by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
…this is how business might be done:
You (a willing home seller) would look for a real estate agent and discover that the government mandates that you hire, its delegated agent, to market and negotiate on your behalf. That chosen agent will be the only one who can deal with potential buyers and will select which offer you should consider, among the many offers available. The agent presents the offer, to which you suggest a counter-offer or refusal.
In this hypothetical example, the agent tells you that you don’t have the option to counter and reminds you that you have a binding contract with her as an exclusive agent; she says “Take the ‘reasonable’ offer or suffer the consequences”. Obviously, you don’t think that’s fair and want to test the free market. You might consider another real estate agent because you don’t think she’s negotiating on your behalf.
Rather than allow you to pursue your own course of action, the real estate agent accuses you of “agent busting”. She sets up a picket line, in front of your home, with big signs proclaiming you to be “evil” or responsible for “unfair tactics”, or “greedy”. She turns away all potential buyers of the home by calling them “scabs” and proclaiming that a reasonable enough offer was on the table and you were just an evil, greedy agent buster.
She might convince the power company to sever your electricity, phone and internet. She might try to prevent the grocery store, pizza delivery guy, landscapers, and pool maintenance guy from servicing you, per your standing contract with them. Finally, she might try to restrict your income by hampering your ability to work .
You’re a tough cookie, though. It’s your home. You bought it, improved it, kept it clean, and want the best price a willing buyer might pay you. You hold out, regardless of the wacky protesters, bused in from out-of-town, screaming at you, your children, your neighbors, and anyone who might dare speak with you. Even your priest declines your dinner invitation because he wants to stand “in solidarity” with the “fair traders”. He dare not call you evil but his actions suggest that you are being unfair.
The manufactured shunning, and (false) threat to eternal damnation still doesn’t work. It’s your damned house, paid for with your hard-earned money! You intend to sell it for the best price you can receive!
The real estate agent brings a government board in to bind you to mediated terms, whether you’re in agreement with them or not. If you try to walk away from the home, and let the agent deal with the bank (which will foreclose on your property), she’ll get the government board to seize your home, or have that government board order you to sell it to her hand-picked buyer, or have that government board throw you in jail.
That sounds crazy, doesn’t it?
Of course it does but that’s the exact effect The Wagner Act of 1935 had on labor relations. The Wagner Act assigned exclusive negotiating rights, to a designated agent, on behalf of all employees. Whether the employee consents to that agency relationship or not, the designated agent has the power of force (the government) behind it and all employees are bound to accept that agents’ negotiated terms.
The Wagner Act permitted the coercive tactics of picket lines, to scare away customers, potential employees, suppliers, etc. In essence, the Wagner Act proclaimed that the labor monopoly has the “right”, under the direction of its exclusive agent, to engage in such coercion. If the business owner complained, well then he had to deal with force (the government),,, again.
Finally, The Wagner Act also established the National Labor Relations Board , to mediate the price of labor, if that designated agent could not convince a business owner to accept the terms offered. The business owner could either:
- (a) accept the mediated terms (offered by the NLRB), or
- (b) surrender the business to the NLRB, or
- (c) move to another jurisdiction, outside of the reach of the NLRB.
Which option do you think private business owners chose? If you remember the outsourcing movement, in the 1980’s, you have discovered the answer.
Labor, like land or capital, is a factor of production. When force is introduced, to a commercial exchange of any of those factors, it is no longer voluntary. There will be unintended reactions to that introduction of force.
If you wouldn’t condone my hypothetical real estate agency relationship (monopoly backed by force), why would you turn a blind eye to the very same practice in the labor movement?
jay says:
Just share on Facebook and twitter under couple of profiles…..
May 20, 2011 — 6:21 pm
Broker Bryant says:
Brian. This is also where lenders are headed when it comes to short sales. They are trying to dictate to borrowers who they MUST use to sell their property and handle their short sale. “If you want us to consider your short sale then you need to use this agent.”
May 21, 2011 — 5:08 am
Jeff Brown says:
Meanwhile, back in the economic kitchen, the frog is beginning to think the water’s gettin’ just a tad too warm.
May 21, 2011 — 8:15 am
Brian Brady says:
@Bryant–I can understand why lenders are doing that. Which between the seller and the lender has the largest economic interest?
Naturally, I wouldn’t endorse such an idea because private property, even over leveraged property, still belongs to the seller but I do understand lenders’ reasoning.
May 21, 2011 — 12:47 pm
Sean Purcell says:
But Brian, you’ve missed the most important point. If the agents – all of whom have the right to associate and to assemble – don’t create a union, their employers (the homeowners) will only look out for their own interests. They will try to lower the cost of selling their home in order to increase their own, selfish profits. Some agents might not earn a living; some homeowners might make a poor selection in agent. This is no way to sell a home!
I know you’re trying to use our industry to make a point, but it’s a silly example. I mean, what if we applied your disdain for the Wagner Act to… say, education? You’d have selfish parents out there only interested in buying the most education at the least expense. They might choose the “wrong” schools, some teachers might not earn a living, there’d be no way to insure that the consumer’s interests (their children) were being properly indoctrinated… it would be anarchy!
May 22, 2011 — 7:43 am
Don Reedy says:
Sean….if facetiousness had a scent, I’d be a-smelling it way up yonder in rural Vista today.
Thanks for covering up the odor of NAR’s septic tank.
May 22, 2011 — 12:53 pm
Michael Cook says:
If only you guys could see the construction workers unions here in New York City. They have inflatable rats, they have coffins and all kinds of other creative ways to terrorize those sites that dont use union labor.
I often wonder how great their union would be if they used that same energy to train and re-train their staff, rather than forcing crane “supervisor” and a crane “oiler” to get paid almost six figure each for watching a crane operator do his/her six figure job.
Fun facts that I learned in the distressed commerical real estate loan business. Crane Oilers were needed years ago when cranes require constant lubrication. Modern cranes rarely need to be oiled at all; however, unions have fought hard to make it a requirement that a crane oiler be on the premises whenever a crane is being operated. So if you want to make six figures and literally do nothing, take a couple of months and become a crane oiler. Then laugh your wait to the bank.
There is a Greece joke in there some where, but I didnt have the heart to make it.
May 23, 2011 — 2:34 pm
Joe Hayden says:
A “Greece” joke 😉 Very nice!
I’m curious how Boeing is going to play out. If there is any doubt regarding the NLRB’s intent and power, what ultimately happens with Boeing will let all others know which way the wind blows.
June 1, 2011 — 8:19 pm