As two of the nation's largest industries go toe-to-toe to determine if banks should sell real estate, housing consumers don't have the clout in their corner to referee what is likely one of the most important consumer bouts ever.

Buying a home, for many consumers, is the most expensive transaction they'll ever complete. Unfortunately, at what should be an opportune time for them to voice concerns about the transaction, consumers have been virtually voiceless -- powerless to make a difference.

"Real estate has been the sleeping giant of consumer issues and this issue is big enough to wake it up," says Bill Wendel, a Boston-based real estate consultant and consumer advocate who founded the now dormant Real Estate Cafe, a click-and-mortar pioneer in the fee-for-service movement.

Wendel contends the debate that asks the question, "Should banks sell real estate?" is a debate that should occur in the context of a Real Estate Consumer Bill of Rights, which would grant consumers more say over how real estate is transacted -- with or without banks in the mix.

The issue of banks selling real estate has been a heated one since the far-reaching and complicated Gramm-Leach-Bliley Financial Services Modernization Act of 1999 was enacted, primarily to free banks, securities firms, and insurance companies to affiliate and enter each other's businesses.

The proposal

Drafted late last year by the Federal Reserve Board and the U.S. Treasury Department, a proposed rulek that would amend and clarify the Gramm-Leach-Bliley to allow banks to act as real estate brokers and property managers, is now in an extended public comment period until May 1.

Also on March 29, the U.S. House of Representatives' Financial Services Subcommittee on Financial Institutions and Consumer Credit will conduct a hearing on the issue.

At stake, primarily, is the $915.4 billion-a-year resale home business.

Little consumer advocacy

On the consumer side, Consumers Union, publisher of the trusted Consumer Reports magazine and a champion of consumer real estate issues is noticeably absent from this debate.

"We don't have anybody on that. No one has looked at it," said a spokeswoman from the group's San Francisco Office. Over a period of two days, calls to two officials were not returned.

The Consumer Federation of America hasn't tackled a major real estate transaction issue since it studied real estate agency in 1994. Several calls to the federation, during a two day period, were not returned.

The should-banks-sell-real-estate debate is an opportune time to reopen discussions about the perceived conflict of interest in dual agency, commissions and real estate transaction costs, privacy, the use of technology and other issues, Wendel says.

"What's the criteria of a new business model? Can industry be more competitive. Are there new technologies the consumer can benefit from," he added.

In a Boston Globe story early this year, Edward Mierzwinski, consumer advocate at the Massachusetts Public Interest Research Group's Washington D.C office, did question whether competition exists in the real estate industry, based on commission rates that consistently hover at 6 percent.

Mierzwinski told the Globe, "Name another industry where the commission is almost always the same. There doesn't seem to be much competition when nearly everyone is charging exactly the same fee. If banks enter the market, they could provide a healthy dose of competition. I'm not sure banks will necessarily give consumers a better deal, but any competition is probably healthy."

But that's not what the primary opponents argue.

NAR's arguments

"Should this regulation be adopted, several large financial services holding companies will quickly dominate our industry by buying up brokerages or driving others out of business," said National Association of REALTORS (NAR) President Richard A. Mendenhall.

NAR says banks already have mortgage, insurance, appraisal and other inroads into the real estate market and permitting the industry to sell homes and manage property would give them an unfair stranglehold on the market. Such control would add consumer costs to a home selling system that isn't broken and doesn't need to be fixed, NAR says.

"America's broker-centric real estate industry is the envy of the world and has been a major contributor to our record national home ownership rate. Real estate brokerage is highly competitive, widely available, efficient and structured to provide a high level of personal service to buyers and sellers," said NAR president Richard Mendenhall who outlines NAR's position in a letter to President Bush.

An NAR survey earlier this year revealed that most consumers, for one reason or another, didn't think real estate banking was a good idea.

Wendel says that's because the questions were loaded.

"I think NAR's survey did not use the right criteria and it didn't go far enough to assess what will be the affect on consumers. It didn't ask pointed questions about alternative service models, future of commissions, technology innovations being brought to the table," said Wendel.

For example, the survey never asked "If banks offered you the option of integrated financial planning, would you be more or less likely to use them as a broker?" "If banks offered reduced commissions, would you be more or less likely to use them as a broker?" and "If banks offered you greater access to home listings, would you be more or less likely to use them as a broker?"

Bankers' rebuttal

Financial advisors insist buying a home shouldn't be completed in a vacuum, but considered along with all your financial goals and plans, including savings and investments -- services many banks already offer, along with on-staff financial planners.

Handling the largest financial transaction most consumers will ever complete is a natural for banks says the American Bankers Association.

Offering consumers realty brokerage services would level the playing field not tilt it. Real estate brokerage services include mortgages, title insurance and property insurance and the banks say they should have a slice of realty brokers' pie.

And so it goes.

The bankers and the real estate brokers both say what they have to offer is in consumers' best interests, especially financially. Both also say what they have to offer is good for the economy.

But as recent declines in consumer confidence have revealed, what's best for the economy is a satisfied, confident consumer who isn't confused or uncertain about issues in the market.

"If I have an agenda here, it's to change the debate from "Should they or shouldn't they?" What I'm interested in doing is seeing the question debated in the context of a Real Estate Consumer Bill of Rights and what consumers would want that bill of rights to include," said Wendel.

Should banks sell real estate?

Published: March 26, 2001

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.