Using the excuse that consumers paid $61 billion in brokerage fees in 2004 and that the Internet has failed to lower those fees, U.S. Rep. Mike Oxley (R-Ohio,) chairman of the House Committee on Financial Services that oversees Wall Street, banks, and the insurance and housing industries, asked the U.S. Government Accountability Office to look into the competitive practices of the real estate industry.

Specifically, the chairman, who is also the cosponsor of the "Fair Choice and Competition in Real Estate Act which would allow banks into real estate activities, without state oversight or the need for licensing, asked the GAO to find the answers to the following questions:

1. How does consumer and industry use of information technology, in residential real estate, compare to the use in other areas of commerce?

2. How could greater use of information technology benefit consumers and residential real estate professionals? Among other things, could it help increase homeownership among lower income or non-English speaking consumers? If it is possible to quantify potential savings to consumers from removing barriers to greater use of electronic commerce in real estate transactions, please do so.

3. What legal or regulatory barriers or, self-regulatory practices hinder greater innovation and modernization of residential real estate transactions?

4. Do the MLSs in effect, function as the marketplaces for residential real estate?

5. What is the general governance structure, including any governmental oversight or regulation, of MLSs?

6. What are the legal and practical effects of the "IDX" and "VOW" rules adopted by the National Association of Realtors for Internet display of MLS information, and what purpose do they serve? Could these rules result in the blocking of legitimate commerce, particularly against certain licensed real estate brokers?

7. What is "Realtor.com" and how does this company generally promote the use of technology by consumers and real estate agents? Is this an IDX or a VOW site subject to the NAR rules?

8. What are the state law obligations of real estate agents and brokers to consumers to promote homes for sale, and how, if at all, are these obligations consistent with restrictions on display of information over the Internet?

9. Has the Internet facilitated the custom of agents representing both the buyer and the seller in the same transaction and, if so, is this good for the consumer?

What the GAO found may disappoint Oxley, but it should be enough for him to call for more hearings to publicly embarrass the real estate industry and to provide banks with inside knowledge of how the real estate industry and its MLSs work. Oxley's goal is to hand over the so-called anti-competitive real estate industry to banks, so that the banks, led by Treasury support, will oversee real estate transactions. What many don't realize is that the end game is to add a federal transfer tax in place of significantly lower real estate commissions and title company fees, and to slowly start reversing homeowner tax benefits.

As predicted by Realty Times, the GAO report came out swinging -- opening with a right hook to the industry that the MLS is used to limit fees and "encourage price conformity" by publishing what the buyer's brokers will be as offered by the listing broker.

The report findings continue by suggesting that despite an increase in the use of the Internet by homebuyers, Internet-based brokers are still in the minority, raising questions of competitive barriers. Some brokers aren't allowed to post other broker's listings to attract customers to refer, for example. And, cue the HUD and the single package closing, the GAO says other factors such as the lack of a uniform sales contract to facilitate inspection, appraisal, financing, title search, etc. also inhibits the Internet from lowering the costs of transactions.

But if Oxley wanted a blanket attack on Realtors, he didn't get it. The argument that weakens Oxley's position is the GAO's conclusion that the real estate brokerage industry "has a number of attributes that economists normally associate with active price competition." Despite its close range of fees between 5 and 7 percent on average, brokerage is "characterized more by nonprice competition (service, quality, reputation, etc.) than price competition," says the report.

What had to set Oxley's teeth on edge was this statement, "Uniformity in commission rates within a market at a given time does not necessarily indicate a lack of price competition," as they should be responding to market conditions. More than 20 years ago, brokerage fees were roughly what they are now -- six to seven percent, despite the housing recession of the 1980s and early 1990s, when fees presumably would have gone up much higher due to the difficulty of getting homes sold during a buyer's market.

The report acknowledges that commission rates have fallen, but that rising home prices have increased the average brokerage fee. However, it suggests that competition from an increasing number of "nontraditional" brokerages is also reducing fees.

About MLSs, the report warns that the cooperative nature of MLSs provides certain benefits to consumers such as aggregating data on homes for sale, but it also inhibits price competition because of the interdependent nature of cooperation.

Another possible disappointment for Oxley is that the report finds "limited consumer pressure" for lower brokerage fees. While several reasons are suggested for this lack of demand that third-parties and others insist is out there, the report suggests that it's homesellers are aware of alternatives or competitors to traditional full-fee brokers, but they aren't fighting the fees so that there is plenty to entice buyers' agents to show their homes.

Also of significance is the GAO's observation that the Internet "facilitates alternative service and pricing options," despite the fact that only a "small portion of the real estate brokerage market at present," are Internet-based brokers.

While these facts blunt Oxley's attack on the real estate industry in favor of banks, there's still enough he can use to harm the industry.

One ace in the hole is listing information, which the GAO report finds could be limited in some ways, either by voluntary opt-outs by brokers from MLS sites designed for consumers by competitors or by preventing "certain companies such as information and referral companies from using their listings simply to earn referral fees."

Look for open access to all MLS information by anyone -- from FSBO sellers to LendingTree -- to be the next battleground.

Published: October 4, 2005

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Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment. Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's. Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. To contact Blanche, email her at . For more articles by Blanche, click here.