Realtors challenged on antitrust grounds

Critics say national organization colludes over fees and home listings

October 30, 2005|By KNIGHT RIDDER/TRIBUNE

It could be coincidence. It could be collusion. Either way, a typical American house sale involves a 5 percent real estate commission, and two federal agencies wonder why.

In an open forum last week with members of the National Association of Realtors and their critics in Washington, the Federal Trade Commission and the Justice Department tiptoed around that touchy topic.

An estimated 82 percent of American home sellers hire realty agents to supervise the transactions, with "the vast majority" choosing full-service brokers, said James C. Cooper, a Federal Trade Commission spokesman. His agency questions if consumers are truly free to find a cheaper way.

Realtors weren't shy about vocalizing their views.

"It's our firm belief that the federal government should not get involved here," said Thomas R. Kunz, president and chief executive officer of Century 21 Real Estate, a national full-service firm. "In what other industry do individual service providers negotiate a competitive price, sharing upwards of 50 percent or more of their fees to attract buyers? What other industry voluntarily makes its inventory available to competitors?"

Kunz called his trade group colleagues "fiercely independent."

They're fiercely self-protective, bent on crushing less expensive competitors, countered Aaron Farmer, broker-owner of Texas Discount Realty. His firm offers consumers a menu of paid services, including a bare bones $595 for nothing beyond access to the coveted, Realtors-only Multiple Listing Service databank of properties for sale.

"I had brokers tell my customers no one would show their house, had them say, `Hey, he's going out of business,' and I got hateful mail. Other agents like me around the country have had similar experiences, including listings removed from MLS for no reason. I don't call this competition. I call it harassment and discrimination. And it's not just practiced against other brokers, but against consumers who might be drawn to us," Farmer said.

Catherine Whaley, broker-owner of Buck & Buck Inc., a Jacksonville, Fla. realty firm, asserted that Realtors are the most transparent service group around. Customers and competitors know exactly what fees will be paid a property's listing agent and selling agent; that information is in sales contracts and on MLS entries, she pointed out.

"If I put a property into the MLS as listing agent, allowing competitors to see it, it tells them at what fee I'm willing to cooperate with them. The ability to have this aggregated information on MLS, that other brokers are willing to share - that is highly competitive," Whaley said.

Economist Robert Hahn, executive director of American Enterprise Institute-Brookings Institution, dismissed the MLS system as "a club whose members decide who gets to be in and who doesn't." He pointed to research showing that most home sellers pay a 5 percent to 5.5 percent sales commission as evidence of the industry's marketplace stranglehold.

Hahn's repeated description of the MLS as the Realtors' private club irked Whaley. "MLS has been validated by the courts," she said.

"At one point, Realtor commissions were totally non-negotiable - and a court struck that down," Hahn retorted.

American Homeowners Grassroots Alliance, an advocacy group in Arlington, Va., asked federal regulators to halt the growing hodgepodge of state laws that restrict or bar no-frills realty services. It accused industry traditionalists of pushing for such curbs simply to keep cheaper competitors at bay.

The event's co-hosts have already shown their hand on the issue of competition in the home-selling business.

On Sept. 8, the Justice Department filed an antitrust lawsuit against the National Association of Realtors. And the FTC is challenging as anti-competitive rules in several states, including Texas and Michigan, that impose restrictions on minimum-service real estate service firms.

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