The Problem With The Wall Street Journal Op-ed By Rex Executives - An Op-Ed with Unsupported Assertions

A hand holding a magnifying glass examining houses made of newspaper clipping cut-outs

 


 

In a perceived attempt to smear the Realtor organization and its MLS services and excuse the failure of venture-funded entities to provide consumers with a better market opportunity to buy and sell homes, executives from a low-cost, tech-driven realty firm wrote an editorial filled with numerous unsupported assertions in The Wall Street Journal on March 3. The National Association of REALTORS penned a response that was confined to the Letters page.

Expertise

First, a disclosure. I have been retained by and qualified as an industry expert by the U.S. Federal Trade Commission (FTC) in matters pertaining to MLS and its relationship to brokerage and housing consumers. I testified as an expert in a major case brought by the FTC against an MLS that was found to be practicing anti-competitive ways. Further, I was employed by the Canadian Competition Bureau in an investigation into the likely impact of certain minimum service requirements in Canada on low-cost brokerage firms. Plus, I was employed as an industry expert witness by the National Association of REALTORS® in the actions of the U.S. Department of Justice Antitrust Division. Most of these cases were over ten years ago. I also provided expert reports on behalf of Zillow in its acquisition of Trulia and, just last year, provided an expert report to the FTC’s panel looking into a review of the industry upon the termination of the consent decree of more than 10 years ago.

Assertions By The Writers About The Realty Industry:

  1. “Sites like Zillow and Homes.com are commonplace, but they could not have thrived without the department’s intervention. “The authors may not have known that Microsoft HomeAdvisor, Realtor.com, Homes.com and others were thriving before the DOJ’s actions.
  2. “They’ve shielded themselves with a skein of anti-competitive practices, such as restrictive all-or-nothing membership rules and commission tying practices. These have kept the high fees they charge unchanged since 1991.” Without commenting on how Realtor membership rules have any effect on commission levels, they are wrong about commission levels. As the Department of Finance/FTC’s economic reports show, through the end of 2006, the inflation-adjusted cost of commissions had gone up less than 1.5 percent per year for the previous 10+ years. Further, our own authoritative research on commission rates show that the rate has dropped from 6.1 percent on average to slightly less than 5 percent in the past 25 years.
  3. “The REALTORS’ anticompetitive practices have had a greater negative impact on the American economy than anything Canadian dairy companies or European car makers could to their counterparts in the United States. “What facts do the authors have to back up that claim? More to the point, what economics courses have they taken, or studies have they read to get anywhere close to a correct assertion?
  4. “Homeowners are required to hire a buying agent if they employ a selling agent through a multiple listing service—a potentially illegal tying arrangement under the Sherman Antitrust Act that keeps buying agents paid though they offer almost no useful service.” I have news for the writers: No homeowner is required to use an agent at any time. In the U.S., no seller or buyer is required by law to use an agent. No seller is required to pay any stated commission, as commission rates are all negotiable. Our studies with Harris Insights (REAL Trends 2019 Consumer Study) show that consumers know this. Further, even when a seller employs a listing agent, the homeowner can dictate whatever amount they decide to offer the agent working with buyers. If agents provide no useful service, then why do the authors employ their own agents to help buyers and sellers?

In our REAL Trends 2019 Consumer Study by Harris Insights on recent buyers and sellers in July 2018, over 90 percent of all buyers and sellers used an agent, up from 85 percent in a similar study in 2014 and up from 81 percent in 2001. Millennials (you know the ones who didn’t want to own homes or who would use smartphones to buy homes instead of agents?) used an agent 92 percent of the time to buy or sell their homes.

The REX authors say, “Agents offer no useful service.” Again, our independent Harris Insights research said that the highest value consumers received was “helping me negotiate the price and terms of a purchase or sale.” I assume their own company does the same thing. But, what really jumps out is that buyers and sellers said they found that their agent helped them “by providing me with homes that match my home when I am selling (Comparative Market Analysis) and those I am looking for.” They said this when housing consumers could find virtually every home online; yet, consumers still find their agents helping them find homes!

There are many things wrong with our industry and those of us who have called it home for 30 to 40 years know what those things are. The MLS can be made more effective. Consumers know something that these executives don’t know:

  • Buyers and sellers like using a real estate agent.
  • Buyers and sellers know that they can dictate the cost of their own transaction, including not using a real estate professional at all.
  • Buyers and sellers find their agents’ services actually quite useful.

Wall Street and Silicon Valley have been trying for 25 years to blow up our industry and do away with agents, and, in some cases, brokerage firms. They haven’t succeeded yet. Even the best of the real estate tech firms, Zillow and Realtor.com, have found that using agents in their service delivery is critical to their business success.

Whether REX succeeds or not, the execs who spent their time writing these unfounded and unsupportable claims should spend more of their time focusing on how they can offer something compelling as a way to win the hearts and minds of consumers. Otherwise, they’re just wasting their investors’ money.

This article originally appeared in the April 2019 issue of the REAL Trends Newsletter. It is reprinted with permission of REAL Trends, Inc. Copyright © 2019.
To read the rest of this issue & more, please visit our Real Trends page online.

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