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Department of Justice and Real Estate Brokers Square Off About AntiTrust Laws

Friday, October 21, 2005 posted by Tommi Crow

Federal antitrust officials oppose real estate legislation that would cause consumers to pay thousands of dollars in commissions to real estate brokers. The Department of Justice contends that the proposed “minimum service” or “limited-service” restrictions for real estate, limit consumer choices and are anti-competitive.

What’s anti-competitve about “minimum service” type restrictions? To summarize, legislation in states such as Texas, Missouri, Illinois, Iowa, Kentucky, Oklahoma, Utah and Alabama effectively ban limited forms of real estate services.

The powerful, real estate trade groups are pushing the new legistlation in an effort to curtail the growing popularity of new ala carte, type real estate companies. The legislation mandates that real estate agents assist home sellers in developing, communicating, negotiating and presenting offers, counteroffers and related documents in real estate transactions. This action requires all brokers to provide the same minimum-level of services, effectively eliminating fee-for-service options.

Fee-for-service, real estate companies offer homeowner’s a full menu of services and charge a flat fee for each service. For example, a homeowner may opt to do a full-service listing or they can choose to just list a property for sale in an MLS for $500, or hire an agent for contract negotiations for a flat fee of $250. Flat fee brokers offer substantial savings for the homeowner who wishes to buy only the help they need. In contrast, the traditional, full-service brokerages offer only turnkey assistance to homeowners. The full-service broker handles all facets of the transaction with little to no help from the seller. The charge for full-service is typically 6% of the sales price of the home.

The DOJ is also concerned that the Realtor boards, who own 80% of the MLS’s (Multiple Listing Services) in the country, intend to use the passage of this legislation to block limited service property listings from reaching the MLS. Blocking limited service listings means that home buyers and their agents could only access property listings from full-service brokers. Blocking listings from property searches would seriously limit the availability and choices of homes in the marketplace.

The Department of Justice fears that these protectionist laws are not being enacted to protect the consumer. The DOJ believes the purpose is to protect full service brokerages from having to compete with companies who offer more choices in the quantity and type of real estate services that are available to consumers.

A free marketplace requires competition. Legislation that limits choice, decreases competition, increases fee’s and blocks housing inventory from consumers must certainly be scrutinized for violation of anti-trust laws. Monopoly, anyone?