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Relax, The Department of Justice is solving the real estate commission problem

Last Wednesday the citizens of the United States became a lot better off. I was surprised that no one publicly popped open a bottle of champagne to celebrate. This is not some small thing, it is exciting news. The Department of Justice, Anti-Trust Division launched a website that is going to make the world a better place. The nice lawyers who worked on the research for the site and wrote the copy spent considerable time compiling the information.

This is my favorite page on the site. I liked it a lot because the page it linked from had this quote:

“Brokers typically charge a commission based on a percentage of the home’s sale price. Over the past decade the average commission rate has remained relatively steady between 5.0 and 5.5 percent. As a result, the actual median commission paid by consumers rose sharply along with the run-up in home prices.

Unless broker costs were also rising sharply during this period of time, competition among brokers should have held commissions in check even as home prices were rising.”

The word, “costs” was bold on their site, as well. Unless broker costs also went up (where the brokers could actually prove they had to spend more) competition SHOULD have held commissions in check. My costs have gone up in the past nine years.  Way up.  My acquistion cost per listing and my costs to service each listing has gone up, as well. What they may be shooting for is the correct amount of profit a Realtor should be making.  I wonder if they plan to subsidize those agents and companies who can prove they are making less (like Foxtons)?

I’ve included a link here for any stray DOJ lawyers reading this post to help them. There are many calculator sites on the internet, I choose this one because it came up first when I did a Google search for “consumer price index calculator”. Try it. Type in 1998 = $1.00 and then put 2007 in the year you want to check. I got $1.26. I think you will too.

If you are a Realtor going to a grocery store or a furniture store or even to a house you want to buy, inflation will be taken into account.

I fully understand that low income, government employees, who are highly literate, highly educated law school graduates (with loads of spare time on their hands) can successfully use a limited service broker to sell their house. But it almost seems as if they have a bias against full service brokers on the DOJ site. Is that possible? My taxes pay their salaries. Literally. And they put up a site practically telling people NOT to use me? Wow.

I sure hope they add a new entry showing the “average commission” dropping in late 2007 / early 2008. Falling home prices are going to bring that about. We should all anticipate the DOJ declaring victory in their quest to get real estate commissions down and dropping their lawsuit against the NAR.

flyingpig

5 comments

5 Comments so far

  1. Right_Wing_Zealots October 14th, 2007 11:58 pm

    Please! Let’s put the onus where it belongs. The issue is not the DOJ attorneys themselves, but the Attorney General (and the administration) for whom they work.

  2. J. Ferris October 15th, 2007 9:20 am

    Russell,

    I laughed with a dropped jaw when I saw the DOJ site. It really doesn’t encourage competition but it does a great job of slamming real estate agents. My favorite section is:

    http://www.usdoj.gov/atr/public/real_estate/rebates.htm

    Where they only quote negative comments made on rebates by real estate “brokers” in their “survey”:

    “If we give rebates and inducements, it would get out of control and all clients would be wanting something. The present law keeps it under control.”

    “This would turn into a bidding war, lessen our profits and cheapen our ‘so-called’ profession.”

    “If inducements were allowed, they could lead to competitive behavior, which would make us look unprofessional in the eyes of the public.”

    “I think this would just take money right out of our pocket.”

    Classy and fair DOJ we have indeed. I blogged on this exact topic and even noted how much the government would lose in tax money should our profession disappear as they seemingly would hope for on my blog:

    http://activerain.com/blogsview/233218/DOJ-5-Commissions-are

    Great post!

  3. Steve Berg October 15th, 2007 5:21 pm

    Russell – Funny, I read all the headlines on the DOJ website and didn’t see the one that said “commissions are negotiable”.

  4. Arlington Virginia Condos — Jay October 16th, 2007 6:20 am

    I’m pretty sure it costs significantly more to run a newspaper ad now than 5 years ago….Anybody can list a home for $500 or less in the great majority of the USA. I don’t see how DOJ expects the consumer to have any more choices–the choices to the consumer are numerous indeed.

    In our economy businesses should be encouraged to make as much profit as possible. Of course the way a business increases its profits is by providing more service(s) to more consumers and earning their repeat business. If consumers want full service brokerage they should not be denied that service from the DOJ. This bullcrap quest is a mockery of capitalism and what our country stands for given all the choices and information the consumer has today. It is shameful and unAmerican.

    jay

  5. Thomas Johnson October 18th, 2007 7:29 am

    These guys are salaried lawyers with government. They should talk to their trial lawyer buddies who take 33% of the winnings PLUS expenses, they might understand that our contingent percentage is about where it should be. Where is the DOJ on lawyer contingencies?

    We Realtors put our livelihoods on the line every day, knowing that if we do not perform, we do not eat. Until the consumer wants fee for service, we have what we have. I haven’t had much luck with a cash retainer up front for a lower fee. The discussion is entertaining, however.