Companies representing nontraditional business models have reached a tipping point in the residential real estate business and account for a substantial portion of brokerages today, industry experts said yesterday at a workshop on competition in real estate hosted by the Federal Trade Commission and the U.S. Department of Justice.
NAR General Counsel Katie Johnson speaking on a panel at a FTC-DOJ workshop on competition in residential real estate on June 5.
The two agencies are using the end of a 10-year consent decree between the Justice Department and the National Association of REALTORS® later this year as an opportunity to examine the level of competition in the industry. The workshop yesterday, called What’s New in Residential Real Estate Brokerage Competition, brought together professionals from brokerages, MLSs, and technology companies, as well as academics, to discuss the state of new business models, price competition, and the availability of listing data to consumers.
The consent decree, agreed upon by NAR and DOJ in 2008, applies to the governance of virtual office websites but not to other types of online display of residential real estate listings. VOWs are different than other types of online listing displays because they require administrators to enter into an agency relationship with the real estate company as a condition of accessing listings and services on the site.
VOWs represented a small portion of online listing displays at the time the agreement was signed and have not seen any growth as a percentage of the market in the last decade. Other types of displays have grown significantly in recent years and today account for a significant portion of listing data offerings. NAR has said it plans to maintain the rules for VOWs outlined in the agreement after it expires later this year.
At the workshop, executives representing different types of brokerage models agreed nontraditional companies are becoming a force in the real estate industry. “There’s a number that’s being bandied around that says nontraditional brokerage models now are the majority in the marketplace,” said Simon Chen, president and CEO of ERA Franchise Systems. “And that’s what we feel as well.”
Those new entrants into the marketplace are expected to increase competition. “As we go forward over the next five years, we’ll continue to see pressure on pricing and continue to see more efficiencies, more conveniences, and more value—all to the benefit of the consumer,” said Eric Eckhardt, U.S. CEO of Purplebricks, a nontraditional brokerage company that launched in 2014 in the U.K. and is now launching in U.S. markets.
Katie Johnson, NAR general counsel, and Brian Larson, associate professor at Texas A&M School of Law, cautioned regulators about intervening in the industry given how well competition is flourishing.
“Our multiple listing services are the envy of the world,” said Johnson. “Regulators in other countries recognize the pro-consumer benefits of having an orderly marketplace, where all the information is located . . . and where there’s price competition.”
“Knee-jerk reactions to anecdotal stories,” said Larson, “or under-tested solutions to problems that are identified based on theoretical or empirical perspectives that are limited in their scope come with risks, and so we need to make sure we’re not throwing out the baby with the bathwater.”
—Robert Freedman, REALTOR® Magazine