Home Buyers Hurt By Industry Dominance Of State Real Estate Commissions Charges Consumer Group

Home buyers could pay less in brokerage fees if state real estate commissions were not dominated by … [+] industry says consumer advocacy group report

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Home buyers are being hurt by industry dominance of state real estate commissions, the Consumer Federation of America asserts in a new report.

As evidence of the dominance, CFA said it found of 378 seats on commissions in 49 states responsible for regulating real estate agents, brokers, and their firms only 15 percent are held by individuals outside the industry and none by a consumer or housing advocate.

Independent agencies that could facilitate competition among real estate agents could save buyers 20 percent to 30 percent on broker commissions, said the report’s author CFA Senior Fellow Stephen Brobeck.

In addition to the dominance, the group said the commissions lack needed power to help home buyers harmed by real estate workers:

“State real estate commissions have a mandated responsibility to receive, investigate, and act on complaints against licensed real estate agents. However, the commissions do not have the authority to provide restitution to complainants who have been treated unfairly.”

In addition, the report claimed a number of commissions in the past supported and defended anti-competitive practices, notably state bans on buyer broker rebates and agent minimum service requirements and there is no evidence that the commissions in the ten states with rebate bans, or the at least half-dozen states with minimum service requirements, have opposed these restrictions on competition.

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In spite of the weaknesses, the report said the commissions still seem to confer value to home sellers and buyers by licensing and penalizing agents for a wide variety of offenses, including consumer deception and fraud.

The ability of the commissions to act against bad actors definitely is a deterrence, the study said.

To better protect home buyers, CFA is urging state governments should shift authority from the commissions to state officials and ensure effective consumer representation on the commissions themselves. 

“Just a single consumer or housing advocate sitting on a commission would likely have a positive impact on the work of the commission,” contended Brobeck: “At the very least, the commission would feel obligated to recognize and provide information to home buyers and sellers on their website, to make greater efforts to enforce agency disclosure laws, and to refer egregious consumer complaints to the state attorney-general or consumer protection agency,” he added.

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