Internet-Based Realtors Win Monster Settlement

coondoggie writes "Until today, most Internet-based real-estate brokers were considered second-class citizens, and their clients were left in the cold. But perhaps that will change with today's news that the Department of Justice has reached a proposed settlement with the National Association of Realtors that requires NAR to let Internet-based residential real estate brokers compete with traditional brokers. NAR has agreed to be bound by a 10-year settlement, under whose terms NAR will repeal its anticompetitive policies and require affiliated multiple listing services to repeal their rules that were based on these policies." Here's the whole settlement document on the DoJ's site.

Great.

[mrbluze (1034940)]

Now where is the nerd-bit to this article? Apart from the fact that there's the word 'internet-based' in the summary. I mean, not everything on the internet is nerd.

Re:

[.deepershade (994429)]

Or perhaps it is, but not everything on this site would interest a nerd like you?

News for Nerds. Nerds is a very broad term, and not everyone is going to have the same tastes in articles.
Just pass on by the ones you don't want to read.

Re:Great.

[mrbluze (1034940)]

Just pass on by the ones you don't want to read

Nah, half the fun of this site is to get annoyed and stamp one's feet at stuff randomly.

Re:Great.

[NMerriam (15122)]

It's just one more example of Internet disintermediation changing economics.

Hard as it may be to believe, there are still a lot of businesses that think this "internet fad" is going away, so seeing yet another major industry be dragged into the 21st century economy is interesting to a lot of folks.

Re:Great.

[by Anonymous Coward]

so seeing yet another major industry be dragged into the 21st century economy is interesting to a lot of folks.

"Realtors" are a cartel, not an industry.

Re:Great.

[PhreakOfTime (588141)]

I appreciate the views that others have of the real estate industry that are similar to what I saw while working as the IT grunt for a small real estate company. And yes, I heard the exact phrase 'the internet is just a fad' and IT was just a waste of money. The babysitting eventually got old for me, and I came to realize that I had to leave, because the people in charge just dont 'get it'. Not in a bad way, just in a 'my grandparents still listen to music on AM radio' kinda way.

There is no other industry I have seen that is so absurdly protectionist in its business practices. And the result of that type of worldview has led some real estate companies to be literal fossilized relics of their time.

This settlement gives me great pleasure to finally see, as the roadblocks setup by MLS are some of the most frustrating I have ever encountered, from the buyers point of view.

Having seen the industry from the inside, I would never have any part of buying or selling a home through a real estate agent. If I see a house thats for sale that I want, I am patient enough to let the rediculous 'listing agreement' expire, and then buy it right from the seller directly. It is amazing how eager people will become to sell to you when they realize that waiting a few months can net them a 7% larger profit.

And what ever happened to that small real estate company, you may ask? Well Caton Commercial [willcounty...tcourt.com] spends some of its time showing up to court cases brought against them by various old employees and business partners, and sending out threatening Cease and Desist [demystify.info] letters to other old employees.

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[Copid (137416)]

Inflated market today? Man..where are you living? Housing values are dropping like crazy in most of the US....and it is slowly starting to sink in to homeowners minds that their homes aren't worth what they think or want them to be worth. I"m looking to buy in the near future myself...it is definitely a buyers market.

Well, they're dropping like a rock because prices have been inflating like crazy over the past several years. Personally, I don't see any reason to believe that we're seeing the bottom of it

Why was there a housing bubble?

[yuna49 (905461)]

People are usually cheap SOBs looking for the lowest price on food, clothes, toys, computers, cars, etc., yet they all of a sudden got Truly Stupid paying huge prices for homes. Why???

1) Houses were seen as a lifetime investment that would not depreciate.

2) Home ownership in the US is highly subsidized by the Federal Government through the mortgage interest and property tax deductions.

3) A lot of shady operators took advantage of poorer and less well-informed people by writing them mortgages with ridiculous terms (like a late payment increases your interest rate to double digits), waiting for the borrowers to run afoul of those terms, then foreclosing on a house the family had owned for years. It's called "predatory lending [consumerlaw.org]" for a reason.

There's been lots of corruption in the "secondary" and "subprime" lending sectors, too. Borrowers were encouraged to hedge, and sometimes lie, about their qualifications because the lenders felt no risk. Lenders found they could sell almost any mortgage into the securities markets where the liabilities were sliced and diced into pieces and repackaged as equity holdings. The Federal Reserve Board also helped fuel the housing bubble by holding down key interest rates and failing to perform any real oversight of its member institutions' lending practices. Many, many people, including many supposedly well-informed financial types, simply believed real estate would continue to rise in value over the years ahead.

Whenever large numbers of people become convinced that the price of a particular item, be it tulip bulbs or homes, can never fall, you have the potential for a pricing "bubble." In this particular instance, public policies and private greed together created the over-valuation of residential property that occurred over the past decade.

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[onepoint (301486)]

WOW, it's funny how well hated Realtors are. I happen to be one with a lot of dislike for my fellow Realtors.

A lot of Realtors are really not trained correctly and only have a transaction based mentality ( nothing wrong with that but they forgot the long term part of the deal )

but here is my problem with internet Realtors, let's say I have house for sale, and one of these internet companies that send the people out without a realtor wants to see the house, no problem, I show the house to the best of my abil

Re:Great.

[QuantumRiff (120817)]

It has as much to do with this site as "internet-based" retailers did a decade ago. It is forging ahead, changing an industry. I don't have time to go sit with a realestate agent, I want to look at the houses online, and narrow it down to one or two, take a look at them, and make an offer. I don't want to have to give 3-6% of the sale price to somebody, when I do most of the work. (And no, posting some pictures and some text into a MLS database is not "work"). If I, as a nerd, can make the standard 6% commission go down to about 3% by using "internet-based" real estate companies, who have less infrastructure costs to support, and can make a profit on volume, instead of "services", then I can save many thousands of dollars. In California, many houses in "average" neighborhoods sell for around 400k. The commission you are paying to an agent is around $24k for the privilege of buying that house.

Re:Great.

[ShinyBrowncoat (692095)]

The commission you are paying to an agent is around $24k for the privilege of buying that house.

Actually, the seller pays the commission, but the point is the same: why pay 6% to sell your house if a internet-based real-estate agency can get you in the same listings and attract almost as much interest at half the cost?

Re:

[ImaLamer (260199)]

"Attract Almost As Much Interest"

The funny thing about this statement, and the business that we are talking about here is this: I fired up this browser in the search of homes, condos and apartments in St. Petersburg, Fl where I'm thinking of moving for a different job. The reason this is an issue, and the reason the traditional real estate agent is so afraid is because this newfangled Internet (and this is how it intersects with nerd news) gives me the ability to check those listings from my home in Cincinn

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[tyen (17399)]

That's obfuscation from the real estate industry. The seller remits the commission, the buyer funds the commission. The agents say "the seller pays" to hide how the buyer is putting up all the actual funds of the commission, unless the transaction is a short sale where the seller actually puts up funds from their own pocket. Thus affecting buyer psychology. As long as the seller negotiates a price that is over the lien amount, any claim that the seller is "paying" the buyer (including claims of closing co

Re:

[larkost (79011)]

The seller brings the house to the table. All of the money that is brought to the table is from the buyer's side (which includes the institution that makes the loan). So while the seller might be paying the realtor, they are paying with money gotten from the buyer. It might be presented as otherwise, but that is just a fiction.

Re:Great.

[Frizzled (123910)]

Unless you've gone through the hassle of buying (or attempted to buy) a house this wouldn't be very clear.

Right now it is almost impossible to purchase a house using internet based tools. Every housing market is controlled by the local realtors and they are VERY territorial. This means extra calls to look at houses if you aren't using a local realtor, extra time spent researching because tools are intentionally crippled for non-local agents, houses that aren't "keyed" properly for non-local agents (meaning even if you've done your research, then had someone call on the house, you still might not be able to get in and see it).

This makes it harder to find (and buy) a house if you aren't working with a local agent. Knowledge is power, and with current tools & rules the local agents wield a lot of power over non-local (internet) based ones.

Time will tell if this ruling bears fruit, but it is definitely good news for any nerd looking to buy a house in the future.

Re:Great.

[phoenixwade (997892)]

Unless you've gone through the hassle of buying (or attempted to buy) a house this wouldn't be very clear.

Did you really just say that he will become relevant when he moves out of his parents house?

That was very smooth!

Re:Great.

[inviolet (797804)]

Anything which drives down cost in the realestate market is a good thing. With an average home cost of $200K (nationwide) and an average commission of 6% and an average stay lasting 7 years that means realtors are taking about $1,750 per year per household out of the economy, that's almost half as much as my property taxes!

That's an insightful and shocking analysis.

What value add do they bring to the system, they drive around a couple days a week and show houses to buyers or spend a couple days a week showing houses. Other than that they add a house to the MLS. True they help a bit with the paperwork, but that's really not worth 6% of the value of most peoples largest purchase.

Until last week I would've agreed with you, and helped light the torches at the next realtor lynching.

Last week I had a change of heart because I set about to buy a house. That's when I realized how valuable a good realtor really is.

It's important not to score their work along Marxist "physical labor is the only real labor" ideas. Mostly what you're paying for, as a buyer, is their expertise in assessing the value, condition, and livability of a house. Once your realtor understands what you want (and they'll spend the first six house visits figuring this out about you), they can give insights that you would otherwise have to learn the hard way.

The good ones also know what maintenance issues to look for. And of course they guide you through the buying process and give advice on negotiations. My realtor had all sorts of insights into reading between the lines of the seller's listing verbiage.

As a seller you benefit from a similar expertise, except in reverse: a good realtor can show you how to market your house's strong points.

In both cases, their expertise can add or subtract thousands from the closing price. My realtor just led me to a fantastic house for which I signed an offer letter just this past weekend. He's going to get $4500 out of the deal, and I consider that a reasonable fee for an expert consultant.

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[ArhcAngel (247594)]

The problem is your experience (and mine when I bought my house) is the exception not the rule. The bulk of realtors I know act as if they are ALL knowing when it comes to property buying and selling. Donald Trump is a perfect template for a typical realtor IMO. If you want to offend a realtor just mention you are thinking of using buyowner [buyowner.com]. As far as most realtors are concerned mortals are incapable of comprehending the "complexities" of buying a house. The truth is that most of the "complexities" are indu

Just wait until they discover "spam"....

[Joce640k (829181)]

Internet + sleazeballs. What could possibly go right?

A boon for the Real Estate Industry

[antirelic (1030688)]

Protectionist policies usually only protect a handful of businesses. In the case of the Real Estate industry, a high cost to entry bars a lot of business from entering into the market without going into co-hoots with the "big brand" businesses. What this does is allow independent realtors to compete with the big boys, which will in essence force the big boys to be more competitive.

The internet helps small businesses expand as fast as they can handle, and forces big business to stay competitive or lose business. This is really good for everyone. Not a perfect solution, but a good start. Now, if this would only happen for all industries...

Monster?

[Mistah Bunny (1256566)]

When I saw "Monster Suit" I at first thought the article would be about realtors winning a suit against Monster Cable. What realtors would call themselves monsters?

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[kernelphr34k (1179539)]

I thought it was for monster.com. Maybe change title to "Internet-Based Realtors Win A Monster Settlement" . . . ?

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[oodaloop (1229816)]

I thought it had to do with flying pasta.

recent advertising blitz?

[v1 (525388)]

I've heard the same realtor's ad on the radio here for a month now, and one of its catch-phrases at the end is "Only Realtors are members of the National Association of Realtors.".

That always struck me as an "orly?" (/duh?) statement every time I heard their ad, but now reading this I wonder if they are trying to strengthen their "name brand" (NAR) so to speak since they are losing their lock-in? Since now merely looking for a Realtor doesn't necessarily mean they will get your business.

Re:recent advertising blitz?

[TClevenger (252206)]

They actually have a trademark on the word "realtor", so you can't call yourself a realtor unless you belong to the NAR.

Yes, it's ridiculous.

Registered trademark

[wheatwilliams (605974)]

I don't think that part is ridiculous. There's a distinction between a real estate agent and a Realtor®. One is a person who has a license to sell real estate, and another is a person who pays dues to and is a member of the National Association of Realtors®. It's been that way for many decades, as far as I know.

Re:

[morgan_greywolf (835522)]

There's a distinction between a real estate agent and a Realtor®

Yeah, that's because Realtors® are real estate brokers, whilst agents are just people that are licensed to work under a broker.

Although, it's important to note that not all real estate brokers are Realtors®. Only NAR members are Realtors®

BTW-- the word 'realtor' is just a made up word. There was no such work until NAR came along.

Re:Registered trademark

[urbanrealtor (1295226)]

That's actually not accurate. Realtors are members of the NAR. It does not have a bearing on their level of licensing. I am a Realtor. I have a salesperson's license. My broker is also a Realtor. By the way, while it can be beneficial to have a trade association (like the NAR) for the purposes of constructing a fair and organized market (though that is really a subjective measure), lots of the "benefits" (eg: code of conduct, pledge of fairness, listing services) are either redundant with existing structures or not implemented in a helpful way.

Re:

[v1 (525388)]

The fact that a brand has become so successful that
many people informally but incorrectly use it to refer to anything in that generic class doesn't mean anything in that generic class should be allowed to call *itself* by that trademark.

Actually if you let your term fall into generic everyday use without defending it you can lose it. Companies that are in danger of losing a trademark because if common use often mix in their company name in all their ads.

Microsoft Office
Kleenex Brand Tissues
Ziploc Brand Zip

Re:recent advertising blitz?

[by Anonymous Coward]

I've heard the same realtor's ad on the radio here for a month now, and one of its catch-phrases at the end is "Only Realtors are members of the National Association of Realtors.".

That always struck me as an "orly?" (/duh?) statement every time I heard their ad, but now reading this I wonder if they are trying to strengthen their "name brand" (NAR) so to speak since they are losing their lock-in? Since now merely looking for a Realtor doesn't necessarily mean they will get your business.

That's exactly what they're doing. You can almost hear the "(tm)" trademark and the ALL-CAPSness in the word "REALTOR". That's because it is a trademark, and it's NAR's trademark. The generic term is "real estate broker".

Similar cases of trademark dilution have taken place in the past -- do you use a Xerox(tm) or a photocopier? Kleenex(tm) or facial tissue? Likewise, are you doing business with a REALTOR(tm) or just some random real estate broker?

All of which is, as you've surmised, bullshit. Much like used car salesmen, real estate brokers are basically weasels. Because houses aren't identical, they can't be bought and sold like stocks, bonds, or even consumer electronics, so buying a house is more like buying a used car; people have to interact, in meatspace, if for no other reason than to inspect the property, and that invites a whole food chain of people whose only interest in the process is in getting a cut of your transaction.

And as the president of the National Association of Weasels, we'd like to make sure that you do business with one of our WEASELS(tm). Only WEASELS(tm) are members of the National Association of Weasels. Would you risk your family's financial future with mere polecats, skunks, or other poor imitation? Demand professionalism! Settle for nothing less than genuine WEASEL(tm)!

The trademark has worked well for NAW^HR, but this court case is the thin edge of a very big wedge. NAW's de facto monopoly over the WLS data broken, there'll no longer be any advantage to being a Genuine Weasel. Any old weasel can work within the same set of databases, which means that NAW will be denied the fat fees that only WEASELS pay...

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[gujo-odori (473191)]

The way they phrase it (I'm a real estate licensee, in addition to my primary gig in IT) is awkward/duh, but what they mean is that Realtor is a registered trademark of the NAR, and that only members may call themselves a Realtor.

What, you may ask, is the benefit of that? Basically, it comes down to your rights if an agent screws you over. If that agent is not a member of her/his $STATE Association of Realtors (and by extension, the NAR), you can file a complaint with your state's Real Estate Commissioner a

Won't change a thing

[by Anonymous Coward]

"Real" realtors will still blacklist listings by online or DIY listings. Non local "real realtor" basically translates into negligible viewings.

Obviously this is pathetic. I happen to have three realtors on my doorstep, and they sing the same song, claiming colleagues will do the same. You cannot break this kind of cartel when grassroots will practice it regardless.

Re:Won't change a thing

[Vectronic (1221470)]

"I happen to have three realtors on my doorstep..."

Shit, is this a new fad like pink flamingo's and garden gnomes?

"...and they sing the same song..." Aww, a triplet, do they dance too? If I tickle the right ones tummy, does he give me the key to your house?

Now I want realtors for my porch.

Re:

[urbanrealtor (1295226)]

As a realtor, I won't try to convince you that your experiences are rare. They aren't. I think saying that the entire industry is scum is a bit of an overstatement. It tends to cater to people who don't want a boss and want to get rich quick. That is true. It think a lot of these dynamics you mention will only be addressed effectively by actual changes in the market by innovative actors. A good example is redfin (I think that is the name). They offer limited services but kick a large portion of the buyer-si

One anti-competative practice down, many to go.

[Original Replica (908688)]

I'm glad to see anti-competative practice and brokers in the same sentence. I don't know if internet brokers are going to have any positive effect on the rental market in major cities though. Right now the only realistic way to get a new apartment in NYC is to pay a fee equivalent to 15% of the annual rent to a broker for the privilege of renting from the landlord who has given them the exclusive right to make the public aware of the apartment's availability. So that's easily $3600, just to be allowed to deal with the apartment management company. I once paid a broker's fee to someone who had an exclusive on all the apartments owned by the broker who shared an office with her. I was in the same room with the landlord, but I couldn't rent from him without paying her first. i would love to use capitalism properly and not give my money to brokers, but they control far to high a percentage of the real estate for that to be a viable option.

Re:One anti-competative practice down, many to go.

[Original Replica (908688)]

The landlord will never pay the fee, because there is always someone who will step in and pay it for them, because of the permanent housing shortage in NYC. "As of April 2005, the rental vacancy rate in New York City was 3.3%, making it one of the tightest housing markets in the United States. (A vacancy rate under 5% is considered an official housing emergency under New York state law. Nationally, the rental vacancy rate is approximately 10%.)" [habitatnyc.org] The apartment scene in NYC is out of control, for $2000 a month which will get you a small studio in Manhattan or a small one bedroom in Brooklyn, this is what you pay: "In addition to a security deposit, some landlords also want the first and last month's rent. Tack on a broker's fee and a prospective renter for that $2,000 apartment is out of pocket nearly $10,000 just to get the keys to the place."

What about Realtors' conflicts of interests?

[whoever57 (658626)]

Wake me when someone acts against real estate agents who are supposed to be representing the buyers stop getting commissions paid by the sellers. This is an obvious and massive conflict of interest.

I saw an item on TV where agents were saying that sellers wanted to place their houses with agents on the basis that the buyer's agent got a larger commission. Now, why would they do that if they did not think it would influence the AGENT of the buyers? If the seller can influence the buyer's agent, there is something deeply wrong.

Can someone explain to me how this obvious conflict of interest has persisted for so long?

And before anyone tells me that a realtor is necessary -- I bought a house in the US (for several hundred thousand dollars) with no agents involved on either side of the deal.

Re:What about Realtors' conflicts of interests?

[jmv (93421)]

It's a lot more than who pays who. One basic problem is that agents are paid on a percentage of the sale. Let's say a property is worth $500,000 and the commission is 3% to each agent (seller and buyer). The seller's agent knows that if he can get the seller to sell for $450k, he only loses 10% of his commission and he'll make the sale with nearly no effort. Hence, the interest of the seller's agent (in terms of pay/effort) is to make the seller accept any price even if it's low.

On the buyer's side, it's even worse because if the buyer pays more, the agent gets more, so there's clearly no incentive for the buyer's agent to help his client bring the price down *if* the client is buying anyway. In the end, both agents' *only* interest is to get the property sold, no matter what the price and the interests of the clients. It's as simple as that.

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[Pulzar (81031)]

So you're saying that one agent's self-interest is to push the asking price as low as possible, and the other's self-interest is to push the offered price as high as possible. That sounds like conflicting interests requiring negotiation that will wind up with a price in the middle that everyone accepts, which is exactly what you want.

That's not at all what he way saying... He was saying that they will both be looking to sell as quickly as possible and have no interest in getting the best deal for their clie

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[Solandri (704621)]

Wake me when someone acts against real estate agents who are supposed to be representing the buyers stop getting commissions paid by the sellers. This is an obvious and massive conflict of interest.

Real estate agents exist to match buyers and sellers. Technically, you both hire one -- and it's only a potential conflict of interest if your actual agent shows you a house she also acts as the seller's agent for.

And for this service of spending a few minutes on a computer matching their client's specificatio

Re:

[zerocool^ (112121)]

This is a very simplistic view of what the Realtor provides to the transaction, market comparisons that no automate system can match, advise about home inspections, mortgage advice, other local issues such as oil leases etc. that the average buyer an a zillow (or whatever site) search will not provide.

Yeah, because there's no such thing as the internet. Wouldn't it be great if everyone had a tool for looking up information and sharing experiences related to this kind of thing?

You also are not taking into a

From the Trenches

[LifesABeach (234436)]

From previous experience, any home in southern California for sale is not only on the MLS portal, but is also on someone's web site, usually the listing agent. I do not know of ANY listing agent that is going to tell anyone NOT to advertise their listing for free. Given the above, all it means is that the same address will get on the search engines more than once. The impact will be that other properties will be pushed down the list. I do not know if that is a win for the Seller, or Buyer, but this is going to be the outcome. There are going to be some legal problems about the listing, but I figure the folks that won the law suit already know how to side step it. Ya, I am a Realtor, if you have a question about homes ask me, my advice is always free.

Re:From the Trenches

[fredmosby (545378)]

Ya, I am a Realtor, if you have a question about homes ask me, my advice is always free.

What exactly do realtors do? Why would I want to use a realtor to sell a home rather than listing the home myself, and what is the benefit of using a realtor to find a home rather than just looking through the listings myself?

I'm not actually planning on buying a home any time soon, but I'd like to know. Usually I prefer researching major purchasing decisions myself, rather than trusting a salesperson.

Re:From the Trenches

[DougWebb (178910)]

My wife is a Real Estate agent (not a broker; there's a difference) and there is a ton of work she does for her listing clients, often including spending hundreds of dollars of her own money, sometimes over a thousand, to pay for preparing the house for sale and marketing the home. I've also donated many hours of my own time ripping out old carpeting, taking down wallpaper, painting, and doing various light carpentry jobs for her clients.

Her clients also get her experience. I've seen a number of For Sale By Owner homes, and they never look as nice as my wifes listings. People just don't realize that you have to clean your home and make repairs before you try to sell it. Otherwise, it looks like run-down junk, and buyers will treat it accordingly. First impressions are everything, and you need an agent who knows what to spend money on and how much to spend, so that you get the best return on your last-minute fix-up dollar.

All of that is before the house even goes on the market. Once it's on, there are endless phone calls, viewing arrangements, and follow-ups that have to be performed; it's definitely a full-time job. Once an offer is negotiated and accepted, there's even more phone calls and work to do meeting with inspectors, dealing with lawyers, and making sure the deal doesn't fall through. It's just a steady stream of work, and if you've already got a job, you don't want to do the agent's job too.

Finally, all of the buyers know that you're not working with an agent, and since they're probably selling their home as well, they know just how much you're saving. 99% of the time they'll deduct that amount from what they would otherwise offer you, figuring that you wouldn't have gotten the money anyway, and why should you get a free ride? It can't be for your time; agents don't do anything, right?

It must be said...

[chill (34294)]

Welcome to the 21st Century, Century 21.

Texas and NAR

[787style (816008)]

Someone I work with buys and rents out houses as a side hobby, and in an attempt to save money is on her way to get her brokers license. Along the way she needs her agent license, which is being refused to be given to her until she joins the Texas NAR.

Probably won't help much

[Trailer Trash (60756)]

Here in TN, the NAR just bought a piece of legislation making it illegal (you read that right: illegal) to give a purchaser a rebate. They have a lot of power, and they'll use it.

Re:Outmoded Business Model?

[flanksteak (69032)]

Apparently the Realtors didn't pay enough to their lobbiests and lawyers. Just look at how the MAFIAA has done at getting policies and laws to lock in a outmoded business model.

It's not just money that helps the **AA, it's movie and rock stars. Nobody gets excited about getting lobbying calls from a realtor.

Re:

[EastCoastSurfer (310758)]

I don't think buying a house that is still +60% of '00 values would be considered anywhere near the bottom.

Re:

[Darkness404 (1287218)]

But, compared to everything else, housing prices fell sharply. Just look at a gallon of gas back in 2000, it was $1.50-$2.00ish if I remember correctly, today it has nearly doubled to $3.50-$4.00