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A Bunch of Hooey

ByBrian Phillips

A federal jury in Missouri recently found the National Association of Realtors (NAR) and several residential brokers guilty of conspiring to inflate commissions on real estate sales. The jury assessed a fine of $1.78 billion. The plaintiffs complained about the commissions they paid to buyer’s agents and alleged that the commission model suppressed competition. The claim, to use a technical real estate term, is a bunch of hooey.

Over the past ten years, I have sold nearly a dozen homes. I sold many without the aid of a broker. The brokers that I have used had a variety of different commission models, with the most common being a flat fee. In some deals, I offered a lower commission to the buyer’s agent.

I don’t know with certainty that non-traditional commission models are used in every state. However, a quick Google search revealed numerous flat fee brokers in Missouri. In other words, there is competition in brokerage services. If the plaintiffs didn’t like the commissions one realtor charged, they were free to find one with more suitable rates.

No private business or organization can stifle competition. Government can and does. Private businesses and organizations can’t erect barriers to entering a profession or industry. Government can and does with occupational licensing and similar policies. Private businesses and organizations can’t mandate pricing. Government can and does with rent control and other price caps.

Nobody forced the plaintiffs to accept the commission model offered by their broker. They had choices. They could have found another broker or negotiated terms more to their liking.

Morally, one cannot enter into a voluntary contract and then later complain about the terms and conditions to which one agreed. The time to complain, and perhaps negotiate, is before the agreement is signed.

It is understandable that individuals may later regret the decisions that they made. However, the proper course of action is to learn from one’s mistake, not file a federal lawsuit. The former is the rational response. The latter is a bunch of hooey.

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