If you've read my "Reflections on Realtor® Antitrust Cases" this is the second installment of my thoughts and proposals based on my over 30-years of dealing with the Realtors. This page continues my rationale for why fee-based services are so much superior to commission-based Realtors.

 

The current model of home sales is a scam cooked up by listing brokers to keep commissions high and also reduce their effort to maximize their own commission income. 

​

My analysis of nearly 4,000 sales in Milwaukee MetroMLS since January of 2024, shows that on average, only about 8% of listings are actually sold by the listing agent. 92% of all listings in the MetroMLS are sold by other agents representing or working with a buyer.  That is extraordinary.  These agents speak with such grand authority about how effective they are as sales agents but they don't actually sell their own listings.

​​

In this market the "usual and customary" commission prior to the Antitrust Settlement was six percent.  In MetroMLS the typical buyer agent commission was 2.4% or 40% of the 6% commission.  The listing broker kept 3.6% and literally DID NOT SELL THE HOUSE!  The buyer agent does the work and gets 2/3 of the commission the listing broker gets. That's a SCAM!  My fee-based service greatly reduces the buyer agency costs and shifts the responsibility for dealing with the property to the rightful party: the listing agent.  They have the codes and keys, they've inspected the property, they've interviewed the seller about material adverse facts.  It's their job to show the house and sell it.  If they are keeping the bulk of a commission, they should be doing the work of selling it.  If buyer agents are doing all the work for 2.4% maybe it's only right that that's what the listing brokers should get for now doing the same thing. 

​​

Maybe instead of a broker having 20 listings where they do 8% of the work to sell the house, they should instead have five listings where they do 92% of the work selling the house, completing the transaction and earning their commission.  Finally, across the country, this terrible system has ended.​

​

Gramm-Leach and Banks in Real Estate

A Bit of Historical Perspective from the 1990s

​

In 1999 the Gramm-Leach Bliley Act was passed which allowed banks to offer additional services besides lending that were "financial in nature."  Of particular interest was a proposed rule that would allow financial holding companies (FHCs) to engage in real estate brokerage and management.  The Realtors went into overdrive to kill this rule.  A record 75,000 letters were sent to regulators claiming irreparable harm to the real estate market with potential for conflicts of interest and monopolistic practices by the banks.  After several years of intense lobbying pressure in Congress and with federal regulators, the rule was abandoned and banks were prevented from offering real estate brokerage services.  
 

The fact that many large brokerages have wholly-owned mortgage subsidiaries and offer their buyer customers financial services seems a bit two-faced and disingenuous to me.  As an appraisal professional who works closely with lenders even back then I felt the market could use more competition in the form of  bank employees who were often more professional and experienced than the average real estate agent.  Bankers have "skin in the game" and if their customers are unable to meet their obligations under their purchase loan, the banks would often lose. Realtors don't care. It's sell the house for the highest price and highest commission and off they go to the next deal.

​

It's ironic that for all the Realtor clamoring about conflicts of interest with the banks, it was the Realtors committing antitrust collusion.  Had there been true competition in the real estate market back in 2000 perhaps the billions of dollars in excess commissions would have been avoided, the Crash of 2008 limited and skyrocketing property prices would have been moderated.

​​​

From the Milwaukee Journal Sentinel, October 22, 2000

How about this little chestnut from October of 2000? 

​

This article was written by a local Milwaukee Journal Sentinel reporter discussing the impact of new models on real estate commissions.  I was interviewed and quoted but what struck me was the blatant antitrust statements of a local large brokerage owner...

​​

"...How vast the 6% commission's reign is can't be measured by outsiders. Most realty agents have apparently taken a vow of silence, citing federal antitrust laws.  Leading the mum on money matters are motivational speakers such as Kim Daugherty, director of training and education at Gundaker Realtors in Maryland Heights, Mo., who lectured at the Oct. 11-13 Wisconsin Realtors Association annual convention in Appleton.

"In our industry, you can't say what commission you charge because of antitrust laws. A company can have a flat fee, an hourly fee or a percentage fee; that's the only type of charge we can talk about. You can't imply there's a standard," Daugherty said.  Daugherty said he cautions agents not to discuss price with reporters, and heeds his own advice.

"I can't go there. I really don't know. I don't keep that data," Daugherty said. He wouldn't even disclose what his own agency charges.

Seramur echoed his philosophy. "Discussing commissions -- a given commission -- is something we are not allowed to do. The word `collusion' comes to mind," she said.  "Quite frankly, as far as conversations on commissions, we prefer to keep that between us and our clients," said Kevin Donnell, vice president of Prudential Preferred Properties, a nine-office group based in Brookfield.

​

Donald F. Horning, president of Shorewest Realtors, a Brookfield-based group of 14 offices that advertises itself as Wisconsin's largest home seller, doesn't share the concern of his colleagues. "We are strictly and always have been a 6% real estate firm," Horning said. "I think all the major firms are.  "We do not deviate from that..."  He feels the 6% commission will remain a staple. "As more and more people earn more and more money, they want services -- more, not less -- and they're willing to pay for it," Horning said. "Are there bargain hunters out there who want something else? Absolutely. They were always there and they always will be there." Horning said such customers were not unlike those who want to build their own home, or write their own will.

 

​MICHELE DERUS, Journal Sentinel staff, 'Realty sale fee under pressure - Discount brokers are charging less', Milwaukee Journal Sentinel (online), 22 Oct 200001 ‹https://infoweb.newsbank.com/apps/news/document-view =AWNB&docref=news/0EB82E18F26614D1›

​​​

READ MY THIRD INSTALLMENT ON REALTOR ANTITRUST...

​

​