On October 25, 2005, the Federal Trade Commission and the Anti-trust Division of the Department of Justice co-hosted a workshop on "Competition Policy and the Real Estate Industry." The NAR subsequently submitted a comment letter to the FTC and DOJ to clear up apparent confusion on the parts of the government representatives.

Addressed were the three issues which seem to attract the FTC and DOJ's interest:

• competition, including price competition

• MLS/ILD policies

• banks in real estate

It's heroic and some would say even Quixotic to brandish a sword at the very government entities who would like to eliminate you and your lobbying forces, but the NAR is determined to make its points nonetheless, even if no one at the FTC or DOJ appears to be listening.

Stiffly but challengingly, the NAR writes that "a number of policymakers, analysts and media observers have raised concerns about the purported anti-competiveness of the real estate brokerage industry. They suggest that there could be collusion among real estate agents, real estate firms, and others involved in the industry to control access to information, artificially set commission rates, and block entry into the real estate business.

"To refute those arguments and provide a true picture of the competitiveness and efficiency of today's real estate industry," the NAR has supplied the FTC and DOJ with a convenient, easy-to-read white paper.

The NAR's analysis "demonstrates that the real estate industry is competitive and efficient, and allows consumers to make informed choices when selecting a real estate professional."

Among the more interesting findings:

1. Real estate brokerage is a $60 to $70 billion industry. Approximately $1.9 trillion exchanged hands in 2004 for new and existing homes, accounting for 15 percent of the U.S. gross domestic product. Housing indirectly contributed to consumer spending through nearly $4 trillion in equity accumulated by the nation's 74 million homeowners.

2. Real estate professionals are independent contractors licensed by their respective states, and less than half of these 2.5 million individuals are Realtors. As independents, they have different training, experiences, expertise, services, and more.

3. In 2004, 849,083 held their memberships in the NAR while 127,877 dropped out due to the stiffness of the competition, while 253,167 joined the NAR.

4. In 2004, 14 percent of homes were sold by for-sale-by-owner sellers, illustrating that brokers and agents have to earn and compete for business.

5. At the end of 2004, there were 236,000 active brokerage offices in the U.S. They operate independently.

6. There are 8 million buyers and 8 million sellers in the market, and more than two million real estate agents, which means that there is one agent for every four buyers and four sellers, which is not enough business for most agents to make it financially throughout the year.

7. Government interference assumes that consumers are not already seeking the lowest cost and most efficient services.

8. Commissions declined from 1991 to 2004 by 16 percent, with average commission rates ranging from 4.3 percent to 5.4 percent.

9. A real estate agent at $49,300 is not being paid at a monopoly profit. The Bureau of Labor Statistics' information showing the average real estate agent's salary does not take into account the fact that agents gross this amount and are then required to spend a considerable sum marketing their clients' homes, paying referral and advertising costs to get business, plus maintain an arsenal of electronics to serve customers while mobile.

10. Total home sales reached 8 million in 2004, representing one sale for every nine homeowners.

If that's not competitive and efficient, what is?

Published: December 6, 2005

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