‘Unfiltered’: How real estate’s ‘powerful culture’ led to ‘price fixing’
Watch the conversation with Steve Brobeck — whose work has influenced commissions cases and DOJ investigations — as he shares concerns about industry practices.
Editor's note: The Real Estate Insiders Unfiltered podcast explores the people and forces that shape the real estate industry. Check out our top takeaways and watch the latest episode from NextHome CEO James Dwiggins and Keith Robinson, NextHome's chief strategic officer.
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On this week's episode of Real Estate Insiders Unfiltered, consumer advocate Steve Brobeck — whose research was cited by plaintiffs in the commissions cases — shares his views on cooperative compensation and other topics. (Spoiler alert: He's not a fan.)
Brobeck, a senior fellow at the Consumer Federation of America, said his organization "is not an anti-industry group in any way," but exists to "advance the interests of consumers through advocacy, education and research."
See what Brobeck really thinks about commissions: "What the industry calls cooperative compensation is thought by many of us to be price fixing, or more precisely, the facilitation of high, nearly uniform rates," Brobeck argues. "Buyer agent commissions really effectively can't be or couldn't have been negotiated. And most listing agents, according to our research, won't negotiate the listing agent commission."
His recommendation? More negotiation, and lower commissions — in the 2% range for each side of the transaction.
On the Sitzer/Burnett verdict: "The main reason I believe the jury made their decision, which was so quick and involved such a large award, was because they just didn't think it was fair that sellers should be required to compensate buyer agents. And I think the industry knows that if there are other jury trials, the juries will render the same decision."
"If the marketplace were normal," says Brobeck, "buyers and sellers would each negotiate agent compensation and pay for it separately. And companies and brokers would compete on the basis of price as well as service." Instead, he argues, "a century of industry practice" has led to "a very powerful culture supporting the lack of price competition."
Too many agents, unreadable forms: Brobeck also has thoughts about the low bar of entry for agents — "make it tougher to get into the profession" — and the consumer-friendliness, or lack thereof, of many buyer agreements and other real estate contracts.
And while he may not be popular with some in the industry, his influence extends far: "We send things to the DOJ. We have had conversations … because they want to listen to what I have to say."