While the National Association of Realtors leaders politely testified at the closed hearings called yesterday by 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, that banks will cost consumers more if they are let into real estate sales and management, they little realized they were speaking to deaf ears. Realtors are the sacrificial lamb for the real agenda behind Oxley's push to put more federal oversight over real estate transactions by allowing banks into real estate.
It's a kangaroo court, a conspiracy, a classic land grab, and it's ugly. Worse, it's not about benefiting consumers.
In fact, if Oxley, et al, have their way, it will be uglier for consumers than ever. While homebuyers and sellers are thanking him, the DOJ, the FTC, the Treasury Department, the GAO, banks, and the national press for delivering them from Realtor commissions, they will have no idea what is about to hit them -- a federal real estate transfer tax.
Real estate transfer taxes are already happening in all but 13 states because states have oversight of transfer tax rates for real estate transfers. With federal oversight, it becomes a federal coffer-filler.
Remember, we're talking about a government that is $7.8 trillion in debt . While government distracts the public from its overspending by scaring the public about underfunded Social Security, it has thought of a brilliant way to siphon off some of the $6.75 billion annually paid to the nation's 1.1 million Realtors in commissions.
The trick is creating a new tax without a public outcry. By distracting the public with heroics as it strong-arms Realtors into extinction, the transfer tax will be slipped through on a Congressional housekeeping bill and quietly show up on HUD statements at closing. Consumers will never realize the difference because all they will know, thanks to the trumpeting of Oxley's heroics by The Wall Street Journal, et al, is that consumers are paying less in transactions costs, trimmed sharply by banking fees promised to be lower than commissions paid to Realtors.
Realtors won't be around to fight on Capital Hill for homebuyer rights anymore because banks will be able to conduct transactions without state oversight and licensing. Even if consumers do notice the tax, they are so relieved not to be paying commissions any longer, they're happy to write the check.
Until the banks start raising fees, that is. And, it will be years before anyone says "ouch."
It's said in investigative annals that when a thing doesn't make sense, you don't have all the facts. The federal and congressional persecution of the real estate industry doesn't make sense without a transfer tax as its goal. Real estate is 20 percent of the gross domestic product. It's held up the economy through the worst attack on the U.S. since Pearl Harbor. Homeownership is at an all-time high. The nation feels prosperous? Why mess with any of that?
By targeting Realtors and their practices, Congress believes it won't harm housing. Make Realtors the bad guys, and consumers will continue to buy homes, buoying the economy and be happy to pay more in other fees and taxes -- as long as they don't add up to what they were paying Realtors.
A federal real estate transfer tax is the only agenda that makes sense of recent federal and congressional actions, including the closed hearings going on now.
The first clue is the number of pro-Realtor agencies, witnesses, and experts who have testified to the GAO, FTC, Treasury, DOJ, and Oxley ad nauseum to no avail.
Oxley says he wants to look into the competitive practices of the real estate industry, yet he has steadfastly refused to acknowledge that the real estate industry is one of the most competitive industries around.
This is proven by one simple question -- In what other industry do competitors voluntarily share inventory and compensation to help consumers?
His deaf ears not only mean "I'm not listening," they mean "It doesn't matter what you say, because I have another agenda."
He's got a great smokescreen to hide the agenda. The real estate industry needs to be reigned in and lower costs for consumers by allowing greater competition. But the real agenda is annihilating his biggest opponent. Get rid of Realtors, and consumers will lose the mortgage interest rate deduction, the capital gains free ride on homesteads, and they'll start paying federal transfer taxes -- all without a whimper.
The government has been thwarted by the NAR too many times. So how to get a federal transfer tax passed without an uprising?
By making your opponent the problem. And Realtors, unfortunately, make the perfect patsy.
Thanks to the Wall Street Journal, et al, certain facts about Realtors are misrepresented or ignored -- that real estate commissions have been dropping four basis points annually for years. The average commission today is not the six or seven percent that is constantly quoted, but 5.1 percent and dropping, according to Real Trends. Those commissions are divided between as many as six parties, including brokers and agents on both sides and their franchise associations.
It's ignored that the MLS is voluntary and that brokers don't owe competitors a means to get customers, only to share inventory with the customers they have. It's ignored that the Internet has created more middlemen which add to the cost of a transaction. It's ignored that commissions have always been negotiable and have always been subject to market demand. Watch interest rates climb, and as homes become harder to sell, sellers are only too glad to return to paying higher commissions.
It's really ingenious. The same government that got us into trillions of dollars in rising debt will be a hero to consumers. Real estate will have a soft landing, as banks enter the field promising to "partner" with Realtors, until they drive independents into bankruptcy. Membership in the NAR will collapse, and with no teeth in the NAR anymore, the government can impose fees and transaction management through banks, and the fee for all that service will be a transfer tax.
Consumers won't feel the pain for a while, but the pain will come. With four to six years between transactions, banks will be able to steadily raise fees unnoticed until consumers will be paying more than they ever dreamed of paying a Realtor to help them close a deal.
So, it doesn't matter what NAR leaders testify -- Oxley is only going through the motions to give them a voice. In his mind, and that of the Bush Administration, the matter is already settled.
Unless the heat is put right back on them with letters to congresspeople and tips to news media that the real end game isn't about helping consumers at all, but siphoning money from the one remaining entrepreneurial industry to the federal government and away from the states.