Real estate's Net turf war

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On July 13, the Federal Trade Commission charged the Austin Board of Realtors with violating federal antitrust laws. A settlement announced at the same time, which contained no admission of wrongdoing, said the realtors would no longer deny or restrict access to the MLS.

The federal investigations have drawn the attention of some politicians, who are threatening a more extensive crackdown. "Organized real estate brokers (are) setting or using the rules to protect higher fees or stifle competition to the detriment of consumers and to the detriment of new brokerage models," Rep. Michael Oxley, the Republican chairman of the Financial Services Committee, said this week.

Saving money on a house

For most people, buying or selling a home will be one of life's biggest transactions. Here are some tips:

Pay by the hour: Instead of paying a broker tens of thousands of dollars for a few days of work, find an agent that will work by the hour. Some agents prefer this because they're guaranteed to make money even if no sale happens.

Do it yourself: Sites like ForSaleByOwner.com and Emongoo cut out the middlemen and provide some coaching on how to do it.

Pay a flat rate: Redfin and Help-U-Sell use licensed agents but pay them a flat fee, typically around $2,000 or $3,000, rather than a percentage of the sale price.

Negotiate: There's no law saying brokers must charge 6 percent of a property's value. If you use a traditional broker, negotiate that number downward. If your broker won't budge, realtors listed on HungryAgents.com will.

Oxley and Massachusetts Rep. Barney Frank, one of the House's most liberal Democrats, have introduced a bill to increase competition by letting banks get into the business of real estate brokerage. But realtors' lobbyists have bitterly opposed it, and instead have counterattacked with legislation--boasting 257 sponsors, or more than half the members of the House of Representatives--that would flatly prohibit it.

A report (click here for PDF) published last month by the nonprofit Consumer Federation of America also took aim at a "cockamamie brokerage system that traditional brokers are trying to maintain" at the expense of consumers. It singled out for criticism the 11 states that have adopted realtor-backed laws that discriminate against discount and Internet brokers, and called realtors a "cartel."

For its part, the National Association of Realtors denies any wrongdoing. Pat Vredevoogd-Combs, its president-elect, told Oxley's panel that the association is "not a cartel and does not encourage imitative price-setting." Vredevoogd-Combs said that the association's 1.3 million members are "vigorously competitive" and do not conspire to keep commissions artificially inflated.

At this week's conference in San Francisco, discussion veered between how to use the Internet to attract more customers and fear that more Americans would switch to flat-rate Internet brokerages.

A typical audience question: "Can you tell us the future of commissions?"

Fear of discount brokers and Google
Another common worry was that Google or other established Internet companies would switch from directing people toward brokers to replicating the MLS or providing real estate services themselves. Google Base, for instance, already offers a real estate search category.

Justin McCarthy, Google's partner development manager for real estate, tried to assuage the audience's concerns. "The proposition is to drive people back to you, the MLS who is supplying us with data," McCarthy said.

McCarthy did acknowledge, however, that the Internet has changed the way people shop for homes and brokers. Thirty-three percent of recent home buyers said they used the Internet to help find a broker, he said, and 50 percent used the Internet to find information on the purchase.

Lennox Scott, CEO of John L. Scott Real Estate, which employs 4,500 sales associates in the Pacific Northwest, downplayed the threat of Internet start-ups such as Emongoo, BuySideRealty.com, and HungryAgents.com.

A few years ago "everyone was trying to disintermediate the real estate business," and it still hasn't happened, Scott said.

Other brokers said that the Internet already has ended real estate agents' near-monopoly on information. "If people have the information that realtors pretty much have had a lock on, you have to have a value add," said Dottie Herman, CEO of Prudential Douglas Elliman, a New York real estate firm that handled $12 billion in sales last year.

Herman added: "I do not see the Internet replacing real estate agents."

Help-U-Sell's Ozonian said the industry's transformation is already well under way. "Anyone who says the Internet has not changed the way real estate is practiced--I don't think that's right," he said.

Ozonian took aim at realtor-backed state laws that "make doing business more difficult" for Internet start-ups and said "the government is standing partly in the way" of a level playing field.

"Consumers are doing one part of what a realtor had been doing previously," Ozonian said. With the dramatic increase in housing prices, he said, the amount of work that brokers do has stayed the same but commissions have zoomed upward. "There's been an automatic raise given to the industry based on the sales price."

[pgioffre]

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