In the final panel of the day at the Federal Trade Commission (FTC) and Department of Justice’s (DOJ) workshop on competition in real estate, voices from the legal and academic fields addressed some of the regulatory and industry factors affecting competition in the industry.
(You can read coverage from the first panel here and the second panel here).
The strictness of the panel was illustrated early on, as DOJ moderator Matthew Mandelberg actually interrupted and cut off Brian Larson, Texas A&M University professor and real estate attorney with Larson Skinner, saying that Mandelberg, as moderator, would be the one asking follow-up questions.
But it went on to touch on a number of topics, including transparency on the quality of agents.
“There’s not very good information about the quality of services,” said Stephen Brobeck, the executive director of the Consumer Federation of America.
He specifically criticized Zillow’s agent rating and review system, saying he’s looked at over a hundred reviews for different agents.
“Nary a contrary word or negative evaluation,” he said, noting he saw mostly perfect ratings. “My guess is Zillow says: give us some of your comments from clients, and those are washed.”
“Information published by Zillow on service level is deceptive, bordering on fraudulent,” he added.
Zillow spokesperson Viet Shelton told Inman after the panel, “I think, with all due respect, [Brobeck] fundamentally doesn’t understand the Premier Agent program. And he actually even admitted as much.”
He said Brobeck was making “wild accusations” about the way agent reviews happen, which, he said, are not true at all. “They’re unbiased consumer reviews,” he said, adding that nothing malicious happens on the backend of that.
Larson noted that there is a lot of good information out there, but most of it is quantitative, which isn’t always helpful for consumers.
Katie Johnson, National Association of Realtor’s general counsel, said she doesn’t believe it’s a good idea to mandate certain things that agents need to market about their services. Some may want to promote their sales numbers, others may want to advertise their therapy services.
“They have to market themselves in the way that they think will be most effective,” Johnson said. “They have a lot of different ways to market themselves. I don’t think it should be mandated to them how to do that.”
A 2008 consent decree between the NAR and the DOJ — which governs how NAR treats virtual office websites like Redfin and prevents brokers from discriminating against such sites — is set to expire at the end of the year, and both Larson and Johnson agreed there’s no need to pursue renewing it in any form.
“The consent decree embodies a policy that isn’t relevant now,” Larson said.
The policy made sense in 2008 when it was written, but it doesn’t even include mobile applications or other new technology, Larson said.
“There’s no evidence that NAR intends to make it harder to be a virtual broker once the consent decree expires,” he added.
Johnson, in her opening remarks, also praised the way multiple listing services currently operate.
“The real estate industry is unlike any other industry in the world because competitors agree to cooperate for the benefit of their customers,” she said. “Without the MLS, consumers would not have access to accurate information like they do today, and new brokers would have a hard time entering the business.”
Panle Jia Barwick, an economics professor at Cornell University, also agreed that it’s important for parties to share data and not discriminate. She cited a case where American Airlines pulled its flight listings from travel website Orbitz. When the major airline withheld its data, traffic to Orbitz dropped 11 percent.
Brobeck also criticized state anti-rebate and minimum services laws, calling them, “anti-competition.” He said that states don’t particularly care about competition and that things like anti-rebate laws — which prohibit brokers from incentivizing use of their services by offering a rebate on their commission — hurt the ability of innovative brokers to compete, especially in an industry he said was not transparent in regards to compensation.
Larson agreed, saying, “I think anti-rebate laws and minimum standard laws are a bad idea. Unless something is patently problematic, I think it makes sense to let them do that.”
“I don’t see that there’s any value to consumers,” he added.
The panelists sparred over whether or not the industry is clear enough on compensation structure. Barwick specifically argued that buyers should consider experimenting with paying their own agent, instead of the listing agent determining the commission for both parties.
Brobeck criticized the industry’s silence on compensation sharply.
“There’s been no explosion of reliable information about compensation to consumers,” he said. “Why aren’t any of the traditional brokers talking about price?”
Johnson took issue with the blanket characterization that agent compensation is so much higher in the United States, noting that in other countries there’s often only one agent involved in the transaction. She also made it clear that when a prospective seller enters into an agreement with a listing agent, compensation for both the selling agent and buying agent are clear.
The panelists also discussed the impact portals have had on competition and the general sentiment was that their influence has been double-edged.
Brobeck said having more information available like Zillow’s home estimation value tool and for-sale-by-owner (FSBO) listings can be very helpful for consumers. But if portals become too powerful, they can wield “oligarchic power,” to charge high advertising prices to agents and brokers and those costs are passed down to consumers, he said.
Barwick made a plea to the audience: economists would love to study data on the portals, if they make it available.
