Real estate brokers and their agencies are guilty of price fixing, limiting competition and restricting service options for consumers, officials from the Consumer Federation of America charged Monday.
Real estate brokerage firms are the “last remaining unregulated cartel functioning in America,” said Stephen Brobeck, executive director of the Consumer Federation, at a press conference Monday morning.
The organization released a report that accused the industry of a laundry list of anti-competitive practices, including self-regulating commissions so broker commissions don’t dip below 6 percent or 7 percent. They self-regulate, said Brobeck, by shutting out other brokers that offer rebates or reduced commissions to clients, showing their own listings first in hopes of avoiding splitting the commission with another agent and keeping consumers in the dark about all available listings by restricting access to multiple listing services.
Keeping commissions high across the board is an unfair practice that hurts consumers’ wallets, Brobeck said. Instead, commissions should be based on the level of service an agent can provide.
“You took a month’s course and now you’re selling my house?” Brobeck said. “Why do you deserve a 7 percent commission?”
“It’s really obvious to me that they don’t understand the business,” Thomas Stevens, president of the National Association of Realtors, told The Examiner.
“Real estate is probably one of the most competitive businesses in the country.”
Real estate agents provide an in-depth, personal service for clients, Stevens said.
“The consumers dictate the value of the service,” he said. “It’s what the consumers are willing to pay. … I don’t think the CFA is giving the consumer enough credit. They understand the value you get.”
The report accused agents of showing their own listings first in order to get the whole commission, rather than splitting it with the buyer’s agent.
Stevens countered that at his former agency, Coldwell Banker, between 70 percent and 75 percent of commissions were split with other agents and between 30 and 35 went to a single agent.
In addition, commissions have declined over the years, Stevens said. In 1988, the average commission was 5.5. Today, it’s 5.1.
