Ready Real Estate, a real estate company that offers discounts to sellers and rebates to buyers, is savoring the federal government’s scrutiny of possible anticompetitive and anti-consumer practices in the real estate industry.
Last month, the market director of Ready Real Estate in Albuquerque, N.M., launched a company announcement stating in large bold type, “Ready Real Estate Supports Justice Department’s Probe of National Association of Realtors. Internet-based company fights for consumers.”
The company’s announcement relates to a Justice Department investigation of the national Realtor trade group’s online property listings policy – the federal agency has studied whether the association’s policy is anticompetitive. Leadership for the National Association of Realtors have delayed implementation of the listings policy and amended the policy in an effort to avoid an antitrust lawsuit. The Justice Department’s investigation has reportedly centered on a provision that would permit brokers to opt out from receiving other brokers’ listings on a blanket or selective basis.
Antitrust officials at the Justice Department and Federal Trade Commission also have written several letters opposing Realtor-backed state measures that have sought to ban some forms of limited-service real estate offerings by requiring all companies to perform a minimum set of real estate services for their clients. And the Kentucky Real Estate Commission last month agreed to establish a less restrictive policy on real estate rebates in settling a lawsuit brought by the Justice Department.
“I think what the Justice Department is trying to do is keep large brokerages from price-fixing,” said Mark Brady, owner-agent for the Ready Real Estate office in Albuquerque. He said the federal attention to real estate competition has benefited his company. “It’s going to keep larger brokerages from squashing smaller companies like ours. The Justice Department is saying, ‘You can’t decide what the consumer is able to shop for.'”
Executives at other discount real estate companies, emboldened by the federal agencies’ focus on the real estate industry, are also speaking out about antitrust issues in their market areas. While real estate discounters lack the numbers and clout of traditional players in the industry, they say they are gaining ground. Trade groups, meanwhile, have said that the new policies are intended to protect their members and consumers – not to crush new competition.
Some real estate agents and brokers don’t think rebates are legal in New Mexico, Brady said, and he expected that another company would formally complain about Ready Real Estate’s rebates. “We were hoping we would be challenged on it…and it just didn’t happen. We felt confident we would win.”
Von Sutten, president and CEO of Dallas-based Ready Real Estate, which launched about 15 months ago, said he spoke with Justice Department officials about his market observations earlier this year. “One of the things the Department of Justice wants to know: Are we seeing any discrimination in the marketplace? Are we seeing any issues with boycotting?” Sutten said he also spoke with Justice Department officials about the online property listings policy.
And he is not alone. Inman News has contacted several other real estate professionals who have shared insight and information with federal officials about possible anticompetitive real estate practices.
Federal agencies have helped to bring some attention to issues that new real estate business models are facing in the industry, Sutton said, and perhaps traditional real estate players are more hesitant to work toward policies and practices that could restrict competition. The Justice Department seems to be in favor, he said, “of letting the little guy in – letting them compete on a fair playing field. The consumer obviously wants that. We’re seeing it.”
Sutten said that his company’s rebate policies are still questioned by some real estate professionals, and the company is cautious about advertising its rebates and discounts to other real estate companies because there is some worry about backlash from traditional companies.
“The last person we want to advertise to is the traditional real estate agent. We want to fly under their radar screen. Our goal is to sell to the consumer. On a large scale I think we still have to be careful because of the feeling and hostility of traditional companies about what we’re doing,” Sutten said.
Proponents of new and discount real estate business models have also said they sometimes find themselves in the awkward position of joining and participating in Realtor trade groups while fighting against policies enacted or promoted by those groups.
Larry Whited, owner of WebMLS.net, a discount real estate company in Ohio, said he expects that the federal government’s attention on real estate industry practices will play a major role in the evolution of the industry. “Change is blowing through the industry. What you’re hearing is the death rattle for the 6 and 7 percent industry,” he said, referring to the real estate industry’s historic reliance on 6 percent and 7 percent commissions in the sale of a home.
“I think a lot will depend on the federal government. If they keep the pressure on, I don’t think (traditional commissions) can last another year or two. If the federal government backed off, it might be five years,” he said. Already, there has been downward pressure on traditional commission rates as new companies have emerged with new cost structures for real estate services and as average home prices have risen rapidly in many markets across the country.
Ed Davis of Fisher Team Realty, a flat-fee listing business based in Prairie Village, Kan., said he believes the business environment is becoming friendlier to new real estate business models. But still, he said, “You have to have a lot of thick skin, just because most people are not used to the business model.” Davis said his company, which operates in Kansas and Missouri, wasn’t active in protesting a new Missouri law that requires all brokers to provide a minimum range of services. The Justice Department and Federal Trade Commission had objected to that Missouri law.
“We just kind of found the sidelines. I’m not as radical as a lot of people. I don’t have a problem with Realtors wanting to increase standards,” he said. “I figured if the Department of Justice was going to fight this battle, go ahead. There was no reason for little-old me to get involved,” Davis said.
Fisher Team Realty, as a result of that law, has absorbed the higher cost of providing additional services. “It’s going to cause us additional cost but the only way to offset additional costs is to have more volume. We’re not going to go away – in fact we’re going to grow,” he added.
While some companies have shied away from the antitrust debate, others have embraced the opportunity. Derek Eisenberg, an affiliate and partner of AmeriSellRealty, a network of companies offering flat-fee real estate services, said he has supplied some information to federal agencies about real estate practices he has witnessed.
“I am more willing to speak about (antitrust issues). I think others are, too, now that the Department of Justice is willing to listen,” he said, adding, “I think the Department of Justice has to start exercising some muscle or they will be viewed as all talk and little action.”
Eisenberg said he has seen some resistance to his company’s business model, and this is in some cases a result of brokers’ lack of understanding about his company. “I am not draining from the pool of traditional-service sellers who would always want to be in an MLS. So I am not a threat to traditional brokers. Some brokers have threatened boycotts but I think it’s because they don’t understand what I do,” he said.
Corey Scholtka of BuyHomes.com, who has advocated for alternative business models in the real estate industry, said that alternative brokers “are definitely more willing to speak out, promote their business, and address consumer and antitrust issues” than they have been in the past. He has worked with his state Realtor Association to educate members about alternative business models, he said, and he expects a growing number of traditional real estate brands to launch new business models.
Lawrence Bunnell, CEO and principal broker for InSight Realty, which offers property-listing services for a flat fee, said he also supports the federal government’s efforts to ensure healthy competition in the real estate marketplace. Referring to minimum-service laws passed in several states, he said, “It’s sad to see our industry taking advantage of consumers in such a fashion and to such an extent that the federal government has to step in to protect the public.”
He added, “The overall effect (appears to be) to drive the cost of real estate services up with no counter-balancing positive impact. That’s not what I call protecting the consumer.”
Chris Nye of MLS4owners.com said that the Justice Department has contacted his company on several occasions “and we answered their questions and provided documents.”
He added, “We have never been shy about defending the right of consumers to have choices, but we would prefer to let the marketplace decide instead of having to continually fend off those who seek to ban us.”
While Nye said his company has met some resistance from other industry players, “We stay focused on serving our customers and try not to be distracted by naysayers.” The company has worked to find representation for alternative business models as a participant in local MLS and licensing law groups.
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