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Monday, October 22, 2007

The feds go after Oregon realtors

Here's an interesting development. The Bush Justice Department has embarked on a campaign to convince Americans that the real estate brokerage industry is anti-competitive. It's pushing to force some states to loosen up their laws regarding real estate brokers, in order to allow more competition and lower commissions.

One of the features of its new website is a state-by-state evaluation of various laws that restrict or allow what the feds call good competition in the industry. Oregon, for example, gets a green checkmark for "Allows choice of brokerage services," but a red X for "Prohibits brokers from offering rebates to consumers." The site explains:

Oregon law prohibits real estate brokers from paying part of their commission to unlicensed persons. As a result, because consumers do not have real estate licenses, Oregon law prevents them from receiving rebates. Oregon consumers are unable to benefit from rebates that consumers in other states may receive.

In the 2007 legislative session, Senate Bill 673 was introduced, addressing the ability of brokers to offer rebates. The legislative session ended without passage of SB 673.

Meanwhile, Washington State and California both get two green checkmarks on both issues, while Idaho gets a green checkmark for rebates but a red X for "Limits choice of brokerage services."

It's been my impression that real estate commissions are negotiable in Oregon, and that generally, you get what you pay for. Since the realtor's fee can be haggled down, does it really matter much that a price cut can't be styled as a rebate? Are we really that anti-competitive?

Comments (7)

Wow, something I actually agree with from the Chimp's Justice Department. Has Hell frozen over?

No, we're not anti-competitive at all. But FSBO is the easiest money you'll ever save. Is this supposed to prop up the flagging market or something?

As an investor I Sold many houses via a broker and I always haggled on commission. Multiple housing listing, the sign and once a week ad were all part of the bargain. I never had a Realtor turn me down. My places sold well within a 90 day period. Open houses are pure BS and help lister to gain names for future sales..never saw a house sold by an open house.

I think it would be buyers that might benefit from being able to get a rebate.

If I find a house and buy it without a broker, the selling agent/broker keeps the entire commission, so why wouldn't I find a broker that would spend 20 minutes with me and share 75% of the commission as a rebate with me? (It might save almost $8,000 on a $350,000 house.)

Open Houses sell only a home .54% of the time. The majority of things that agents, and homeowners ask for, don't work. Open Houses and newspaper advertising don't work. Most inexperienced agents don't understand that these things don't work and follow "common" wisdom. They eventually find out that these only work to get them more business keeping the owner happy and getting a benefit for them.

People see this as a sales business and unfortunately too many agents do as well. This is a service business. There are too many ways out in the beginning for a Buyer to get "sold" on a house, this isn't a car. The job is making sure that they understand their risk and options which are many and varied depending on the deal. Our real job is to protect you. That is why you should find an agent from a referral.

And the rebate rule actually stops companies like Costco cutting in on the commission to provide "leads". The lack of rebates keeps agents or companies from buying your business and needing higher commissions to make it up. Just like when you hear loan companies "paying" for your appraisal, the money comes from somewhere in the end.

Does FSBO mean open house? We just hired someone to put them on the MLS for $500 and offered 2.5% to the buyer's agent or a discount to a buyer w/o one. Once we got a lawyer to write up an offer for us for $250. The whole transaction cost both parties under $400. But that was then...

Disclosure: I am a Realtor!

Our industry has shot itself in the head by failing to explain what it does and having barriers to entry that are way too low. The consumer doesn't appreciate us because the industry can't articulate what it does. General market perception is that our job is done once the house is identified. I'm not going to use Jack's blog to explain that is not the case.

Our value, comes in part from knowing what questions to ask and understanding the market to help the client get the best deal for the seller or buyer. Yes, you can go it alone just like you can be your own attorney. On that note, Joe Blow attorney does not have the earning/billing power that a "star" attorney does. Yet Realtors are paid on a percentage basis, not a success basis or based on the tools provided (would you rather see houses in a 1980 accord or a Lexus hybrid?). Hmm. The commission model is already starting to change where sellers will pay their listing agent's commission and buyers will pay their agent's commission. If we've negotiated that, why the need for a rebate? Dual agency, where one Realtor represents both the seller and buyer, is legal in Oregon. I don’t think it should be but that again is another story.

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