Well.
It is beyond all doubt that readers here are thrilled to the core to cogitate on the implications of real estate licensing laws and their hypothetical repeal. So far the silence has been deafening, with nothing but a host of fallacious arguments, some charming insults and something new under the sun: green-baiting. (It’s like red-baiting, but for Capitalists.) What we have not had is a rational defense of the law.
That’s a real shame, because we are on the verge, potentially, of a revolution in real estate brokerage. Take note:
By means of its “Make Me Move” feature, Zillow.com is engaged in the essential act of real estate brokerage, the introduction of buyer to seller. Zillow’s efforts are not subject to state regulation because it is not performing brokerage for compensation.
IggysHouse.com is going to list homes for sale for free. The state may try to regulate IggysHouse, perhaps by arguing that the co-broke is compensation, even if IggysHouse keeps none of it.
Either way, the stench from Tennessee is too thick to ignore. What are traditional real estate brokers going to try to do with state laws when they come up against competition willing to work for free?
And: Does anyone want to argue that the proposals the traditional brokers come up with will be good for the consumer?
Why has no one been able to rebut the argument that real estate licensing laws are contrary to the consumer’s interests? How about because the argument is correct?
But: I’m here to help. The laws themselves are not going anywhere. Rotarian Socialism rules the country, and it will for quite a while. But you can know what is right and what is wrong, and you can apply your mind to figuring out who is to be benefitted and who penalized when new laws are proposed — as they will be.
Give a look to these questions. If you answer them honestly, you will understand why the real estate licensing laws should be repealed — even though they won’t be.
Like this:
In the absence of real estate licensing laws, are consumers more likely or less likely to investigate the education, qualifications and experience of prospective agents?
In the presence of real estate licensing laws, are new licensees more likely or less likely, when appealing to consumers for employment, to equate their status as licensed real estate agents with better-educated, more-qualified, more-experienced agents?
Taking account that they make profits when they perform their functions well and suffer liabilities when they fail, do free-market oversight entities seem more likely or less likely to assure consumer protection than government bureaucracies? The same question on a more practical level: When buying electrical equipment, if you could have either government regulation or oversight by the Underwriters Laboratories, but not both, which would you choose?
In the presence of real estate licensing laws, are free-market oversight entities concentrating on real estate transactions more likely or less likely to come into existence?
In the presence of real estate licensing laws, are alternative business models — radically different from traditional real estate brokerages but offering consumers more choice and possibly substantial cash savings — more likely or less likely to come into existence?
In the presence of real estate licensing laws, are traditional real estate brokers more likely or less likely to try to outlaw alternative business models offering real estate brokerage services to consumers for reduced or even no compensation.
Is there any interest of consumers considered here that would not be better served by repealing the real estate licensing laws? Even if you wish to assert that real estate licensing laws offer specific benefits to consumers — rather than to traditional real estate brokers — can you argue that those benefits outweigh the damage done to consumers by those very same laws?
I don’t think there is any other way to address this issue.
Technorati Tags: disintermediation, real estate, real estate marketing, Redfin.com, Zillow.com
Terry Shortt says:
REALTORS Pay Politicians a Staggering 4.3 Million Dollars in 2006.
“IS there any way to list all the anti consumer legislation or behavior that the National Association Of REALTORS (NAR) has supported?” asked Jeff Fox of California in a letter to the editor at Inman News.
The 4.3 million dollar check that the REALTORS wrote to buy political influence in the 2006 election cycle gives practically every politician a debt to repay.
So the list, when written, is likely to be a huge one.
The most recent example of this may be in Tennessee where REALTORS promoted a ban on the practice of buyer’s agents offering rebates to their customers. Citing the potential harm to consumers (the ones that would have actually benefited from rebates), The Tennessee REALTOR Association got a legislator to sponsor the bill and the governor signed it into law recently.
Although there is no direct or indirect benefit to consumers from this new law, REALTORS were able to erect yet another barrier to real estate business models that have the potential to save consumers thousands of dollars.
The US Justice Department Antitrust Division and the Federal Trade Commission have been aggressive at discouraging the adoption of these anti-competitive measures in several states.
Unfortunately for consumers though, the debt that politicians owe REALTORS carries more weight than their commitment to actually promote the interest of ordinary home owners.
Many states have implemented rules and supported legislation that is contrary to the interest of their citizens.
In Kentucky for example, REALTORS managed to get a legislator to introduce a bill that would have forced home sellers to pay for real estate services that they didn’t want .This just to slow the spread of business models that offer unbundled services.
The bill was eventually withdrawn, due in large measure to the pressure exerted by the US Justice Department on the Kentucky Real Estate Commission (KREC). The KREC was already in hot water from an earlier action against them where the commissioners were charged with conspiracy for other anti-competitive laws on the books.
The US real estate industry operates like no other business in the world. It’s a business that relies on a delicate balance of cooperation among competitors. It attracts large numbers of licensees and it’s very easy to enter the business. Most real estate agents receive no training beyond the state mandated two week course and a few hours of continuing education. The vast majority of agents have been in business under five years.
The turnover rate is astronomical.
The larger picture though is one of huge companies recruiting as many people as possible and getting as much as they can out of the short life span of an agent. Virtually every real estate agent must join the National Association of REALTORS and its state and local affiliate and pay annual dues.
This explains the millions in the coffers of the National of association of REALTORS. Cash that is desperately needed to keep the political favors flowing.
It’s a complicated web that connects the National Association of REALTORS to its state and local affiliates and then ties them in with the state Regulatory bodies or Real Estate Commissions.
In Kentucky, as in some other states, the real estate regulators don’t make a move without the approval of the state REALTOR Association.
While it may seem extraordinary, even the brokers that serve on the panel have to be approved by the REALTORS Association in advance of the Governor ceremonial picking a person.
Since most people only use a real estate agent on an infrequent basis, they are not aware of the politics that has gone on behind the scenes to block low cost business models that would otherwise be available to them.
The National Association of REALTORS, when confronted with these issues is quick with their two point defense. 1) We don’t set commissions and 2) The real estate industry is the most competitive industry in the country.
The forces of legitimate competition should drive the price of products and services down and the quality of service up.
To see why this anomaly exist in the Real Estate industry one need only follow the money trail.
June 13, 2007 — 5:17 am
David G from Zillow.com says:
Hi Greg,
I don’t want to distract from the core message here but need to point out that Make Me Move does not preclude the buyer or seller from needing representation. In fact I expect some Realtors will specialize in helping to close Make Me Move deals.
June 13, 2007 — 10:01 am
CA Zip Agent says:
I was told that the Zip Realty NY district doesnt have a rebate… is that true?
June 13, 2007 — 2:03 pm