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Senate of South Carolina
Post Office Box 142
Columbia, SC 29202
April 7, 2006
BY EMAIL:
Dear Senator:
We are writing to request that you oppose the legislation that would
prohibit real estate brokers from offering rebates to their clients
(H. 3478, Relating to Grounds for Denial of Licensure or
Disciplinary Action against Real Estate Professionals). This
legislation harms consumers and homeowners by driving up the cost of
real estate transactions.
There is no legitimate justification for prohibiting rebates on real
estate transactions. This legislation is similar to a Kentucky
regulation, which, in 2005 was the subject of an antitrust lawsuit
filed by U.S. Department of Justice against the Kentucky Real Estate
Commission. The Kentucky regulation was withdrawn after the suit. We
would hope that South Carolina legislators would not support
price-fixing legislation that would violate U.S. antitrust law were
it the action of the executive branch.
Homes are typically the largest asset most households own; this
legislation erodes the value of this asset and hampers the ability
of households to build wealth through homeownership. Additionally,
the measure subverts free market principles by hindering competition
and intervening on behalf of one type of real estate broker at the
expense of others.
We believe that the measure is designed solely to prevent real
estate brokers, agents and salespeople from competing on the basis
of price. Rebates have been employed brokers, including Internet
brokers, to capitalize on greater efficiencies. Traditional real
estate brokers could either offer rebates or achieve the same result
through reduction of commission rates. Prohibiting rebates is thus a
means of excluding a class of competitors and eliminating downward
pressure on the six percent commissions of traditional real estate
brokers. The legislation is an effort by traditional full-service
realtors to maintain a uniform commission by denying buyer agents
the opportunity to rebate a portion of their commission split.
Rebates lower the transaction costs of home purchases, allowing a
buyer to put more of his or her money toward the home purchase. In
Columbia, the median existing home price at the end of 2005 was
$135,000; the standard six percent commission would cost $8,100.
Some Discount brokers will lower their commissions to one or two
percent, saving consumers thousands on the transaction. And, other
brokers, often traditional full service realtors, may offer buyers
rebates of one percentage point, also saving the consumer thousands
of dollars -- money that can be put toward closing costs or a down
payment.
There is no evidence that consumers are harmed by rebates or
discounted real estate sales commissions. Indeed, there is every
evidence that the emerging competition in real estate services is a
tremendous benefit to consumers and homeowners. There is no reason
to support this measure except as a special protection to the
traditional, full-service real estate industry. We urge you to
oppose H. 3478 to preserve the opportunities of consumers to build
wealth through homeownership.
Sincerely,
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Stephen Brobeck
Executive Director
Consumer Federation of America |
Bruce Hahn
President
American Homeowners Grassroots Alliance
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