In 2008, when the average real estate commission was 5%1, NAR and the DOJ reached a settlement regarding display of data online. The DOJ’s theory behind the need for this change was that consumers would benefit from a decline in commissions caused by the ability of “new model” brokers to use sold data online. Let’s look at what really happened:
Before the settlement:
“The average national residential commission rate fell in a virtual straight line from 1991 to 2005, falling from 6.1 percent to 5.02 percent.” 2
After the settlement:
|Year||Average Commission 3|
Meanwhile, ZipRealty – a strong advocate for VOWs with the DOJ – hasn’t fared so well. They eliminated commission rebates to consumers a few years ago and pulled out of 12 markets. Fielding a VOW apparently did not fill an overwhelming consumer demand or create a profitable brokerage able to thrive and grow on lower fees to consumers.
If commission trends can be tied to anything, it is to the housing market and how much effort it takes for professionals to service the transaction.
The DOJ’s theory does not seem to be supported.
Have people from Canada’s Competition Bureau looked south to the U.S. as they contemplate their own experiment, or are they still repeating the same old disproved theories?
3 Published online in various locations by Real Trends (http://realtrends.com)
4 projected by Real Trends.