Earlier this month, the Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ) brought together government regulators and select industry leaders to discuss the state of competition in real estate. The group sought to explore whether the prevalence of nontraditional business models has so disrupted real estate practice that a new business paradigm is required. Realtors® say no.
Companies representing nontraditional business models are using the upcoming expiration of a 10-year consent decree between the Justice Department and the National Association of REALTORS® as an opportunity to force sweeping changes to the landscape of real estate as we know it. These known disruptors argue that Realtors’® unilateral control of listing data restrains competition and ultimately harms consumers.
In stark contrast to the unpersuasive cries of injustice and unsupported claims of consumer harm, NAR general counsel Katie Johnson presented a vibrant, healthy and vigorously competitive real estate market, driving home the points that innovation, competitive forces and consumer choice have never been stronger.
See NAR general counsel Katie Johnson’s prepared remarks below:
There are three important takeaways for this workshop.
First, over the past decade, technology has positively enhanced the consumer experience, and has added to the cost of doing business.
Search is a great example because property listings are now available on thousands of websites and apps. Technology also helps brokers deliver better service through diverse business models, enhanced digital marketing and CRM tools. And the transaction itself has become almost entirely electronic with the advent of transaction management platforms, electronic signatures and now, electronic notarization.
But all that costs money. Brokers and agents are spending money to make all that happen for the consumer. And I didn’t even mention lead generation which has been an increasing cost these past ten years. For example, just five years ago in 2013, the average agent spend on Zillow was $3,000 a year and now it’s tripled to about $9,000.
And, as in many other industries, while technology has improved the customer experience it has not displaced the worker. Real estate professionals are not mere order takers, button pushers, or door openers that can be replaced by technology. Every house is unique – it’s not like buying airline tickets or books. That leads us to the second takeaway.
Even with these great advancements in technology, consumers still choose to hire real estate professionals to help them buy and sell their homes.
Brokers and agents are valuable resources. Real estate is local; brokers and agents are local. They live in the neighborhoods and communities they serve. A home is often the largest and most complex purchase anyone will ever make in their lifetime. Consumers want a local, trusted advisor to guide them through the entire process.
There’s just no technological substitute for a local, trusted advisor.
And third, the real estate industry is robustly competitive, the market is working, and government intervention could stifle this competitive environment.
The real estate industry is unlike any other industry in the world because competitors agree to cooperate for the benefit of their customers. Without the MLS, consumers would not have access to accurate information like they do today and new brokers would have a hard time entering the business.
But the MLS only exists because brokers are incentivized to voluntarily participate. Destroying broker incentives through government intervention will harm consumers – not help them. This is a free and competitive market. There’s no need for government intervention today.
While it is unknown how government regulators will respond to what was learned at the June’s “What’s New in Residential Real Estate Brokerage Competition,” as of June 18, 2019 shares of Redfin (RDFN) and Zillow Group (ZG) are trading lower after Goldman Sachs downgraded the online real-estate stocks.
For more information from NAR: https://magazine.realtor/daily-news/2018/06/06/real-estate-competition-fierce-experts-say
Video of the panel
Additional Videos can be viewed here.
