At FTC workshop, industry grapples with the sacred cow of commissions

Katie Johnson and Trelora CEO Josh Hunt (Credit: National Association of Realtors and Trelora)

Despite having access to a wealth of real estate data online, buyers and sellers can still be clueless about how commission fees work.

But have traditional brokerages intentionally kept consumers in the dark in an attempt to maintain their rates? That was a key point of contention at a “workshop” convened Tuesday by the Federal Trade Commission and Department of Justice.

The workshop, titled “What’s New in Residential Real Estate Brokerage Competition” coincided with the expiration of a 2008 “consent decree,” or agreement, between the DOJ and National Association of Realtors over how real estate and listings data can be used online. Earlier in the day, FTC Chair Joseph Simons said the new realities of the market would inform how the industry would be regulated going forward.

In the decade since the agreement, access to online data has transformed the industry, giving rise to agent advertising and discount brokerage models.

But Katie Johnson, general counsel of the National Association of Realtors, the industry’s largest trade group, said “the market is working and government intervention could stifle this competitive environment.”

Feedback from consumer advocates and others, however, portrayed a different reality on the ground.

“Information about properties is accessible to consumers, that’s a great thing. But there’s been no explosion of information about the actual fees that are being charged,” said Stephen Brobeck, executive director of the Consumer Federation of America. “I mean, you have to ask yourself the question, ‘Why aren’t any of the traditional brokers talking about price?’”

According to Brian Larson, a partner at Larson Skinner PLLC, the industry has been dominated historically by a single listings portal or two — first and now Zillow. Larson said despite that consolidation of power, listings data is “valuable intellectual property” for agents, whose business is linked to how they present data online.

“That’s how you’re going to earn your keep,” he said. For that reason, “Sellers and listing brokers should have control over where listing information goes.” That fight for control of listings information has been one of the defining features of the New York market over the past year, ever since Zillow debuted Premier Agent.

Earlier in the day, the CEO of one flat-free brokerage said despite an enormous amount of property information that’s available online, most consumers are still clueless about commission rates.

“We’re withholding pertinent information from consumers,” said Josh Hunt, CEO of Denver-based Trelora. Traditional firms are “dead set,” he said, on keeping commission rates at the traditional 6 percent, despite pressure from discount firms like his.

According to Hunt, traditional firms have been bolstered by local MLSs, which wield outsized control over data. He said one-third of MLSs nationwide require agents to be a member of NAR to access their listings. In Colorado, one local MLS won’t allow his firm to become a subscriber because it is not a NAR member.

Hunt described the animosity Trelora agents and clients have faced from proponents of traditional models. “We have had bricks thrown through car windows,” he said, “cars egged and hate mail sent to sellers.”

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