DOJ/FTC Exchange Explores Compensation, Data, the MLS and More
Technology, commission rates, real estate portals and overall brokerage competition—these were just a few of the themes discussed this week at a joint public workshop held by the Federal Trade Commission (FTC) and the Department of Justice (DOJ) in Washington, D.C. At the heart of the “What’s New in Residential Real Estate Brokerage Competition” workshop? The consumer.
“We have the same end goal: the best experience for the consumer,” Katie Johnson, general counsel and senior vice president, National Association of REALTORS®, summed up in her closing thoughts during one of the panels, “Regulatory and Industry Factors Affecting Residential Real Estate Competition.” “That’s what we want to do, and what the current market environment supports—to raise the level of professionalism so that consumers are confident in their transactions.”
Other panels—”Listings Data, Emerging Technology, and the Structure of the Real Estate Market” and “Developments in Real Estate Fee and Service Models”—touched on varying subjects; however, the transformation of technology and its effect on the industry, particularly the consumer, raised heated questions all centering around how to create the most efficient and fair real estate industry, all while maintaining a level of competition beneficial to the marketplace and tackling freedom of information without removing the real estate agent from the transaction.
“We believe an inflection point that the industry is being driven by is the change in consumer behavior fueled by access to data—a lot of information that historically you needed an intermediary to gain access to—that’s empowering consumers to take on a lot of the traditional work that agents ,” said the U.S. CEO of Purplebricks, Eric Eckardt.
“We are providing a lot of data to consumers and they still use agents,” said Johnson. “These are infrequent transactions, and so both buyers and sellers want to be represented by professional real estate agents, but they are now doing a lot more work beforehand themselves. By the time they engage with an agent, they’ve developed a pretty clear picture of what they’re looking for and what’s available in the marketplace.”
Where does the information come from? Largely, through MLSs and real estate portals such as Zillow and realtor.com®—companies that were represented at the event.
“We inject listings from thousands of sources,” said Kathleen Philips, chief financial officer and chief legal officer at Zillow Group. “We are excited about the process of standardizing and trying to aggregate the most data possible in an extremely complete and fresh way. The consumer mission is central to what we do in terms of the democratization of data.”
“As for data democratization and free access to data, I have a more pessimistic view of this going forward,” said Luke Glass, executive vice president of Industry Platforms for realtor.com®. “You can leverage consumer data, and use that data to influence all market participants. All boats have risen in that tide, but looking forward, it really advantages big companies over small companies.”
Will the emergence of too many portals force the distribution of information to become segmented?
“There are positives and negatives,” said Stephen Brobeck, executive director for the Consumer Federation of America. “A lot more information is available to consumers about properties, and I think that’s really important for consumers to have access to that information. On the other hand, if real estate portals are really large, they can wield a lot of power.”
“As a technologist, there is this saying: ‘Garbage in, garbage out,'” said Simon Chen, CEO and president of ERA Real Estate, part of Realogy, the largest residential real estate company in the U.S. “If the data isn’t consistent, and comes from multiple sources, you have a hard time aggregating it, ultimately, it’s the consumer that is disadvantaged and inconvenienced by it.”
However, others believe that cutting back on real estate portals could increase advertising fees, and, therefore, commission rates.
“We view the portals as a tax that we would rather avoid—every dollar we have to spend is a dollar that we have to charge the consumers,” said Art Carter, CEO of the California Regional Multiple Listing Service (CRMLS) and chairman of the Board of Directors for the Real Estate Standards Organization (RESO). “If there are only a few portals, you’ll see prices go up. We carefully monitor the price to advertise on different sites.”
Although MLSs receive support from the majority of industry professionals, ethical questions were raised on whether consumers and agents should be forced to share listing information on real estate portals.
“The forced sharing of listing data to listing websites and technology companies, which are not even essential to buyers and sellers taking advantage of brokerage services, may only be to the profit of third-party entities, and not to consumers, who already have great access to real estate information,” said Johnson.
“We want every website to have every listing,” said Glenn Kelman, CEO of Redfin. “The problem is that websites outside the MLS don’t reciprocate. It creates fragmentation in the market if one website has a listing and another doesn’t—that benefits bigger websites.”
With these ideologies, where does transparency fit in—and, more specifically, should the industry be more transparent about agent commissions?
“Folks don’t understand how commission works; they assume if the buyer agent gets paid one thing, the seller agent gets paid the same,” said Khalil El-Ghoul, principal broker of Glass House Real Estate. “‘The buyer agent fee is free, the listing agent is the only one that gets paid, and the listing agent offers a share of his commission with the buyer agent…that’s not a good place for the industry to be in.”
“The challenge is lack of transparency and ability to collaborate in a way with the consumer, not with each other, to expose what’s happening. What the fees and services are—that’s where we should be safely competing,” said Joshua Hunt, CEO of TRELORA.
If change is on the horizon, some panelists warn that without close scrutiny of possible solutions, there could be consequences.
“There are definitely points of friction in the real estate business, but we need to have knowledge and information if we’re going to make changes,” said Brian Larson, associate professor of Law, Texas A&M University School of Law, and of counsel, Larson Skinner PLLC. “Under-tested solutions come with risk.”
The question remains: Should government regulation play a role in the transparency and sharing of real estate information?
“We have to voice the importance of having free information, and if we allow some parties to withdraw some information, that could have important consequences,” said Dr. Panle Jia Barkwick, associate professor of Economics, Cornell University.
“In an already vibrant and competitive environment, the National Association of REALTORS® does not think that a trade association or the federal government should mandate how or where REALTORS® and their customers’ properties are shared and posted on the internet; consumers and their agents should have ample choices and protections,” said Johnson. “We firmly believe industry innovation is abundant and the current market is working.”
Liz Dominguez is RISMedia’s associate content editor. Email her your real estate news ideas at email@example.com.
Suzanne De Vita contributed to this report.
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