One bright sign emerges in a gloomy housing market
USATODAY.com
These are not good times to be selling a house.
Prices are plummeting — 14% in the first three months of this year compared with the first quarter of last year, according to the S&P/Case-Shiller index of 20 major cities.
Adding insult to financial injury, sellers are up against the one constant in all markets: the 5% to 6% sales commission.
It might be a long time before prices rebound. But the outlook is brighter on the commission front, where the Justice Department is chipping away at the walls real estate agents have erected to thwart competition and fix fees. On Tuesday, the National Association of Realtors agreed to a settlement designed to guarantee discount brokers full access to "multiple listing services," the databases of homes for sale.
The settlement probably won't drive down commissions immediately. Full-service brokers are entrenched financially and politically. Their lobbyists have pushed through laws and "ethics codes" in many states that ban or limit discounting practices. And the discount brokers still lack the name recognition and resources of the dominant players.
But anything that helps to nurture alternatives to full-service brokers can only help consumers. As home prices skyrocketed in recent years, so too did Realtors' incomes, without a lick of additional work. Over time, there is no good reason why discount brokers earning the lower amounts Realtors once collected could not revolutionize the real estate business much as Charles Schwab, and more recently E-Trade, remade the stock brokerage business.
The Internet has dramatically altered industries ranging from travel agents to auction houses. So far, however, the real estate industry has largely resisted its leveling effects. Would-be sellers can accept Realtors' terms or risk a kind of exile in selling directly or working with a new kind of broker ostracized by the full-service community
Multiple listing services have been key in maintaining this status quo. They simplify the business by pooling everything for sale in a given area. Yet they can also be a powerful tool to punish or exclude. Full-service brokers have shared listings with each other but not with discounters.
That is the very definition of collusion. The entrenched players create a common marketplace in which they share a complete set of all listings, while upstart competitors are left with listings that are incomplete.
The fact that the industry is just now agreeing to abandon this practice shows how far outside the principles of antitrust law the Realtors have operated.
It's likely to take a while before discount brokers gain traction and the industry's culture changes. But this settlement represents about the only promising development in an otherwise gloomy market for home sellers.
USATODAY.com
These are not good times to be selling a house.
Prices are plummeting — 14% in the first three months of this year compared with the first quarter of last year, according to the S&P/Case-Shiller index of 20 major cities.
Adding insult to financial injury, sellers are up against the one constant in all markets: the 5% to 6% sales commission.
It might be a long time before prices rebound. But the outlook is brighter on the commission front, where the Justice Department is chipping away at the walls real estate agents have erected to thwart competition and fix fees. On Tuesday, the National Association of Realtors agreed to a settlement designed to guarantee discount brokers full access to "multiple listing services," the databases of homes for sale.
The settlement probably won't drive down commissions immediately. Full-service brokers are entrenched financially and politically. Their lobbyists have pushed through laws and "ethics codes" in many states that ban or limit discounting practices. And the discount brokers still lack the name recognition and resources of the dominant players.
But anything that helps to nurture alternatives to full-service brokers can only help consumers. As home prices skyrocketed in recent years, so too did Realtors' incomes, without a lick of additional work. Over time, there is no good reason why discount brokers earning the lower amounts Realtors once collected could not revolutionize the real estate business much as Charles Schwab, and more recently E-Trade, remade the stock brokerage business.
The Internet has dramatically altered industries ranging from travel agents to auction houses. So far, however, the real estate industry has largely resisted its leveling effects. Would-be sellers can accept Realtors' terms or risk a kind of exile in selling directly or working with a new kind of broker ostracized by the full-service community
Multiple listing services have been key in maintaining this status quo. They simplify the business by pooling everything for sale in a given area. Yet they can also be a powerful tool to punish or exclude. Full-service brokers have shared listings with each other but not with discounters.
That is the very definition of collusion. The entrenched players create a common marketplace in which they share a complete set of all listings, while upstart competitors are left with listings that are incomplete.
The fact that the industry is just now agreeing to abandon this practice shows how far outside the principles of antitrust law the Realtors have operated.
It's likely to take a while before discount brokers gain traction and the industry's culture changes. But this settlement represents about the only promising development in an otherwise gloomy market for home sellers.
