Restricting Access to Discount Realtors' Listings on its Multiple Listing Service and Public Web Sites
Commission's Order Prohibits Limitations on Discount Real Estate Listings
The Federal Trade Commission today issued an Opinion finding that Realcomp II – a Michigan-based realtors’ group – violated federal law by restricting the ability of member real estate agents to offer consumers lower-priced alternatives to traditional real estate services. Realcomp refused to transmit discount real estate listings to its own and other publicly available Web sites and excluded such listings from the default searches within its own database. The Commission found that these policies restricted access to these listings and harmed competition. The FTC’s Final Order requires Realcomp to provide its members non-discriminatory access to non-traditional and lower-price listings on its Multiple Listing Service (MLS) and to stop preventing such listings from being sent to its public real estate sites.

In its Opinion announced today, the Commission found that “the practices at issue improperly limit consumers’ access to information about the availability of these lower-priced alternatives,” and . . . concluded “that [Realcomp’s] acts and practices unreasonably restrain trade in violation of Section 1 of the Sherman Act . . . and Section 5.” The Commission’s administrative decision resolves litigation arising from a complaint charging that Realcomp’s policies violate Section 5 of the Federal Trade Commission Act.

Realcomp is an MLS serving southeast Michigan. Member brokers (who compete with each other) provide information on homes for sale. Other members representing buyers can then use the database to find potential homes for their clients.

Recent years have seen significant changes to the real estate markets. Some real estate brokers have discounted their fees by offering lower commission rates, accepting flat fees, or unbundling real estate services that used to be available only as a package. These limited-service models typically are less expensive than the traditional real estate model, allow consumers to customize a package that best fits their needs, and have put pricing pressure on more expensive full-service brokers.

The Commission Opinion also noted that public access to MLS listings has increased their effectiveness. The Internet has become vital to selling homes, and a majority of buying and selling homes begins on the Internet.

These changes, the Commission wrote, “illustrate how technological dynamism and organizational innovation can place enormous pressure on traditional business models and create possibilities for ‘the new commodity, the new technology, the new source of supply, the new type of organization’ [Joseph A. Schumpeter, Capitalism, Socialism, and Democracy 84 (1942)] that can transform markets. Because [these] are powerful stimulants for economic progress, an especially important application of antitrust law is to see that incumbent service providers do not use improper means to suppress innovation-driven competition that benefits consumers.”

The Commission found that full-service real estate brokers, who make up a majority of Realcomp’s membership, saw the combination of discount brokers with the public availability of MLS listings via Internet Web sites as a serious threat to their business model. In turn, Realcomp established policies that limited the effectiveness discount brokers’ listings. Although the MLS began providing the public with information on homes available for sale by establishing a public Web site and transmitting listing information to other Web sites, such as those of the National Association of Realtors (NAR) and of its members, Realcomp provided only the more expensive, full-service listings to the publicly available Web sites. As a result, a buyer searching Realcomp’s public Web site or the NAR’s Web site, for example, would not see listings offered by discount brokers.

Further, within its proprietary database, the default search policy excluded listings of discount brokers. So, unless a broker searching the MLS’s own private database changed the default search settings, the broker would not see discount listings.

The Commission found that Realcomp’s policies narrowed consumer choice and hindered the competitive process. In reaching its decision, the Commission reversed a 2007 decision by the Administrative Law Judge dismissing the charges against Realcomp.

The Commission’s Final Order forbids Realcomp from discriminating against discount brokers in, among other things, determining what listings it transmits to public Web sites or setting its default search criteria. The Order also requires Realcomp, within 30 days of the Order becoming final, to amend its rules and regulations to conform with the Order’s provisions, and, within 90 days, to inform its members of the amendments and provide each member with a copy of the Order. Finally, it requires Realcomp to place a statement on its Web site announcing the amendments and to modify the site to include the updated rules and regulations.

The Commission vote approving the Opinion and Order was 4-0. Under the agency’s rules, ex parte communications regarding this matter are barred until the FTC has disposed of any petition for reconsideration, or until the time for filing such petitions (14 days after service) has elapsed.

Edit: Fix wall of text.

Good to see steps in the right direction. Realtor® is one of those "professions" that we really don't need anymore, and that you see fighting to try to maintain control of their market (think music industry).

Realtor's best interest and the public's best interest, never the twain shall meet.

It did take the bailouts for me to lose complete faith in our system. The lobby system undermines free markets every step of the way. We should be punished for even using the term "free markets" when referring to American capitalism. Corrupt. Corrupt. Corrupt.

veyismeer said: It did take the bailouts for me to lose complete faith in our system. The lobby system undermines free markets every step of the way. We should be punished for even using the term "free markets" when referring to American capitalism. Corrupt. Corrupt. Corrupt.
I guess I'm just confused about why the bailout was your tipping point. It's not like there haven't been thousands of examples over the years of lobbying undermining free markets.

The government is pretty transparent, everyone knows it is corrupt, hell movies even poke fun at it.

This FTC investigation should fix things nicely though.

ScrawneyWallet said: Yes, because many government agencies do such a good job of fixing things nicely.On average, companies that have been broken up by antitrust have been better investments than companies that have merged.

Also it seems that realtor commissions in the US are a couple of times higher than those in Britain.

The realtors group restricted information and harmed consumers, no kidding!

larrymoencurly said: Also it seems that realtor commissions in the US are a couple of times higher than those in Britain.That's because they are working twice as hard. Instead of selling houses, they have to lobby congress to double the home buyers credit from 8k to 15k. Senator Isakson, a former realtor, tries to stick that one in almost every new legislation. I am afraid one of those time when nobody is paying attention, boom, everyone will be getting 15K for buying a house!

Sweet, too bad the really powerful and dangerous monopolies, TBTF banks and consolidated corporate media, will never be broken up because they effectively own our government.

Can't wait until RedFin/similar companies expand to cover most of the US, and break up this monopoly for good:

http://www.redfin.com/buy-a-home/share-the-commission

larrymoencurly said: ScrawneyWallet said: Yes, because many government agencies do such a good job of fixing things nicely.On average, companies that have been broken up by antitrust have been better investments than companies that have merged.

Also it seems that realtor commissions in the US are a couple of times higher than those in Britain.

My understanding is British Realtors don't offer full service - i.e. clients are expected to DRIVE THEMSELVES to prospective properties, have the DOOR OPENED by the seller and then FIGURE OUT which room is the kitchen all by themselves, without any PROFESSIONAL help. Personally I think driving, door opening and locating the dishwasher is worth tens of thousands of Dollars.

Yeah, I have big, thoroughly undeserved checks to write to Realtors next week. It is a cartel, pure and simple.

Good news!!!. When this monopoly finally crumbles, it may finally be time for me to buy a home.

LordKronos said: I never would have thought to check to make sure all the appliances work...she found a non-functioning garbage disposal and got it repaired.

Oh my, no inspection?

LordKronos said: I found having a realtor very helpful when I bought my first house.What do they do, other than drive around the customers?

While you're at it, I would also appreciate an explanation of what car sales people do.

.... dancing in the streets .....

scrouds said: Oh my, no inspection?

Please, don't kid yourself into thinking that inspectors do thorough jobs like that. Some may, but many more focus a lot more on structural and code issues (and unfortunately, some don't even do a thorough job on all of that). Besides, even if the inspector finds that, by the time you get to that point, you've already made an offer and invested a lot of time into the process. There's value in catching things as early as possible.

And by the way, that was just one example of something I experienced that wouldn't have occurred to me to check. So please don't come back with jokes about a $6000 garbage disposal (or whatever the realtor fees may have been....I don't recall of the top of my head). It was just part of the package of services she provided me.

How many years of law school did your realtor attend? Over 50% of realtors don't have a college degree (2007 stats NAR).

Realtors have too many conflicts of interest to be really valuable to their clients or to the efficient functioning of housing markets. The more we chip away at their power the better.

If you don't think your real estate agent is worth his commission, why not just dump him and get your own broker's license so you can represent yourself. Years ago when we were buying houses, fixing them up and reselling, I had a bad experience with a dishonest real estate agent. So I took the California real estate broker's exam, and as I recall, the test wasn't very difficult and the prerequisite was only 5 or 6 specific real estate junior college level courses. I still keep my license active. It only costs me a few hundred dollars every four years and 45 hours spent on continuing education. I don't know what multiple listing service dues are currently since I dropped membership when we stopped buying and selling houses, but last time I checked, the dues were only a few hundred dollars per quarter.

Over the years, I have met some honest, hard working, competent real estate agents; unfortunately, there are enough dishonest agents out there that the consumer should do their own due diligence and not rely blindly on the advice or recommendations of their realtor.

SlimTim said: Henry sure is proud that 70% of home sales use realtors. I wonder what percentage of homes that undergo one or more listing price drops are being sold by realtors?

It's a statistic. You can read whatever you like into it. It's actually quite traditional that home under go price drops. What typically happens in a FSBO is that there isn't a price drop. Realtors are actually doing their job when there's price drops. Sometimes in order to get the listing, the realtor will take it even though they know the price is too high. Sometimes they'll tell the client upfront that and tell them that they'll lower the price if they get no action after a certain amount of time. Part of the realtors job is to convince the seller that they've priced their home way too high. Everyone always thinks their home is nicer than the one that sold down the street. Ever watch real estate intervention? I love that show because it's pretty typical of what most sellers go through. They're usually in denial about the value of their home and by actually looking at properties, they understand that they've overpriced their home and that's why it's not selling. In a falling market, you want to be ahead of the curve, not behind it. Sellers typically start off with some story of why they need to get a certain amount, but it takes a while for them to realize it's not what they need to get, it's what the property is worth. No computer is really going to do that.

And I'd really like to get into why realtors aren't monopolies, but I think I give up. Too much time and energy to do so. The FTC action was to regulate trade, not break up a non-existent monopoly. It's why it's the FTC not the FMC or whatever you would call it. When monopolies were broken up, the original company was broken up into smaller ones. Like when Ma Bell was broken up, like when Standard Oil was broken up.