{"id":4169,"date":"2005-10-21T14:45:12","date_gmt":"2005-10-21T18:45:12","guid":{"rendered":"http:\/\/blogs.law.harvard.edu\/formerlyknownas\/2005\/10\/21\/realtors-and-legislators-are-"},"modified":"2011-08-05T14:54:28","modified_gmt":"2011-08-05T18:54:28","slug":"realtors-and-legislators-are-selling-you-out","status":"publish","type":"post","link":"https:\/\/archive.blogs.harvard.edu\/ethicalesq\/2005\/10\/21\/realtors-and-legislators-are-selling-you-out\/","title":{"rendered":"realtors and legislators are selling you out"},"content":{"rendered":"

<\/a><\/p>\n

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Realtors\u00a0like\u00a0receiving that large, uniform <\/span>commission — usually 6 <\/span><\/div>\n
or 7 percent of the purchase price — every time they sell a home.<\/span><\/div>\n
Therefore, they dislike <\/span>discount<\/span> brokers, and particularly\u00a0those who <\/span><\/div>\n
unbundle services and let <\/span>home sellers <\/span>pay a flat fee for each <\/span><\/div>\n
service or option package.\u00a0Of course, if\u00a0the <\/span>realtors conspired together <\/span><\/div>\n
to <\/span>exclude, punish or otherwise disadvantage cut-rate or fee-for-service <\/span><\/div>\n
brokers, <\/span>they would violate\u00a0the antitrust laws. <\/span><\/div>\n
<\/div>\n
\"house<\/span> However,\u00a0realtor\u00a0associations\u00a0have\u00a0found a sword <\/span>against discount brokers<\/span> and a <\/span>shield against the antitrust laws<\/span>:\u00a0 They’ve been\u00a0successfully lobbying<\/span> state\u00a0legislators, <\/span>who have\u00a0dutifully enacted so-called “minimum service laws<\/strong><\/em>” (in the <\/span>name of consumer protection, of course),\u00a0which require brokers<\/span> to <\/span>provide a\u00a0broad set of services,\u00a0regardless of whether\u00a0the consumer <\/span>wants or needs <\/span>them.\u00a0 Because trade associations can lobby without <\/span>violating the<\/span> antitrust laws (under the <\/span>Noerr-Pennington<\/span><\/a> doctrine), and <\/span><\/span>they receive “Parker<\/em>“<\/span> or State Action immunity<\/span><\/a> from<\/span> the antitrust laws\u00a0for conduct that is <\/span>required<\/span> under a state law, consumers in many states have no antitrust <\/span>protection against minimum-service laws, and now face fewer choices <\/span>and higher fees<\/span> when they sell or buy a home.<\/span><\/div>\n
<\/div>\n

Oklahoma passed a minimum-services law in June,\u00a0and its\u00a0realtors <\/span>seem to be\u00a0maneuvering\u00a0for regulations that are even more restrictive than<\/span> the statute (“<\/span>Antitrust\u00a0officials watching minmum service real estate laws<\/span><\/a>, <\/span><\/span><\/p>\n

<\/div>\n

Inman News<\/em>, Oct. 19, 2005). Texas Gov. Rick Perry signed such a law in June, <\/span><\/span><\/p>\n

effective Sept. 1, 2005, causing alternative brokers having to increase their<\/span> prices <\/span>and remove some options (“<\/span>Flat-fee brokers adapt to new real estate law<\/span><\/a>,” Inman News<\/em>, Oct., 12, 2005). Alabama joined the consumer sell-out in August — <\/span><\/span>with realtor clout demonstrated by a 35 – 0 vote in the Senate and 95 -1 vote <\/span>in the House.\u00a0\u00a0(<\/span>States snub Justice Department’s antitrust complaints<\/span><\/a> (Inman <\/em><\/span>News<\/em>, Aug. 10, 2005).\u00a0\u00a0\u00a0 Ohio and Wisconsin are currently considering<\/a> similar <\/span>laws.<\/span>
\n<\/span><\/div>\n
<\/span><\/span><\/div>\n

<\/span><\/span><\/p>\n

\n
<\/span><\/span>\"\"<\/a><\/div>\n<\/div>\n
Although consumer advocacy efforts by the Federal Trade Commission
\n<\/span><\/p>\n
and Department of Justice, <\/span><\/span>in each of the above states, have proven <\/span>fruitless<\/a> <\/span><\/div>\n
(e.g.<\/em>, their Letter<\/span><\/a> <\/span>re Texas legislation earlier this year), the agencies <\/span><\/span>submitted <\/span><\/span><\/div>\n
a <\/span>Letter<\/span><\/a> this week (<\/span>Press Release<\/span><\/a>, Oct. 20,<\/span><\/span>2005) to the state Senate in the <\/span><\/span><\/div>\n
newest battle ground – Michigan. <\/span><\/span><\/div>\n
<\/span><\/div>\n

The FTC\/DOJ Letter to Michigan legislators gives this background (at 4):<\/span><\/p>\n

“It is becoming increasingly common for home sellers and home buyers<\/span> to want some, but not all, of the traditional brokerage services.\u00a0 For example,<\/span> some sellers might want help advertising their homes, but want to negotiate<\/span> the sale price themselves.\u00a0 Such consumers might prefer to pay a real estate <\/span>professional only for the service of listing their homes in the local MLS [multi-<\/span><\/p>\n

ple listing service] and placing advertisements in local media.\u00a0 Other consumers<\/span> might find a buyer without assistance, but would like to hire a real estate professional to assist them with the negotiation of the sales price or with the<\/span> paperwork required to close the transaction.\u00a0 The marketplace is evolving in response to these consumers.\u00a0 Real estate professionals who are willing to<\/span> provide a customized subset or menu of a la carte<\/em> services have emerged in Michigan and throughout the country.\u00a0 These “fee-for-service” or “menu-driven”<\/span> business models are currently legal under Michigan law and typically enable consumers to save thousands of dollars because the consumers pay only for<\/span> those services they want.”<\/span><\/div>\n<\/blockquote>\n
\"MichiganN\" The legislation proposed in Michigan (HB 4849) would require brokers acting <\/span><\/span><\/div>\n
“pursuant to <\/span><\/span>a service provision agreement creating an exclusive agency relationship” to, <\/span><\/div>\n
at a minimum,<\/span>provide (a) marketing services for the seller in the manner agreed upon in the <\/span><\/div>\n
agreement; <\/span>(b) the acceptance of delivery and presentation of offers and counteroffers; (c) <\/span><\/div>\n
assistance <\/span>in developing, communicating, negotiating, and presenting offers, counteroffers <\/span><\/div>\n
and related <\/span>documents, until agreement is reached and all contingencies satisfied; (d) assis-<\/span><\/div>\n
tance <\/span>necessary to complete the transaction under the terms specified in the purchase <\/span><\/div>\n
agree<\/span>ment; and (e) furnishing and completing the legally-required closing statement. <\/span><\/div>\n
<\/div>\n
FTC Chairman Deborah Platt Majoras noted:<\/span><\/span><\/div>\n
\n
<\/p>\n
\u201cConsumers should have a choice in the level of real estate <\/span><\/div>\n
services that best meets their needs.\u00a0. . <\/span>The bill likely would <\/span><\/div>\n
take away lower-<\/span>price choices and also likely increase the <\/span><\/div>\n
prices of full-service <\/span>real estate services.\u201d<\/span><\/div>\n

<\/span><\/div>\n<\/blockquote>\n

Thomas O. Barnett, Acting Assistant Attorney General in charge of the DOJ\u2019s <\/span><\/span><\/div>\n
Antitrust Division, added: \u201cConsumers deserve to receive the full benefits of <\/span><\/span><\/div>\n
competition \u2013 greater choices and better services \u2013 in order to meet their real <\/span><\/span><\/div>\n
estate needs.\u201d\u00a0 In their joint submittal, the agencies point out that there is no <\/span><\/span><\/div>\n
evidence that options available in the current broker marketplace has caused <\/span><\/div>\n
consumer injury. <\/span><\/div>\n
\n
The <\/span>f\/k\/a<\/em> gang wants to add that consumers always face some\u00a0 “emptypocketsS”<\/span><\/div>\n
level of potential risk, <\/span>when <\/span>they purchase <\/span>lower-priced products <\/span><\/div>\n
or services, but they should be allowed <\/span>those choices, subject to <\/span><\/div>\n
a strong showing that the risk is unacceptable.\u00a0 That is <\/span>especially <\/span><\/div>\n
true in situations, like here, where consumers have such\u00a0varied needs <\/span><\/div>\n
and <\/span>capacities (for example, many Americans are capable of drafting <\/span><\/div>\n
their own fact <\/span>sheets, and<\/em> printing them at-home,\u00a0and of talking\u00a0price <\/span><\/div>\n
with potential buyers).\u00a0 Furthermore,\u00a0there is a <\/span>very real\u00a0risk that\u00a0any <\/span><\/div>\n
mandated package includes unneeded services sold at an articifially <\/span><\/div>\n
high\u00a0price. <\/span> <\/span><\/div>\n<\/blockquote>\n
\"MichiganG\" As <\/span>Mark Ijlal<\/span><\/a> <\/span>mentioned\u00a0at his weblawg last <\/span>week, many parts of <\/span><\/div>\n
Michigan can expect to face housing <\/span>market slumps in the near future, due to <\/span><\/div>\n
the <\/span>troubles of companies like Delphi and Ford, which will\u00a0bring countless <\/span>layoffs <\/span><\/div>\n
and <\/span>immeasurable uncertainties.\u00a0 If Michigan’s Realtors have their way, those <\/span><\/div>\n
forced to sell their homes\u00a0at the bottom of the market will\u00a0have fewer ways <\/span>to <\/span><\/div>\n
save <\/span>money on brokerage services.\u00a0\u00a0But, they can feel so good<\/em> about all <\/span>that <\/span><\/div>\n
extra paternalistic <\/span>protection, courtesy of their smiling Realtors. <\/span><\/div>\n
<\/div>\n<\/div>\n
\n
\n
moving day<\/em><\/span><\/div>\n
the other men<\/em><\/span><\/div>\n
in her life<\/em><\/span><\/div>\n
<\/div>\n
<\/span>John Stevenson<\/span><\/a> <\/span><\/span> <\/span><\/div>\n<\/div>\n<\/blockquote>\n
Ken Wallis,\u00a0chief legal adviser to Alabama’s governor, <\/span>explained<\/span><\/a>,<\/span><\/span> it<\/span> “was just a <\/span><\/div>\n
no-brainer” to approve their state’s\u00a0new real estate law, because <\/span>“The <\/span>average <\/span><\/div>\n
seller has to <\/span>have additional assistance in a transaction.” Wallis added:<\/span><\/div>\n
\n
<\/span>“There are 100 things that the average seller does not know, and <\/span><\/div>\n
somebody’s got to help them with it. It’s no different than paying a <\/span><\/div>\n
doctor’s fee or a dentist’s fee. You’ve got to have those services and <\/span><\/div>\n
the public benefits from having a good agent or broker to handle their <\/span><\/div>\n
transaction for them. The governor’s interest in this matter was deciding <\/span><\/div>\n
if the law was in the best interests of the public.”<\/span><\/div>\n<\/blockquote>\n
On the behalf of the helplessly grateful residents of Alabama, we thank you, Gov.<\/span><\/div>\n
Bob Riley.<\/span><\/div>\n
<\/span><\/div>\n
\"house I know the realtor trade groups have lawyers\u00a0working to get these laws <\/span><\/div>\n
passed. <\/span>And legislative and executive branch counsel are kowtowing to the Realtors. <\/span><\/div>\n
Are <\/span>any lawyers doing anything to protect the rights of home buyers and sellers?\u00a0 Or,<\/span><\/div>\n
is the Bar so paralyzed by its own dependence on anticompetitive guild tactics<\/span><\/a> (such <\/span><\/div>\n
as barring non-lawyers from performing real estate closings<\/span><\/a>), and so blinded by its <\/span><\/div>\n
own addiction to standard contingency fees<\/span><\/a>, that it is embarrassed to come to the <\/span><\/div>\n
assistance of consumers who have no lobbying clout and no political action committees?<\/span><\/div>\n