Realtor Notebook
By Teresa Boardman, Thursday, November 3, 2011.
When I was taking classes to get my real estate license, I was reminded over and over again that it is against the law for real estate licensees to discuss commissions with competitors. We were told that discussing commissions with our competitors could be a violation of the Sherman Antitrust act, and brokers used to be afraid -- paranoid, even.
The idea behind the law was to foster competition in the marketplace. If all of the brokerages got together and decided what to charge and then charged that amount to consumers, there would be restricted competition -- we could, as a group, work to block others from introducing lower-cost business models. The Department of Justice has had the National Association of Realtors in its sights for years.
As a licensed real estate broker, I should not write an article here or anywhere suggesting that all agents should charge "X" amount because we are worth it, or for any other reason.
I can advertise my own rates, but I should not engage in a conversation about the commission rate real estate professionals should charge with another licensee outside of my brokerage.
Someone without a real estate license can write anything about what real estate professionals should charge for services, but as a licensee I will not comment on such articles.
If I choose to comment and another real estate licensee comments, too, and we both agree that we are worth "X" percent -- and that happens to be the exact rate we charge for our services -- we may draw the attention of lawyers or antitrust law regulators.
Yesterday I was on the Trulia website in the Trulia Voices section, where consumers can ask questions and real estate professionals can answer. A seller asked what the average real estate commission rate is for the area.
Several agents stepped up to the plate and answered the question. The correct response from a licensee should be that we can provide only our own rates and that we don't know anything about averages.
One way for consumers to get an average would be if someone were to survey home sellers and ask them what they paid in total commissions. Consumers often ask us for averages -- they want the information. Another option is to view publicly available financial reports by real estate companies (examples: Realogy Corp. and ZipRealty).
Some of the state Department of Commerce sites handle the issue by stating that real estate commissions are negotiable, and they encourage consumers to negotiate.
The best place to get more information on the basics of the law and how it applies to Realtors is by contacting your local or state Realtor association. There is some information on the NAR website (Realtor.org), but most of it costs money. I found a free quiz on the site that addresses some of the basic issues.
Real estate licensees should not discuss commission rates with each other, and I think we sometimes forget that we can run into trouble by having online discussions about commission rates -- that includes comments on articles or blog posts and consumer websites.
I have occasionally written about commissions on my real estate blog, but I have disabled the ability to comment on the post because real estate agents will leave comments.
One could argue that if my readers are in New York or California, they are not my competitors, so it's OK to discuss with one another how much we charge.
But it could also be argued that an agent in Minnesota could be part of a nationwide real estate price-fixing scheme.
There are several other ways to run afoul of antitrust laws. We could all agree not to show the listings of company "X" because we don't like that company or how it runs its business.
I am not a lawyer. I just want to say that real estate licensees need to take care not to discuss commission practices with each other -- not even in the comments on a website or in answering a question on a website for consumers.
It seems like the real estate industry has gotten lax, as I can easily find agents' discussions about commission practices on websites. We all need to be reminded that we should not discuss commissions amongst ourselves -- even if the conversation was started by a consumer on a website.
We can publish our own rates, and advertise them as much as we want to, but we just should not discuss them with other brokers.
