How the cost of such repairs is split is often the subject of additional negotiation. city or state) under examination, as home prices increased, commission rates decreased.200 However, despite a lower commission rate, the results imply the dollar magnitude of the commission fee paid was considerably higher for higher priced homes.201 The study also found that commission rates associated with sales of existing homes were higher and less varied than rates associated with new homes.202 On average, the commission rate paid on sales of existing homes was approximately 1.2 percentage points higher than the rate paid on new home sales.203 Finally, the study found that commission rates in transactions involving cooperating brokers were on average approximately 0.4 percent higher than rates in non-cooperative transactions. 282. 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. 131. Since cooperating brokers do not directly participate in negotiating listing contracts, rebates offer a way for them to compete on price.164. Action No. No. 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. Lucy Malcolm, Paralegal, Litigation III Section at 233 ("[T]he real puzzle in the real estate business is why does there seem to be this relatively fixed commission structure? As noted above, 80 percent of consumers use the Internet to search for homes in 2006.134 To the extent that consumers have greater knowledge of the stock of housing for sale than they used to, brokers will be less able to exclude a particular listing from home buyers' searches without their knowledge. Id. But 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). 72. 2 of the MLS antitrust compliance policy. 051-0065; Williamsburg Area Ass'n of Realtors, Inc., FTC File No. The evidence also suggests that rising per-sale profits for brokers induce entry by new brokers so that the average number of sales per broker declines. 1999). Some have argued that subagency was created by members of NAR in order to restrict access to the MLS. "105 The same panelist elaborated on the advantages of MLS data: As this panelist explained, access to full MLS, rather than limited IDX datafeeds, is "extremely valuable" because it allows agents to tell consumers "the minute that something is listed, 'Let me tell you, there was a new listing that just popped up, it's matched your criteria, I think we ought to go out and look at it.'"107. In this manner, brokers can take advantage of their superior knowledge of market conditions by steering clients away from home listings that otherwise match the criteria identified by the consumers, but provide lower financial gains for the broker than other homes.133, Home buyers' increasing use of the Internet may limit brokers' ability to steer buyers away from discounters' listings without their knowledge. 31, 2005) (hereinafter "Kentucky Complaint"), at http://www.usdoj.gov/atr/cases/f208300/208393.htm. 244. The complaints accompanying the consent agreements alleged that each of the six MLSs individually controlled key inputs necessary for a listing broker to provide effective real estate brokerage services, and that each respondent's policy was a joint action by a group of competitors to refuse to deal except on specified terms.313 The rules or policies challenged in the complaints state that information about homes is not allowed to be made available on popular real estate websites unless the listing contracts are exclusive right to sell listings (i.e., that require compensation no matter how the home is sold). The authors did not identify the source of the U.S. commission data. 109. B. See also Hahn, Tr. 59 858-353, TENN. CODE tit. 8, 2005), available at http://www.usdoj.gov/atr/public/comments/209203.htm; Letter from FTC and DOJ to Michigan State Sen. Alan Sanborn (Oct. 18, 2005), available at http://www.ftc.gov/os/2005/10/051020commmihousebill4849.pdf; Letter from the FTC and DOJ to Governor Matt Blunt (May 23, 2005), available at http://www.ftc.gov/opa/2005/05/mrealestate.htm; Letter from the FTC and DOJ to Alabama Senate (May 12, 2005), available at http://www.ftc.gov/os/2005/05/050512ltralabamarealtors.pdf; Letter from the FTC and DOJ to Loretta R. DeHay, Gen. 40. at 27. A-00-CA-154 JN, 2000 WL 34239114, at *4 (W.D. INFORMATION TECH. at 149 (listing several features of real estate websites, including property photos, virtual tours, rich text, mapping functionality, and neighborhood information); Sambrotto, Tr. In the 1980s and 1990s, several local MLS boards banned exclusive agency listings from the MLS entirely. See Farmer, Tr. For example, if a cooperating broker were to earn half of a 5.1 percent commission and offer a 50 or 33.3 percent rebate, a consumer would save $3,459 or $2,306 in commission payments, respectively, on the sale of a $271,263 home.241 Consumers in states with rebate bans could enjoy a similar level of savings only if such bans were eliminated. 193 More specifically, approximately 53 percent were quoted a rate of 6 percent, while approximately 32 percent were quoted a rate of 7 percent.194 Factoring in after-the-fact reductions in prices (including rebates and gifts provided by the brokers), 78 percent of those surveyed were actually charged commissions at those rates.195 These results are comparable to those revealed in a sample of HUD-1 forms from the latter half of the 1970s collected by HUD for its own purposes, which showed that 77 percent of sellers were charged a commission rate of 6 or 7 percent.196 Although the average commission rates based on the HUD-1 forms varied across metropolitan areas, in eleven of the sixteen cities surveyed 80 percent or more of the commission rates actually paid were equal to either 6 or 7 percent.197, A 1982 study analyzed the relationship between commission rates and several variables, including the price of the home, whether the home was a new or existing home, and whether the sale involved cooperation from another broker.198 The sample data included 1,107 transactions drawn from seven cities in 1975, 485 transactions drawn from eight cities in 1978, 1,769 transactions drawn from eight cities in 1979 and 3,895 transactions drawn from all 50 states in 1979.199 For each transaction, data on actual commission rates paid were obtained from HUD-1 forms. 124. CODE 452.133. (Amended 5/10) M. Your resource for all things Real Estate. Fee-for-service brokers sometimes also referred to as "flat-fee" brokers or "limited-service" brokers represent a departure from traditional full-service brokers who typically charge a commission based on the sales price in return for a bundle of services. 83. Although neither commenters nor Workshop panelists presented evidence to explain the cause of relatively inflexible rates, this phenomenon has meant that the price that consumers paid for brokerage services rose considerably during the recent run-up in housing prices. For example, home sellers who are referred by one broker to another broker sometimes receive rebates. 76. See GAO REPORT, supra note 3, at 7-8. See, e.g., Your Igloo Real Estate, http://www.yourigloo.com/ (last visited Apr. The recent run-up in housing prices illustrates this phenomenon: from 1998 to 2005, housing prices rose 37 percent in real terms and, although national average commission rates appear to have fallen from 5.5 percent to 5 percent, average brokerage fees per transaction rose 26 percent in real terms during the same period.140 At the same time, the efficiencies generated by the Internet and other technological advances suggest that broker costs should be falling. The aim of antitrust law is to preserve competitive markets. at 427-28. See also Bunnell, Public Comment 146, at 1 ("Low barriers to entry and recalcitrance to change have created a situation where the status quo makes sense for none of the transaction participants. 061-0268; Realtors Ass'n of Northeast Wisconsin, Inc., FTC File No. A remaining question, not resolved by Workshop participants or commenters, is why commission rates are relatively inflexible.229 Regardless of the answer, it is desirable that brokers have the freedom to offer a variety of price and service combinations to attract consumers. Accordingly, there is no basis for believing that there is a need for a minimum-service law to "protect" cooperating brokers from doing additional work when facing a home seller represented by a fee-for-service broker. Section C presents the available data on actual commission rates and fees. This case resulted in a consent decree, under which MiRealSource is prohibited from adopting or enforcing any rules or polices that deny or limit the ability of MLS members to enter into exclusive agency listings, or any other lawful listing agreements, with home sellers.316. For example, within the Washington, DC metropolitan area, there is little or no competition among buyers, sellers, and real estate agents across the micro-markets of Montgomery County, MD, Fairfax County, VA, and southwest Washington, DC).
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