Brokerage Firms Aim to Stifle Competition
Monday June 19, 3:58 pm ET
Brokerage Firms Work Together to Stifle Competition, Consumer Group's Report
WASHINGTON (AP) -- Many real estate brokerage firms band together to set
prices, a consumer group said in a report released Monday.
The brokerage firms work together to maintain commissions charged home
sellers at 6 percent to 7 percent, typically $24,000 for the sale
of a $400,000 home,
and to maintain control of multiple listing services of homes for
sale, according to the report by Consumer Federation of America.
Many traditional real estate brokerage firms, and their organizations, function
as a cartel that tries to set prices and restrict service options," said
Stephen Brobeck, the federation's executive director.
Spokesmen for the National
Association of Mortgage Brokers had no immediate comment on the report's
Consumer Federation said
consumers can protect themselves by:
- Negotiating more forcefully
with brokers, and asking for oral and written disclosures of the party
the broker represents. Brokers who function
as "facilitators," "transactional
brokers" or "dual agents" are not allowed to represent the financial
interests of clients.
- Traditional brokers who work with both buyer and seller in a home sale
nearly always function as facilitators even though consumers often
believe they are
functioning as fiduciary agents, the consumer group says.
- If they are sellers,
asking brokers who are fiduciary agents to reduce the standard commission
of 6 percent to 7 percent by a percentage
point, and brokers
who are facilitators to cut it by at least 2 percentage points. Buyers
should ask brokers if they would be willing to rebate one percentage
point of their
commission back to them.
- Asking about potential
conflicts of interest among brokers, such as promoting their own listings
or those of their firm.
The report was based on information from real estate professionals,
and from articles in industry publications and the general press,