Internet-Based Realtors Win Monster Settlement

coondoggie writes "Until today, most Internet-based real-estate brokers were considered second-class citizens, and their clients were left in the cold. But perhaps that will change with today's news that the Department of Justice has reached a proposed settlement with the National Association of Realtors that requires NAR to let Internet-based residential real estate brokers compete with traditional brokers. NAR has agreed to be bound by a 10-year settlement, under whose terms NAR will repeal its anticompetitive policies and require affiliated multiple listing services to repeal their rules that were based on these policies." Here's the whole settlement document on the DoJ's site.

Great.

[mrbluze]

Now where is the nerd-bit to this article? Apart from the fact that there's the word 'internet-based' in the summary. I mean, not everything on the internet is nerd.

A boon for the Real Estate Industry

[antirelic]

Protectionist policies usually only protect a handful of businesses. In the case of the Real Estate industry, a high cost to entry bars a lot of business from entering into the market without going into co-hoots with the "big brand" businesses. What this does is allow independent realtors to compete with the big boys, which will in essence force the big boys to be more competitive.

The internet helps small businesses expand as fast as they can handle, and forces big business to stay competitive or lose business. This is really good for everyone. Not a perfect solution, but a good start. Now, if this would only happen for all industries...

One anti-competative practice down, many to go.

[Original Replica]

I'm glad to see anti-competative practice and brokers in the same sentence. I don't know if internet brokers are going to have any positive effect on the rental market in major cities though. Right now the only realistic way to get a new apartment in NYC is to pay a fee equivalent to 15% of the annual rent to a broker for the privilege of renting from the landlord who has given them the exclusive right to make the public aware of the apartment's availability. So that's easily $3600, just to be allowed to deal with the apartment management company. I once paid a broker's fee to someone who had an exclusive on all the apartments owned by the broker who shared an office with her. I was in the same room with the landlord, but I couldn't rent from him without paying her first. i would love to use capitalism properly and not give my money to brokers, but they control far to high a percentage of the real estate for that to be a viable option.

Re:Great.

[deepershade]

Or perhaps it is, but not everything on this site would interest a nerd like you?

News for Nerds. Nerds is a very broad term, and not everyone is going to have the same tastes in articles.
Just pass on by the ones you don't want to read.

Re:Great.

[NMerriam]

It's just one more example of Internet disintermediation changing economics.

Hard as it may be to believe, there are still a lot of businesses that think this "internet fad" is going away, so seeing yet another major industry be dragged into the 21st century economy is interesting to a lot of folks.

Re:Monster?

[kernelphr34k]

I thought it was for monster.com. Maybe change title to "Internet-Based Realtors Win A Monster Settlement" . . . ?

Re:recent advertising blitz?

[Anonymous Coward]

I've heard the same realtor's ad on the radio here for a month now, and one of its catch-phrases at the end is "Only Realtors are members of the National Association of Realtors.".

That always struck me as an "orly?" (/duh?) statement every time I heard their ad, but now reading this I wonder if they are trying to strengthen their "name brand" (NAR) so to speak since they are losing their lock-in? Since now merely looking for a Realtor doesn't necessarily mean they will get your business.

That's exactly what they're doing. You can almost hear the "(tm)" trademark and the ALL-CAPSness in the word "REALTOR". That's because it is a trademark, and it's NAR's trademark. The generic term is "real estate broker".

Similar cases of trademark dilution have taken place in the past -- do you use a Xerox(tm) or a photocopier? Kleenex(tm) or facial tissue? Likewise, are you doing business with a REALTOR(tm) or just some random real estate broker?

All of which is, as you've surmised, bullshit. Much like used car salesmen, real estate brokers are basically weasels. Because houses aren't identical, they can't be bought and sold like stocks, bonds, or even consumer electronics, so buying a house is more like buying a used car; people have to interact, in meatspace, if for no other reason than to inspect the property, and that invites a whole food chain of people whose only interest in the process is in getting a cut of your transaction.

And as the president of the National Association of Weasels, we'd like to make sure that you do business with one of our WEASELS(tm). Only WEASELS(tm) are members of the National Association of Weasels. Would you risk your family's financial future with mere polecats, skunks, or other poor imitation? Demand professionalism! Settle for nothing less than genuine WEASEL(tm)!

The trademark has worked well for NAW^HR, but this court case is the thin edge of a very big wedge. NAW's de facto monopoly over the WLS data broken, there'll no longer be any advantage to being a Genuine Weasel. Any old weasel can work within the same set of databases, which means that NAW will be denied the fat fees that only WEASELS pay...

Re:Great.

[ShinyBrowncoat]

The commission you are paying to an agent is around $24k for the privilege of buying that house.

Actually, the seller pays the commission, but the point is the same: why pay 6% to sell your house if a internet-based real-estate agency can get you in the same listings and attract almost as much interest at half the cost?

Re:From the Trenches

[fredmosby]

Ya, I am a Realtor, if you have a question about homes ask me, my advice is always free.

What exactly do realtors do? Why would I want to use a realtor to sell a home rather than listing the home myself, and what is the benefit of using a realtor to find a home rather than just looking through the listings myself?

I'm not actually planning on buying a home any time soon, but I'd like to know. Usually I prefer researching major purchasing decisions myself, rather than trusting a salesperson.

Re:recent advertising blitz?

[gujo-odori]

Why, exactly, is that ridiculous? You can't call yourself a CCIE unless you actually are (well, you could, but you'd be open to getting sued by Cisco and by your clients as well), you can't call yourself and MCSE unless you actually are (well, you could, but you'd be open to getting sued by Microsoft and by your clients as well), you can't call yourself a Sun Certified Solaris admin unless you actually are (well, you could, but you get the idea...).

And you can't call yourself a Realtor unless you actually are, either. There is a difference between a Realtor and someone just licensed to practice real estate.

And of course, if other copier companies put "Xerox" on their copiers, they'd get sued, too. The fact that a brand has become so successful that
many people informally but incorrectly use it to refer to anything in that generic class doesn't mean anything in that generic class should be allowed to call *itself* by that trademark.

Re:Great.

[ImaLamer]

"Attract Almost As Much Interest"

The funny thing about this statement, and the business that we are talking about here is this: I fired up this browser in the search of homes, condos and apartments in St. Petersburg, Fl where I'm thinking of moving for a different job. The reason this is an issue, and the reason the traditional real estate agent is so afraid is because this newfangled Internet (and this is how it intersects with nerd news) gives me the ability to check those listings from my home in Cincinnati, Oh.

Re:Great.

[Anonymous Coward]

so seeing yet another major industry be dragged into the 21st century economy is interesting to a lot of folks.

"Realtors" are a cartel, not an industry.

Re:Realtors still work?

[Anonymous Coward]

I don't think "rock-bottom" means what you think it means.

Re:What about Realtors' conflicts of interests?

[Solandri]

Wake me when someone acts against real estate agents who are supposed to be representing the buyers stop getting commissions paid by the sellers. This is an obvious and massive conflict of interest.

Real estate agents exist to match buyers and sellers. Technically, you both hire one -- and it's only a potential conflict of interest if your actual agent shows you a house she also acts as the seller's agent for.

And for this service of spending a few minutes on a computer matching their client's specifications with what's in the database, they're supposed to be given 3% of the house's selling price? And on the seller's side, 3% for keying the house's data and a few pictures into the database? Match.com does pretty much the same thing for a much more important transaction for less than $30/mo.

Realtors either should be liable for doing a lot more, or they need to be paid a lot less.

Re:Won't change a thing

[urbanrealtor]

As a realtor, I won't try to convince you that your experiences are rare. They aren't. I think saying that the entire industry is scum is a bit of an overstatement. It tends to cater to people who don't want a boss and want to get rich quick. That is true. It think a lot of these dynamics you mention will only be addressed effectively by actual changes in the market by innovative actors. A good example is redfin (I think that is the name). They offer limited services but kick a large portion of the buyer-side commission (which is paid by the seller) back to the buyer. They don't drive around with buyers but they give them full online MLS access (which is common in CA) and give them comps so buyers have an idea of what an appropriate offer is. Even the most bitchy, clickish agents can't stand against a moving market. Just a thought --resident scumbag

Re:Great.

[PhreakOfTime]

I appreciate the views that others have of the real estate industry that are similar to what I saw while working as the IT grunt for a small real estate company. And yes, I heard the exact phrase 'the internet is just a fad' and IT was just a waste of money. The babysitting eventually got old for me, and I came to realize that I had to leave, because the people in charge just dont 'get it'. Not in a bad way, just in a 'my grandparents still listen to music on AM radio' kinda way.

There is no other industry I have seen that is so absurdly protectionist in its business practices. And the result of that type of worldview has led some real estate companies to be literal fossilized relics of their time.

This settlement gives me great pleasure to finally see, as the roadblocks setup by MLS are some of the most frustrating I have ever encountered, from the buyers point of view.

Having seen the industry from the inside, I would never have any part of buying or selling a home through a real estate agent. If I see a house thats for sale that I want, I am patient enough to let the rediculous 'listing agreement' expire, and then buy it right from the seller directly. It is amazing how eager people will become to sell to you when they realize that waiting a few months can net them a 7% larger profit.

And what ever happened to that small real estate company, you may ask? Well Caton Commercial [willcounty...tcourt.com] spends some of its time showing up to court cases brought against them by various old employees and business partners, and sending out threatening Cease and Desist [demystify.info] letters to other old employees.

Re:What about Realtors' conflicts of interests?

[Pulzar]

So you're saying that one agent's self-interest is to push the asking price as low as possible, and the other's self-interest is to push the offered price as high as possible. That sounds like conflicting interests requiring negotiation that will wind up with a price in the middle that everyone accepts, which is exactly what you want.

That's not at all what he way saying... He was saying that they will both be looking to sell as quickly as possible and have no interest in getting the best deal for their clients. He used the price to show why..

Re:Great.

[tyen]

That's obfuscation from the real estate industry. The seller remits the commission, the buyer funds the commission. The agents say "the seller pays" to hide how the buyer is putting up all the actual funds of the commission, unless the transaction is a short sale where the seller actually puts up funds from their own pocket. Thus affecting buyer psychology. As long as the seller negotiates a price that is over the lien amount, any claim that the seller is "paying" the buyer (including claims of closing costs paid by the seller or agent) is marketing sleight-of-hand. Even worse, unless the buyer is doing an all-cash deal, they are on the hook for interest for all these "seller/agent-paid" amounts.

Re:What about Realtors' conflicts of interests?

[Anonymous Coward]

This is a very simplistic view of what the Realtor provides to the transaction, market comparisons that no automate system can match, advise about home inspections, mortgage advice, other local issues such as oil leases etc. that the average buyer an a zillow (or whatever site) search will not provide.. You also are not taking into account the 3% commission the agent would receive is split between the brokerage and the agent also.

The fun thing is the DOJ suit was based on a NAR policy that never actually went into effect..

P.S. I am not a Realtor however I do work in the Real Estate industry.. The DOJ is missing the entire problem with the industry in there suit unfortunately, which is lack of data standards that make it impossible to use data from multiple sources in custom applications without doing expensive and often prohibited modifications and cleanup.

Just wait until they discover "spam"....

[Joce640k]

Internet + sleazeballs. What could possibly go right?

Re:Great.

[Anonymous Coward]

The good ones also know what maintenance issues to look for.
Your house inspection should be done by a housing inspector that you choose (requires a license or certification in most states), the bank will want a copy as well to help determine value. Taking advice about maintenance from the realtor instead of a licensed inspector is not in your best interest. You pay for that inspection yourself.

The "value" of your house is determined by the bank and the banks reps assessment of the house, the realtor only gave you an estimate of what he thinks it is worth and was probably close because he/she has some experience. You pay for that assessment as well.

I view a realtor as nothing more than a secretary that knows the steps required to get you into a new house. The actual steps in that process are paid for by yourself in your closing costs above your fee to the realtor. Just for reference, if you ever refinance your house with a different bank, you will notice that you actually go through 95% of the same things you did when you bought that same house and you will not have to pay the 3-6% fee to a realtor. Title insurance, assessments, inspections, recording fees, casualty insurance etc are all there.

I had no realtor representation when I bought my house, I assume the seller negotiated a better deal with the realtor he had selling the house because there was no one to split the commission with which may have been an advantage for them to take my offer over someone else that offered more.

I agree that a realtor can help you with making your house a little more presentable if you are selling.

Re:What about Realtors' conflicts of interests?

[zerocool^]

This is a very simplistic view of what the Realtor provides to the transaction, market comparisons that no automate system can match, advise about home inspections, mortgage advice, other local issues such as oil leases etc. that the average buyer an a zillow (or whatever site) search will not provide.

Yeah, because there's no such thing as the internet. Wouldn't it be great if everyone had a tool for looking up information and sharing experiences related to this kind of thing?

You also are not taking into account the 3% commission the agent would receive is split between the brokerage and the agent also.

Cry me a fucking river. Someone gets a piece of the HUGE PIE that the real estate agent got for doing a search in the national database. It probably takes 10 hours of honest hard work to sell a house on the part of the realtor. 3% of $250,000 is $7500. $7500/10 = $750/hr. $750/hr is $assload. I'm crying if they have to split their pay with someone else.

The DOJ is missing the entire problem with the industry in there suit unfortunately, which is lack of data standards that make it impossible to use data from multiple sources in custom applications without doing expensive and often prohibited modifications and cleanup.

Bullshit. There is only one database that matters. The problem went like this:

Online Realtors: "We'd like to have MRIS database logins."
NRA: "No." (launches nationwide television ad campaign about how "only a member of the National Association of Realtors can help you").

It's bullshit. I used to have a login to MRIS, and during the boom, I supported umpteen dumbass realtors who all had logins, doing their computer work. With MRIS, there's no work involved. A 5 minute query and you print out everything in the price range / area, show it to the customer, and they point with their chubby finger to the one they want.

And I still hear realtors crying about how down on their luck they are. One guy, no kidding, had to sell his CANARY YELLOW HUMMER H2 because the market is taking a dip. Waaaa, some of us are having trouble buying groceries, and YOU CREATED THIS BULLSHIT ECONOMIC CRISIS.

I'm glad their monopoly got broken up. Having a national country-club of realtors is like taking a random sample of people in the 2nd standard deviation below normal intelligence, and handing them assloads of money and enough influence to adjust international economic policy. Fuck realtors. I have never, not once in my life, met a realtor that I thought wasn't 1.) of below average intelligence, and 2.) a complete sheister, who would screw over anyone and everyone if it made them a profit. Fuck the lot of them.

~X

Re:Great.

[Copid]

Inflated market today? Man..where are you living? Housing values are dropping like crazy in most of the US....and it is slowly starting to sink in to homeowners minds that their homes aren't worth what they think or want them to be worth. I"m looking to buy in the near future myself...it is definitely a buyers market.

Well, they're dropping like a rock because prices have been inflating like crazy over the past several years. Personally, I don't see any reason to believe that we're seeing the bottom of it now based on incomes, historical norms, credit availability, etc. I suppose it all depends on your neighborhood, but the numbers were far out of line with historical norms.

Re:Great.

[ArhcAngel]

The problem is your experience (and mine when I bought my house) is the exception not the rule. The bulk of realtors I know act as if they are ALL knowing when it comes to property buying and selling. Donald Trump is a perfect template for a typical realtor IMO. If you want to offend a realtor just mention you are thinking of using buyowner [buyowner.com]. As far as most realtors are concerned mortals are incapable of comprehending the "complexities" of buying a house. The truth is that most of the "complexities" are industry created to protect their industry so if you don't use them you avoid 1/3 to 1/2 of these complexities. There seems to be a bit of collusion with the other players in the game as well. I refinanced my home a few years ago and when we went to closing I was going over the paperwork and discovered that the title insurance company had charged me the full fee for researching the deed to the property. The problem was I used the same title insurance company when I originally purchased the house specifically to avoid the full fee. I mean they had already done the research 5 years ago and it was in my file. What research was I being charged for? My point is when you go to closing every entity involved is going to pile on every fee they can legally get away with and it is the buyers or sellers responsibility to go over each and every page of the 300+ pages of forms to find and dispute the "massage at spa due to stress $120" fee that's in there.

Why was there a housing bubble?

[yuna49]

People are usually cheap SOBs looking for the lowest price on food, clothes, toys, computers, cars, etc., yet they all of a sudden got Truly Stupid paying huge prices for homes. Why???

1) Houses were seen as a lifetime investment that would not depreciate.

2) Home ownership in the US is highly subsidized by the Federal Government through the mortgage interest and property tax deductions.

3) A lot of shady operators took advantage of poorer and less well-informed people by writing them mortgages with ridiculous terms (like a late payment increases your interest rate to double digits), waiting for the borrowers to run afoul of those terms, then foreclosing on a house the family had owned for years. It's called "predatory lending [consumerlaw.org]" for a reason.

There's been lots of corruption in the "secondary" and "subprime" lending sectors, too. Borrowers were encouraged to hedge, and sometimes lie, about their qualifications because the lenders felt no risk. Lenders found they could sell almost any mortgage into the securities markets where the liabilities were sliced and diced into pieces and repackaged as equity holdings. The Federal Reserve Board also helped fuel the housing bubble by holding down key interest rates and failing to perform any real oversight of its member institutions' lending practices. Many, many people, including many supposedly well-informed financial types, simply believed real estate would continue to rise in value over the years ahead.

Whenever large numbers of people become convinced that the price of a particular item, be it tulip bulbs or homes, can never fall, you have the potential for a pricing "bubble." In this particular instance, public policies and private greed together created the over-valuation of residential property that occurred over the past decade.