US
Studies Realtors' Rule on Net Listings
Some industry practices possibly anticompetitive
By Kimberly Blanton, Globe Staff | May 10, 2005
At a time when Massachusetts real estate brokers face growing
competition on the Internet, the federal government is investigating
whether the brokerage industry is trying to restrict competition
nationwide.
As part of a multipronged effort to promote the interests
of home buyers and sellers, the Department of Justice confirmed
yesterday that it is looking into unspecified industry practices.
The Wall Street Journal reported the government is preparing
to sue the National Association of Realtors for policies
that ''illegally restrict discounting of sales commissions"
in home purchases and sales.
''We're investigating the potential competitive impact
of certain rules involving the display of residential real
estate listings data over the Internet," said Justice
Department spokeswoman Gina Talamona. The NAR did not return
calls seeking comment.
The federal investigation adds clout to efforts by alternative
real estate services, available through the Internet, to
develop their market share and help drive down commissions
for buyers and sellers. Business is growing among services
that list properties for a flat fee, brokers willing to
rebate fees, and for-sale-by-owner services. That is largely
due to the ability of consumers to access listings on the
Net to help them gain more control of marketing their properties
or buying houses.
The association policy at the center of the industry controversy
would allow its members to withhold the houses they are
listing from competitors who also want to show those listings
online. Small rival services seeking to compete with major
players said the policy would set up a closed system that
could benefit the market's dominant players and shut small
firms out.
''If NAR adopts the new policy, it will undermine the ability
of alternative brokers to compete and save consumers millions
a year in commissions," said William Wendel, owner
of The Real Estate Cafe in Cambridge, which provides a variety
of fee-based services.
There is little data on market share held by alternative
services, but the turf battle between major players such
as Coldwell Banker and Century 21 against upstart firms
is clearly heating up. Nationwide, for example, about 14
percent of all homes sold are sold by the owner. But Massachusetts
has been slow to adopt alternatives, with only 6 percent
sold by owners.
Massachusetts home buyers and sellers may be turning to
online and other alternatives in part because house prices
have appreciated so much, specialists said. A fixed percentage
on an expensive house drives up the total commission paid,
prompting closer scrutiny by consumers.
Bill Jebb, who opened Jebb & Driggin Realty Inc. in
January, said firms like his that cater exclusively to buyers
are still fairly rare in Massachusetts. ''Big companies,"
he said, ''don't want this to change."
A new law backed by the Massachusetts Association of Realtors
that goes into effect July 1 in Massachusetts will make
it easier for a single real estate firm to represent both
buyer and seller. ''Brokerage firms have been representing
both parties for a very long time," said Margaret Grant,
MAR associate general counsel. The July 1 rules, she said,
will merely ''clarify the disclosure and consent requirements
to protect consumers.” But Jebb said the large firms
are preserving the status quo, which he says is a conflict
of interest when the buyer and seller are both using the
same firm. ''The big names represent the sellers and buyers,"
he said. ''By its nature it can't be done."
The Internet is shaking up the US real estate market, and
real estate specialists and alternative services said tech-savvy
Massachusetts is not immune. Alternatives such as Zip Realty
Inc. said its business is growing in the state. The ziprealty.com
website provides prospective buyers with complete listings
of homes that are available for sale, including the address,
list price, and other details not always available on traditional
brokers' websites.
Pat Lashinsky, Zip Realty's vice president of marketing,
said consumers pay nothing to peruse its listings on ziprealty.com,
and they receive a rebate if they use his firm to negotiate
the purchase of the home. Typically, commissions amount
to about 5 percent of a house's sale price, with half the
commission paid to the seller's broker and half to the buyer's
broker, or 2.5 percent each.
''If we get 2.5 percent, we'd give [the buyer] 0.5,"
said Lashinsky, whose firm now employs 124 agents in Massachusetts,
up from 47 a year ago.
His business is thriving in the state, because ''consumers
are finding it's much easier to use our site to find homes
that are available" than to use traditional brokers'
sites.
''There are options out there, and you have to be willing
to work a little bit to find them," he said.
Listforless.com is among services that charge home sellers
a flat fee simply to list their property on the Multiple
Listing Service, a service used by all real estate agents.
Pat Rioux, who owns Listforless.com, said she charges $555
to list a home on MLS for six months. Rioux said she was
the first to start this type of business in Massachusetts,
in 1998, but said she has about a dozen competitors.
''The Internet was the genesis of it," she said. ''I
think consumers are shaking things up."
More
Articles
| 
Search for Properties 
