Antitrust Regulators Hold Hearing on Real
Estate Market
By Kirstin Downey
Washington Post Staff Writer
Wednesday, October 26, 2005; D02
Discount and nontraditional real estate firms vented their frustration
and rage at the powerful National Association of Realtors yesterday at
an all-day hearing held by federal antitrust regulators.
Many long-standing grievances bubbled to the surface as panelists
representing new kinds of real estate businesses spoke about ways they
said the trade group had blocked them from full participation in the
market. Several derisively called the Realtors group a "club" that
excludes members who won't play by their rules, such as adherence to the
traditional 6 percent commission charged on home sales.
"Don't be chicken. . . . Let us innovate within the 'club,' " said Steve
DelBianco, a financial backer of eRealty, a cut-rate online brokerage
that he said had looked like a "slam-dunk success" until traditional
brokers "slammed the door" on it.
Industry leaders rebutted the charges, saying the real estate market is
highly competitive, with many new people entering the field. They said
average real estate commissions have dipped, to a bit above 5 percent
nationally, because of new kinds of brokerage services and price
negotiation.
"I'm puzzled as to their statement that the real estate industry shuns
competition," said Alexander Perriello, president and chief executive of
Cendant Real Estate Franchise Group, which includes the chains Century
21 Real Estate LLC, Coldwell Banker Real Estate Corp., ERA Franchise
Systems Inc. and Sotheby's International Realty Affiliates Inc.
The forum was the latest volley in a tough match between the trade group
and antitrust regulators at the Federal Trade Commission and the Justice
Department. In September, the Justice Department filed suit against the
National Association of Realtors, alleging the trade group used its
online multiple-listing-service policies to restrict competition from
discount brokers offering lower prices.
The two federal agencies have also tried to block legislation in several
states, sponsored by Realtors associations, to require agents to do more
things for consumers than many discount brokers want to do, including
delivering purchase offers by hand and making themselves personally
available to negotiate deals. In most cases, the local associations of
Realtors, who have substantial political clout, have easily won.
A lot of money is at stake: About $60 billion traded hands in real
estate commissions in 2004, according to Real Trends Inc., a
Denver-based real estate information firm, much of it coming from the
traditional 6 percent commission. Consumer advocates and discount
brokers say the industry is profiteering off the dramatic rise in
housing prices.
"Home prices doubled, but the level of effort to sell a home has not
doubled," DelBianco said.
Aaron Farmer, a broker with Texas Discount Realty, whose firm offers
home-sales assistance for as little as $595, said traditional brokers
told his clients that no one would show their homes if they listed with
him. He said the brokers sent him "hateful e-mails" and "ridiculed" his
employees at industry events. He said state real estate boards are
dominated by traditional agents who try to keep new competitors out of
the market.
"I don't call this competition; I call it discrimination and
harassment," Farmer said. "They must stop the lies and discrimination
against brokers who are different."
Broker Tom Early said he got his "brains beat out for three years" when
he tried to develop a business that represented only buyers. Despite
what many home buyers believe, in the traditional real estate system,
their agent may not be bound to represent their interests exclusively.
"We were not welcomed. . . . I'm sorry. It's nice to say we're all
playing nice, but we're not playing nice," he said.
Industry executives countered that the traditional system serves
consumers best.
"Simply put, the process works and works well," said Thomas R. Kunz,
president and chief executive of Century 21. He said buyers who turn to
discount or Internet-based real estate services could get hurt if they
find themselves stuck with a real estate agent "operating out of a call
center two states away."
Geoff Lewis, senior vice president of RE/MAX International Inc.,
suggested that the firms criticizing the trade group were running to
federal regulators for help because they were not doing well in the
market.
"We welcome competition . . . from any competition . . . that can stand
on its own feet," Lewis said.
His introductory comments added a light moment to the day. Lewis started
by thanking the FTC and Justice Department for inviting him. "And thank
you for not including us in your lawsuit," he said, drawing a laugh. A
voice in the room piped up: "There's still time."
© 2005 The Washington Post Company
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