patrick.net

Some good research was done in the past couple years by the proponents of the CA Open MLS Act, which has been blocked by the CAR for the past couple years.

Section 2 of the last filing summarize the research well:

http://ag.ca.gov/initiatives/pdf/sa2005rf0145.pdf

-flimsey
+flimsy

Randy? Dangerous?

I've heard enough. Not so much as a "tweaking" needed here boys! Pack up and go home. 6% commission is fine.

Sorry Randy, I'm reading the act right now, and it has nothing to do with your original definition, though your point it taken on patents since I can see your perspective that they are established in regulation.

Are you currently working with an auto agent?

6% is fine as long as the market will bear it. Prices are higher now, 6% is not the norm anymore. MLS had nothing to do with 6%, was around way before and it used to be higher.

Malcom

I already answered that question, once theoretically and once with examples.

You're turn to respond to my points. Otherwise I'm happy to be dangerous if that means discrediting your unsubstantiated arguments. All you keep doing is saying "it's legal". I've given you the framework and tests used to determine that.

Show me.

Hint: You might want to check a 1976 CA Supreme Court ruling vis-a-vis MLS before continuing.

*Your

No... really I'm only too happy to pay it. You're right, we should ALL be glad it isn't higher.

No, and no one is forcing you to work with a real estate agent. Like I said it's a free market, go find a for sale by owner, no one is stopping you.

Seems to me that if Congress really wanted to soften the blow of the housing bubble bursting, they would take Randy's advice and force the NAR to open the MLS system.

Lower commissions would be the natural result. It is easier to accept a 5-10% loss on the sale price of your home if the commission is 2% (total loss of 7-12%) instead of 6% (total loss of 11-16%). In real dollars, this is a savings of $20,000 on the sale of a $500,000 house.

But somehow I think the realtor lobby is stronger than the FB lobby, so I don't see it happening.

Randy, I hope you didn't take me calling you dangerous seriously. It was a compliment, you actually know some things.

You keep providing sources which aren't applicable. A letter from an attorney for instance may make very good points but it is not the law. As for your frustration that I fall back on it being legal, I'm sorry you don't accept that. If you want something made illegal, you do it through law, not attorney's letters which start out with 'they make too much' or misapplying a federal act for your convenience.

You may not like the business practice, but it is legal, and keeps being reaffirmed as legal. You can't have antitrust when everyone keeps saying it is legal.

Malcolm

It's all just good blog debate. The more intense, the more interested I usually am. I'm not one to wave the "let's all just get along" wand, so please don't take my stiffness as a sign of emotional angst.

Oh Malcolm

The HSR act is applied all the time in these types of cases. It was applied in the MSFT antitrust hearings, both criminal and civil cases.

Microsoft is a real monoplistic entity, it is not a cartel of realtors. Microsoft was specifically accused of violating the Clayton Act, you are accusing the realtors of something else. I just don't get the correlation. BTW you're talking to someone who thought Microsoft was being attacked unjustly.

I never understood why putting IE on the desktop or bundling it for free hurt Netscape or the consumer. That was just another Waco Reno stunt.

To me anyway, at the very least NAR/MLS is abusive. Both to members and clients. Arguing about whether or not it's in fact a cartel is like following a trail of empty beer cans to the site of a flaming wreck wrapped around a telephone pole and wondering if "alcohol was involved".

SP? How's that go again? Res Ipsa Loquitor?

Dino, are we arguing if it is abusive, or are we arguing illegal monopoly/cartel? You keep equivocating.

"You can’t have antitrust when everyone keeps saying it is legal. "

"The HSR act is applied all the time in these types of cases. It was applied in the MSFT antitrust hearings, both criminal and civil cases. "

Yes, like the NFL. They did lose a court case about being a monopoly, but were only fined $1.

Immune to quotas, also, No requirement for a certain number of females, etc.

But everyone loves the NFL so they can't be a monopoly. They are popular, not like these horrible money grubbing realtors who aren't worth their weight in shit.

What the NAR does is more like price fixing than anything else. It used to be that the real estate agents had to do some serious leg work, calling, searching central repositories, etc to know what houses were on the market to get their buyers to the houses. Nowadays, it should be perfectly simple for buyers and sellers to connect up without agents, but not suprisingly, the NAR doesn't want that to happen as they have put in place the defacto 'standard' database. Where it becomes dodgy is how if you want to list with a Realtor, that Realtor will not stick your house in any alternative database due to NAR rules against that sort of thing. Nor will they list your house without an exclusive rights contract, which means YOU can't stick it in another database. And they don't want you to be able to stick it into the MLS without going through a realtor. They are using the superior marketshare (probably 95%) to hamper any competing databases. That was how Microsoft fought Netscape originally, making it impossible to not use competing browsers. (Only a roughly similar example.)

The only real use you get out of a Realtor these days is the legwork service you get out of them. They will spend the business day calling the county/town offices about permits, schools, rezoning, etc. They will track down people who did previous inspections and ask them questions about the property. They will let you into lockboxed houses and show you around. They will go around to the neighbors and ask questions about the neighborhood. From a seller's point of view, they will manage the marketing, print out materials, host open houses, help stage and arrange the house for showing. Good agents will do a LOT of work to help you pick out a home or sell your existing home. For people with very little clue about how to go about doing these things, they provide value. If it's 6%, well, that's a judgement call.

Even if MLS went 'public' and they had no way to blackball discount agents, the NAR would still hold a hefty share of the market. They just don't want to cede 30-35% of the market to FSBOs, discount brokerages, and buyers who use a RE lawyer to review contracts. Eventually they will, and I don't think it's going to take actual legislation. Already they have started using Craig's List to advertise properties in the MLS to hit the 'non-agent' represented buyers. Of course, that may be because they hope to double-dip those people, but there is eventually going to enough critical mass at alternative DBs, like ForSaleByOwner.com and Craigslists that they'll HAVE to open the MLS or risk losing traction with that crowd entirely.

Microsoft was scrutinized for some of its M&A activity so of course an act dealing with mergers would apply.

SF, I agree with all your facts, but some things are market driven. Why would an agent not have an exclusive contract? Why would someone invest time and money to not have exclusiveness for that period of time? I know we weren't debating anything but your post then lists a bunch of innovations like Craig's List which are a real threat to the MLS exclusivity. Again, I don't even see MLS being a monopoly in the first place since there are competing and growing innovations elsewhere.

I also thought MSFT was not an abusive Monopoly on the grounds for the criminal case.

But they were accused of something broader in the civil case, which they effectively lost, by the way. That case did not rely upon Clayton, but also harm caused by abuse of market powers. They paid Sun quite a bit as an outcome related to their blockade of Java technology.

SP,

Another case: My wife's cousin and his wife graduated from college and both got jobs in Denver paying $60k each. In Denver, they could easily live on one spouse's salary by renting an apartment in a complex with other 20 somethings, and afford one with a pool and clubhouse. They could bank the other salary and in 5 years pay cash for a $350,000 home. In Denver, that much jack will get you a very nice home. Then one spouse could quit work if desired to start a family and still live well.

Many people in this position choose the McDebtor route.

Discount brokers are a reflection of the changing cost curve in the business. My agent listed my houses for 1% on the MLS, nothing special so I don't even see the price fixing argument. Yes, he got calls from other agents threatening to not show the house and guess what? The free market worked, the houses sold for asking price and those exclusive agents were left holding their dicks.

On previous threads we've talked about what happens when agents try to block or boycott. They lose their value. That's why now you see ads for companies promising to show ALL houses regardless of who lists them. You can't stay in business very long if you don't change with the times.

Malcolm

Are you really arguing that an industry group should be allowed to capture economic benefits for themselves at the expense of consumers? That is precisely what is happening, economically. It's an intermediate level undergraduate econ textbook example of a "dead loss" scenario.

The reason we have free market competition rules is to eliminate dead loss. The existence of dead loss harms both the consumers (who pay higher prices) and the overall economy (inefficiency).

You seem to like parallels. Can you show me any other examples of *transactional* monopolies which have been (a) not regulated and (b) found legal?

Malcom,

Illegal? Abusive? What level of abuse are we going to allow ourselves to be subjected to before "we" make it illegal? (If it isn't already)

It's hardly just "me" that wants a new game Mac. Just b/c you're not actively blogging and actually paid the 6%er's doesn't mean you necessarily like or appreciate it. Let alone see the value. Many are questioning "the value".

Before you jump at the chance to say I'm hopping from topic to topic, in the end, ALL of this is about commissions. It's the very reason the cartel exists. Like SP says, everybody profits from the transaction but the buyer is the only guy bringing any money to the party. It's time he had a say.

That's the part of anti trust that I would agree applies Randy. Whether Realtor associations have so much control of the market that they illegally crush competing innovations. With all my own observations, experiences, and readings I just end up with a different conclusion. The discount brokers are evidence that price fixing doesn't work, the argument of minimum standards of service fails because it would be done through law so it would have to be legal if it is lawful, and I respect proprietary tools. You can't force Coke to tell you their formula because you WANT to sell soda. (not referring to FDA ingredient list)

DINO, finally the true motive, you think they cost too much. I wish I could bandstand everytime I think something is too expensive. You're are still wrong, I can cite personal and plenty of other 1st hand accounts of people not paying 6%.

In a free market you always question the value, that is your RIGHT as a buyer. A seller has a RIGHT to charge whatever they can get. Not pretty, not always equitable but that is the system, and again, I'm not going to call for it to be dismantled because others won't shop around or act like real free market consumers.

Malcom,

I agree that MLS isn't a legal monopoly. I think the NAR has been a virtual defacto monopoly, in that they pull 95% of the business, as it's much harder to do business as an independant real estate agent than as a NAR member. I also believe that there are some Realtors and branches of NAR that think it ought to be a full monopoly and try and make it so. I also believe that after they invented it "hey! Awesome! This makes our job easier!" they realized that it marginalized a large portion of their defacto (not legal) monopoly. So naturally they want to keep it in house. Unfortunately for them, the 'tech' is so absurdly easy to replicate these days that it's only a matter of time before they cave in and offer free access to the MLS if only to try and keep it being the #1 tool. If Zillow ever quits sucking ass in usability (I can never get a search to work during business hours) it demonstrates a tool with far MORE functionality than the simple MLS.

Market forces created the NAR and MLS system. People used to mainly move inside their own town, or possibly one or two towns over. The local real estate agent knew what was on the market, and knew bob over in Closertoyouville and would be happy to call over there and get you connected if you were moving down the road. With a massive increase in mobility, it was much easier to get buyers to houses outside their own neighborhood with a centralized repository. When it was on paper, you almost NEEDED the NAR. MLS changed that, even if it has taken years for people to really see that. Going back to fully independant and local real estate agents would be entirely feasible now that you don't need an unbrella organization to disseminate information. Moving from Maine to Nebraska? No problem. Your local real estate agent can help you pick out a bunch of homes, call the listing agents, get specifics, and you fly out and, check out your choices, buy it. You can even have closing on the original house in another state as part of the closing agreement.

The NAR's de facto (not legal) monopoly is already broken, they just don't want to admit it. There will be kicking and screaming as they go down, and eventually they will accept it and move to be more inclusive so that they stay relevant. At least if they're smart they will.

"The free market worked, the houses sold for asking price and those exclusive agents were left holding their dicks."

Monopoly or not, I do not think the MLS in its current form will last long. In a rising market, the sellers did not care about the commission, as long as they got a profit on the sale. This is the same mentality as the "tax refund" imbeciles. But in a steady or declining market, when the seller sees that his house sold for what he paid for it, but he must write a check of $35,000 or more just to cover the sales commission, the miopic "gotta list with an agent" mentality will disappear. Maybe we will get fee based appointment maker/showers and new forms of independent sales databases. You could visit the database on-line (or at kiosk), make appointments, and drive yourself to the properties.

Malcolm

Now you're using straw men.

Coke's formulae are trade secrets. Any other company is allowed to do their best to replicate the results, and even to reverse engineer within limits of established common knowledge.

What is a proprietary trade secret about MLS? Am I to believe that I cannot replicate their database structure? Their screens? Their report formats?

Rather, Zillow's estimation formulae may well be a trade secret. They cannot and should not be forced to reveal that. I'll tell you what. I'll agree that MLS shouldn't have to reveal their "search algorithms". You and I both know those aren't worth squat.

Malcolm and crue-
I asked a former Ebay employee why Ebay didnt get into Real Estate as deep as they could. The answer was, many states require a certified represenative in the state to conduct business. I suspect this was put into place when interstate banking regulation was being rewritten and powers to be in each state wanted to maintain control over markets.
If we had Fed Deregulation this would assist in breaking down barriers.

Since Ebay isnt a Realtor firm they are excluded from conducting such business on mass scale in California. Actually I think they are a Delware company.

Randy you are questioning basic economic theory of excess profits. Economic theory states they are temporary so now we are discussing freshman college stuff. Anyway I won't be baited with YOUR criteria since I don't see realtors as monopolies why would I strain to fabricate a concept of transactional monopolies to make a point I don't even want to make?

In fact, the Supreme Court *just* ruled in a case which may serve to deny states wide regulatory powers over mortgage financing and more basic real estate transaction services. The Supremes seem to believe this power falls within the Federal Govt's domain.

Now whether that's good or bad in this context is yet to be seen. Depends how much control one believes the NAR has over Congress.

BTW Realtors are regulated so why does the criteria have to be unregulated transactional monopolies. Ebay btw is classic since it attempts to block transactions outside of itself but our system understands that IP is necessary for a business to fairly protect its revenue. Ebay is an auction site, not a networking site.

SFBB,

If you're like me I kind of cringed when the realtwhores basically "stormed" Craigslist. For a very brief period sellers seeking alternatives found a little haven. They were able to peddle their wares (for cheap) on C/L without having to compete with an advertising juggernaut like NAR.

Well NAR wasn't having ANY of it. They quickly flooded it with SO MANY listings finding the actual FSBO's was like finding a needle in a haystack! I s_u_p_p_o_s_e some would argue that this is just another example of "free markets" in action but to me it's the equivelant of Safeway plunking down in the middle of the "farmer's market"? Uh...? Is this what Craig intended?