Fear mongering in NAR’s latest round of lobbying efforts to oppose the proposed regulatory change which would allow banks to sell real estate could have the potential to alienate consumers, particularly distressed sellers, just when the industry should be helping its members and consumers cope with the most unstable employment situation in a decade.

Does NAR really think consumers will agree that banks should withdraw their petition “for the sake of the national economy and real estate markets” or that the proposed regulatory change could disrupt or destabilize real estate? Isn't it more obvious that escalating joblessness will have a much more immediate impact on housing markets?

In mid-August, the Fed itself cautioned that housing values dropped 8 percent on average during the last recession and warned it could happen again “rather abruptly" and as could foreclosures if layoffs accelerate. Forbes Magazine, the Wall Street Journal, and NAR’s own white paper all pointed to signs of a real estate slowdown before 9/11, so NAR's attempt to build any cause and effect relationship between the proposed policy change and economic instability could open the NAR to accusations of politically-motivated scapegoating.

The overheated housing market masked a variety of problems in the real estate industry for years, and the 700 layoffs at HomeStore yesterday are only a few compared to what is coming. With 20% of agents doing 80% of sales, industry consolidation is overdue and inevitable. To blame that consolidation on the proposed regulatory change is not only wrong, it ignores the fact that some agents would gladly trade their commission-based incomes for the security of working on salary in a bank, particularly during a recession.

With layoffs knocking at the industry’s own door and the prospect of one million layoffs in the aftermath of the terrorist attacks--nearly the number of jobs lost in the recession of the early 1990s--becoming more real every day, shouldn’t the industry be debating what can we do to help consumers feel more secure and confident?

Perhaps NAR should extend it’s pledge “to see that no family that lost breadwinner on that day (9/11/01) lose their homes as a result,” to insure that no household that has suffered a job loss should fear that they may also lose their homes.

If Congress and the President can’t find the money in their $75 billion economic stimulus package to at least protect low and moderate-income households as ACORN has proposed, wouldn’t it be appropriate to offer a foreclosure moratorium to Veterans, one in ten of whom is already delinquent on their VA loans, in time for Veterans Day, November 11?

At a minimum, the industry should develop alternative business models so distressed sellers can preserve what is left of their eroding home equity. Why should a seller who is smart enough to use a discount listing service for $495 be required to pay a 3% fee to a buyers agent? Why not let buyers enter their own contracts and finance their own fees rather than taking more money out of the pocket of a distressed seller?

The Consumer Federation of American first recommended uncoupling buyer and seller fees a decade ago, predicting that single change could save consumers billions of dollars annually. When consumer advocates rally around that call for reform this time, they are likely to attract some powerful new allies. The high end of the housing market is being hit disproportionately by the recession, and like President Bush, many of those wealthy households are from Texas. There are already over 600 unsold homes over $1 million in the MLS in the Dallas-Forth Worth area alone.

If banks are allowed to offer brokerage, one of the first changes they should make is to uncouple fees for buyers and sellers, and provide financing for both. Banks can already operate their own REO departments, and the coming wave of foreclosures will enable them to experiment with new business models which minimize transaction costs and maximize seller equity--two things consumers want and need.

Manipulating fear and uncertainty, rather than working on reforms that benefit buyers and sellers, exposes brokers to the risk of being perceived as caring more about protecting their commissions than consumers. Given that, the Fed, the US Treasury, the President, and the public are likely to conclude that banks are better qualified to advise real estate consumers, particularly distressed sellers, through the financial complexity of buying or selling in a recessionary, war-time environment.

Published: November 5, 2001

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