should be able to choose their service models as well as the provider of those services, whether they be limited service or full-service"). Section A examines the structural features of the real estate brokerage industry. Several panelists and commenters cited Real Trends estimates of commission rates. This Chapter also discusses the Internet as a means of providing real estate brokerage and related services to consumers. The obstacles discussed so far in this Chapter represent concerted efforts of real estate incumbents to insulate themselves from new and innovative types of competitors. "62, Due to these significant efficiencies and procompetitive features, the Fifth Circuit held that the alleged MLS-related restrictions at issue should not be condemned as per se illegal.63 At the same time, the Court held that the efficiencies and benefits flowing from the MLS, combined with other factors, resulted in the MLS having market power in a relevant antitrust market, thereby simplifying the rule of reason inquiry concerning the legality of restrictions imposed by the MLS and its members.64, Although the data show that most consumers currently contract with a broker that supplies the full range of services traditionally offered by brokers, many consumers prefer to use brokers whose business models are alternatives to the traditional one. See Perriello, Tr. See Levitt & Syverson, supra note 16, at 6 (noting that if an agent receives 1.5 percent of the sales price and incurred weekly costs of $200 to keep a home on the market, "the agent would be indifferent between selling the house today or waiting one more week and receiving an offer $13,333 higher with certainty."). For example, Weicher calculates that although the average commission rate as reported by REAL Trends fell by 16 percent (6.1 percent to 5.1 percent), because the average price of existing housing increased during this period ($128,400 to $236,000), the average inflation-adjusted commission per transaction increased by 11 percent in dollar terms between 1991 and 2004.187 More specifically, Weicher's analysis indicates that inflation- adjusted commission fees per home sale declined by approximately 7 percent between 1991 and 1998, but increased 19 percent between 1998 and 2004.188 The GAO, also using REAL Trends' commission rate data, reached the similar conclusion that commission rates do not appear to have changed enough to offset rapidly rising home prices in recent years.189 Specifically, the GAO observed that a decrease in commission rates from the prevalent 5.5 percent in 1998 to an estimated 5 percent in 2005, a 9 percent decrease in commission rates, was more than offset by a 58 percent increase in the median inflation-adjusted home sales price. Fulfill your COE training requirement with free courses for new and existing members. See Reifert v. South Central Wisconsin MLS Corp., 450 F.3d 312 (7th Cir. at 1082. 1980). 36. at 32. Id. Hahn believes that rebating will have a positive impact on consumer welfare, and sees no compelling economic rationale for not allowing rebates since they are a form of price competition that should improve efficiency by putting pressure on brokerages to provide better services at lower prices. at 90. 27, 2007). Pursuant to the state's administrative proceedings, the Tennessee Real Estate Commission scheduled a public hearing regarding the rebate ban's final repeal for May 2007. Stay informed on the most important real estate business news and business specialty updates. The recent run-up in housing prices illustrates this phenomenon: from 1998 to 2005, housing prices rose 37 percent in real terms and, although national average commission rates appear to have fallen from 5.5 percent to 5 percent, average brokerage fees per transaction rose 26 percent in real terms during the same period.140 At the same time, the efficiencies generated by the Internet and other technological advances suggest that broker costs should be falling. In addition, in response to an FTC questionnaire, respondents from Colorado, North Dakota, Vermont, and Washington noted that complaints against limited service brokers were minimal or nonexistent. 179, 184-185 (1981); Crockett, supra note 51, at 211. of Realtors v. E-Realty, Inc., No. In litigating its case against Realcomp, the FTC staff will seek to prove that this group of competitors should be prohibited from engaging in such conduct to the detriment of consumers. Alternatively, brokers may adopt a combination of flat fees and a commission rate. Hahn, Tr. 78. According to a Workshop panelist, there are approximately 98,000 brokerage firms operating over 200,000 local offices in the United States.143 These offices provide potential employment for approximately 2.5 million real estate licensees (of which more than 1.2 million are members of NAR).144 In 2004, 96 percent of brokerage offices in the United States employed ten or fewer agents.145 From 1983 to 1999, the portion of brokerage offices with five or fewer agents increased from 51 percent to 60 percent.146 In contrast, the portion of offices with a sales force of more than 50 agents never exceeded 5 percent during that time period.147, There is conflicting information regarding the percentage of home sales nationwide accounted for by the largest real estate firms. In an address at the beginning of the Workshop, (then Acting) Assistant Attorney General Thomas Barnett observed that minimum-service laws and regulations can be viewed as no different from states passing a regulation that says: "When I walk into McDonald's and order a hamburger, I'm told that I also have to buy some french fries, because the state has decided that it might be deceptive or misleading or bad if I only got the hamburger, paid for it and didn't realize I wasn't going to get the french fries." REAL ESTATE RES. 229. 276. 111. NAR 2006 SURVEY, supra note 4, at 74 (69% of sellers contacted only one agent; 74% of sellers found their agent through either a referral or a prior relationship with the agent). Namely, a broker's success typically depends on securing significant cooperation from direct competitors. 310. American Bankers Association, Public Comment 10, at 3 (comment). c. Both a and b. d. Neither a nor b. b. their broker. The aim of antitrust law is to preserve competitive markets.
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