a cooperating broker would be a subagent

(Amended 1/02) . This person is not necessarily a licensed attorney. See, e.g., Lewis, Tr. 1983 FTC STAFF REPORT, supra note 9, at 31. & ECON. Now more than ever, it is critical for REALTORS across America to come together and speak with one voice. cooperating broker Definition | Law Insider at 178-79; Sambrotto, Tr. through the local or regional [MLS]."). A. See Amended Final Judgment and Order, United States v. Kentucky Real Estate Comm'n, Civ. 174. [I]t is apparent that the activity within this study is still ongoing within the industry. It is a standard question now. refer to the transcript of the Workshop. MLSs do not allow FSBO homes to be listed in the local MLS because a listing broker member is not involved. VOW brokerages typically maintain physical offices in the markets in which they operate, staff those offices with licensed brokers who participate in their local MLSs, and represent both buyers and sellers.82. 222. Although consumers benefit to some extent from all of these forms of competition, the available data suggest that brokers may compete less on price than would be expected in a competitive market. 129. See, e.g., Hoover v. Ronwin, 466 U.S. 558, 568 (1984) ("Closer analysis is required when the activity at issue is not directly that of the legislature or supreme court, but is carried out by others pursuant to state authorizations. A cooperating broker participates in the multiple listing service (MLS), and finds a buyer for a property listed in MLS. at 149; Lewis, Tr. If that cooperation cannot be obtained, it is possible that an entrant might fail even if it is more efficient and provides a more attractive combination of price and service to consumers. 233. NAR 2006 SURVEY, supra note 4, at 77. Learn how to properly use the logo and terms. 16, 2007). 126. Hahn believes that rebating will have a positive impact on consumer welfare, and sees no compelling economic rationale for not allowing rebates since they are a form of price competition that should improve efficiency by putting pressure on brokerages to provide better services at lower prices. Multiple listing services may, as a matter of local discretion, require participants to disclose short sales when participants know a transaction is a potential short sale. 103. Two other companies together operate a program that rebates up to $3,000 for the sale or purchase of a home, which can yield a combined maximum rebate of $6,000 when a customer buys one property and sells another through the program when he or she moves. The complaint against MiRealSource alleges that it adopted a set of rules to keep exclusive agency listings from being listed on its MLS, as well as other rules that restricted competition in real estate brokerage services. 319. A Conceptual Analysis, 27 REAL ESTATE ECONOMICS 719, 721 (1999) ("Another factor in sustaining a collusive commission rate is that many sellers do not realize that the commission rate is negotiable. 301. at 68 (describing the option). Consumers differ in their willingness, ability and opportunity to use the Internet to perform functions traditionally provided by brokers. 138. INFORMATION TECH. Perriello, Tr. Iowa 2004), rev'd on other grounds, 406 F.3d 969 (8th Cir. A number of developments have raised competitive concerns, particularly laws and regulations in some states that limit consumer choice of real estate brokerage service offerings and that prohibit rebates to consumers, anticompetitive agreements among brokers, and industry practices that impede competition. Patrick J. Roach, Deputy Assistant Director, Bureau of Competition U.S. Department of Justice, Jeffrey Schmidt, Director, Bureau of Competition This finding undermines a necessary condition for the hold-up theory to be plausible that consumers only learn the prices for additional services after they have entered into an exclusive listing agreement. For more on types of rebates offered in Kentucky and nationwide, see, e.g., Mariwyn Evans, Law: Consumer Rebates, REALTOR MAGAZINE ONLINE (Jan. 1, 2006), available at http://www.realtor.org/rmoprint.nsf/pages/lawjan06; Jessica Swesey, Internet stock brokerage pioneers enter online real estate, INMAN NEWS (Apr. Continuing education and specialty knowledge can help boost your salary and client base. 549 (1988). Nonetheless, this cooperation can result in complex legal relationships between the brokers and principals involved. White, supra note 47, at 4. [In w]hat other business can you find that kind of cooperation?"324. However, that dynamic may not operate as well in industries, like real estate brokerage, where many consumers have significant limits on their knowledge, thus making it easier for competitors to steer business away from new or maverick brokers, or to otherwise withhold necessary cooperation, without the knowledge of their customers. See MiRealSource, Inc., FTC Dkt. NAR, HANDBOOK ON MULTIPLE LISTING POLICY 50 (2006). Some commentators have posited that alternative payment structures may better align consumer and broker interests.139. "249, DOJ also investigated rebate bans by the South Dakota Real Estate Commission, the West Virginia Real Estate Commission, and the Tennessee Real Estate Commission. Press accounts indicate that fee-for-service brokers have raised their prices or exited the market altogether in response to minimum-service laws. 23. However, because sellers typically do not pay for title searches, abstracts, and many of the other fees associated with closing a residential real estate transaction, the data in this field are likely to closely represent commissions paid by the seller. For example, Weicher calculates that although the average commission rate as reported by REAL Trends fell by 16 percent (6.1 percent to 5.1 percent), because the average price of existing housing increased during this period ($128,400 to $236,000), the average inflation-adjusted commission per transaction increased by 11 percent in dollar terms between 1991 and 2004.187 More specifically, Weicher's analysis indicates that inflation- adjusted commission fees per home sale declined by approximately 7 percent between 1991 and 1998, but increased 19 percent between 1998 and 2004.188 The GAO, also using REAL Trends' commission rate data, reached the similar conclusion that commission rates do not appear to have changed enough to offset rapidly rising home prices in recent years.189 Specifically, the GAO observed that a decrease in commission rates from the prevalent 5.5 percent in 1998 to an estimated 5 percent in 2005, a 9 percent decrease in commission rates, was more than offset by a 58 percent increase in the median inflation-adjusted home sales price. A decrease in commission rates does not necessarily imply a decrease in fees. RE57R07: Brokerage Relationships | Mass.gov Re/Max Int'l, Inc. v. Realty One, Inc., 173 F.3d 995, 1003 (6th Cir. See Hahn, Tr. When a broker first meets with a party to discuss the possibility of hiring the broker to help sell a home, the broker may provide relevant information, such as an opinion of value, or offer other services to the party in an effort to get a listing contract. 316. FSBOs often offer payment to a broker representing a buyer. Acknowledging experience and expertise in various real estate specialties, awarded by NAR and its affiliates. Id. William Blumenthal, General Counsel The authors performed regressions analyzing how the contract commission rate was affected by various market conditions and housing variables. The MLS allows broker- members to search and filter homes based on detailed criteria, including property and neighborhood information, offers made on the home, prior sales history, and days on the market.44 In addition to the database of currently available homes, an MLS maintains a database of homes sold through the MLS. The subagent represents the seller, and therefore, works with the buyer, but not for the buyer. See, e.g., United Real Estate Brokers of Rockland, Ltd., Dkt. For example, the head of a major real estate brokerage franchise stated that "while we have no reason to believe that the states' motives [in adopting minimum-service laws] are anything but well-intentioned, neither Century 21 nor our parent company, Cendant, believes that minimum standards legislation is truly necessary. Civ. 165. In sum, it is clear that minimum-service requirements restrict choice by not allowing consumers freely to choose what real estate brokerage services they wish to purchase or not purchase. Network with other professionals, attend a seminar, and keep up with industry trends through events hosted by NAR. of Realtors, 2000 WL 34239114, at *4 n.4 ("It is undisputed that ABOR has significant market power in the relevant product market for residential real estate brokerage services in the Austin metropolitan area and exclusive access to the MLS Data which is essential to effective competition in this market. In those investigations, however, the Agencies have not found evidence sufficient to establish an agreement jointly to steer clients away from or boycott a particular rival and have declined to bring an antitrust case. "); see also, e.g., Reifert v. South Central Wisconsin MLS Corp., 450 F.3d 312, 317 (7th Cir. 187, 187 (2001) ("A number of studies have argued that the uniformity of the commission rate across different properties and regions is an indication of collusive behavior. While offers of compensation made by listing brokers to cooperating brokers through MLS are unconditional (except where MLS rules create specific exceptions as specified elsewhere in this policy statement), a listing broker's obligation to compensate a cooperating broker who was the procuring cause of sale (or lease) may be excused if it is . Competition In The Real Estate Brokerage Industry Subagency offers are typically communicated to cooperating brokers via the MLS. Other commentators have observed that if commission rate competition is limited, brokers will likely compete by engaging in marketing activities or offering to provide higher quality services. The ability of novice entrants to attract clients relative to more experienced agents was not discussed at the Workshop and, likewise, is not addressed in this Report. A fiduciary duty is a special relationship recognized in law. 290. 329. A listing broker who has already agreed to pay a commission to a cooperating brokerin the MLS, for exampleshould fill out the Ratification of Fee box. Cooperating broker who is an agent of the listing broker but not strictly a subagent of the seller. For example, the FTC sued to prevent MLSs from discriminating as to the listings that are made available on the Internet, and DOJ sued to prevent NAR from establishing rules against VOWs that limit the ability of a broker's client to see via the Internet all the listing information formerly screened by the broker. 43, available at http://www.lrc.ky.gov/record/06RS/SB43.htm. 220. Under the terms of the settlement, which was approved by a federal judge, the Kentucky Real Estate Commission agreed to cease enforcement of its rebate prohibitions,245 allowing Kentucky consumers to avail themselves of the benefits of increased competition through broker- offered rebates, discounts, and other inducements.246, During the course of the investigation, DOJ found evidence that brokers wanted to restrict rebates because they understood that rebates are a form of price competition. at 233 ("[T]he real puzzle in the real estate business is why does there seem to be this relatively fixed commission structure? 3:05CV188-H, available at http://www.usdoj.gov/atr/cases/f210100/210142.htm. . According to a Workshop panelist, there are approximately 98,000 brokerage firms operating over 200,000 local offices in the United States.143 These offices provide potential employment for approximately 2.5 million real estate licensees (of which more than 1.2 million are members of NAR).144 In 2004, 96 percent of brokerage offices in the United States employed ten or fewer agents.145 From 1983 to 1999, the portion of brokerage offices with five or fewer agents increased from 51 percent to 60 percent.146 In contrast, the portion of offices with a sales force of more than 50 agents never exceeded 5 percent during that time period.147, There is conflicting information regarding the percentage of home sales nationwide accounted for by the largest real estate firms. . NAR, Public Comment 208, at 1 (comment). "185 Consistent with this observation, none of the Workshop participants or commenters provided data on commission rates or fees.186 To our knowledge, REAL Trends is the only source that publishes commission rate data. State commissions, frequently composed of real estate brokers, oversee drafting of and compliance with these laws and regulations.14. 209. Each of the next four largest firms enjoyed less than 10% of the listings and sales. See The Changing Real Estate Market: Hearing Before the House Financial Services Subcommittee on Housing and Community Opportunity, 109th Cong. Each policy had the effect of discouraging brokers from using exclusive agency listings. Specifically, these panelists pointed to rules that keep exclusive agency listings from being uploaded to national real estate websites like Reator.com.310 Recent NAR data show that 77 percent of home buyers search the Internet for homes, and that 24 percent of home buyers first found online the home they ultimately purchased.311 Thus, online exposure appears to be crucial to marketing a home, and, to the extent that successful marketing tends to lead to a higher selling price and shorter time on the market, it is reasonable to assume that homes without such exposure are likely to take longer to sell or sell at lower prices. NAR, Public Comment 208, at 6 ("In a few markets, some firms may have a larger than usual market share, but market shares are known to change measurably from one year to the next."). 313. 151. PDF Connecticut Real Estate Commission Policy on Agency NAR 2006 SURVEY, supra note 4, at 34. The "New" Chapter 452: Defining Real Estate Broker Practice 148. As discussed below, evidence presented both at the Workshop and outside the Workshop contradicts these justifications. The evidence presented above shows a dramatic increase in agent entry in recent years coupled with claims of intense competition among brokers. "); Austin Bd. they are confronted with the question how much can you reduce your commission? 53. D. One Explanation of the Seemingly Contradictory Descriptions of Broker Competition. 1983 FTC STAFF REPORT, supra note 9, at 1. Id. "115, Industry-produced data appear to support this view. The typical real estate transaction involves several steps. In the residential real estate industry, competition is vitally important because buying or selling a home is one of the most important financial transactions a consumer will ever undertake. The Internet's Effect on the Real Estate Industry, By placing more information in the hands of consumers, the Internet has facilitated the growth of nontraditional business models such as fee-for-service brokers, VOWs, and broker referral networks that allow consumers opportunities to substitute their efforts for those of the broker, in many cases in return for lower fees. "150, In any case, competition among brokerages tends to be local, and brokerage shares calculated at the local level can be far higher than those suggested by national data.151 For example, in Re/Max International, Inc. v. Realty One, Inc., the plaintiff's expert presented "essentially unchallenged" testimony explaining that "[i]n a majority of the 161 cities and towns in northeast Ohio, the [two] defendants' combined market share exceeds 50%. As used in MLS rules, short sales are defined as a transaction where title transfers, where the sales price is insufficient to pay the total of all liens and costs of sale, and where the seller does not bring sufficient liquid assets to the closing to cure all deficiencies. They do extensive research online. Of the alternative brokers providing MLS access, 84% reported that they either frequently or occasionally experienced "refusals by other brokers to show homes listed by [their] business," with 49% reporting this as a frequent problem. States require real estate brokers and agents to be licensed. 45. Further, if commission rates are relatively inflexible, such that agents do not seek to attract customers by offering lower rates, agents will compete along other dimensions to gain clients.214 For instance, agents may expend resources "prospecting" for listings by, for example, door-to-door canvassing, mailings, providing potential clients with free pumpkins at Halloween, and calling on FSBO sellers.215, Marketing is often beneficial to consumers and competition,216 and some consumers may benefit from the enhanced service competition in this market. A subagent is a broker, not in the employ of the listing broker, who is engaged to act for cooperate with the listing broker as an agent of the seller. 150. While the Internet clearly has had a significant impact on the real estate industry, one Workshop panelist, an economist, opined that the real estate brokerage industry has not experienced the types of technology gains benefiting consumers that have been seen in other service industries, such as making airline and other travel reservations and buying and selling stocks.126 Several factors may be limiting wider use of the Internet. 327. There are a variety of options available to buyers and sellers from full service agents to very limited service agents with a wide variety of fee structures. The following people testified at the Workshop: Cathy Whatley, real estate broker and Past President of NAR; Robert Hahn, economist and Executive Director, American Enterprise Institute-Brookings Joint Center for Regulatory Studies; Aaron Farmer, Owner of Texas Discount Realty; Thomas Kunz, President and Chief Executive Officer of Century 21 Real Estate LLC; Colby Sambrotto, Chief Operating Officer of ForSaleByOwner.com; Wayne Thorburn, Administrator, Texas Real Estate Commission and Immediate Past President of the Association of Real Estate License Law Officials; Steve DelBianco, Executive Director, NetChoice Coalition; Thomas Early, President, National Association of Exclusive Buyers' Brokers; Philip Henderson, Vice President, Lending Tree; Geoff Lewis, Senior Vice President and Chief Legal Officer, RE/MAX International, Inc; Alexander Perriello, President and Chief Executive Officer, Cendant Real Estate Franchise Group; Lawrence Yun, Managing Director of Quantitative Research, NAR; Chang-Tai Hsieh, Associate Professor of Economics, University of California. at 149. See, e.g., GAO REPORT, GAO-03-749, Airline Ticketing: Impact of Changes in the Airline Ticket Distribution Industry (July 2003) (discussing how Internet distribution lowered transaction costs in the sale of airline tickets), available at http://www.gao.gov/new.items/d03749.pdf; GAO REPORT, GAO/GGD-00- 43, Online Trading: Better Investor Protection Information Needed on Broker's Web Sites (May 2000) (discussing how Internet brokerages charge far less commission per trade on securities), available at http://www.gao.gov/new.items/gg00043.pdf. REAL ESTATE RES. cash payments) and inducements, such as gift certificates, coupons, vouchers, and discounted or free services relating to buying and selling a home, to buyers and sellers.67 These are incentives that typically are offered by cooperating brokers to home buyers to encourage them to use the brokers' services. See HUD REPORT, supra note 201. 2007), Notice of Rulemaking, available at http://www.tn.gov/sos/rules_hearingnotices/2007/1260/1260.20070228.02-37-07.notice.pdf (last updated Feb. 28, 2007). . Licensees who work for the listing broker or for the selling (cooperating) broker are the subagents of their respective brokers. at 149 (listing several features of real estate websites, including property photos, virtual tours, rich text, mapping functionality, and neighborhood information); Sambrotto, Tr. Specifically, by requiring NAR-affiliated MLSs to adopt rules that will allow brokers to withhold their clients' listings from VOW brokers by means of an "opt out,"319 it enables traditional brokers to block their competitors' customers from having full on-line access to all of the MLS's listings. Such rules are illegal if they unreasonably restrict competition,308 and the Agencies recently have challenged, as antitrust violations, MLS rules that unreasonably restrict competition by brokers who use alternative business models. 30, 2000). See DEL. Realty Multi-List, 629 F.2d 1351 (5th Cir. Shiawee X. Yang & Abdullah Yavas, Bigger is Not Better: Brokerage and Time on the Market, 10 J. As part of its investigation, the FTC conducted a survey of 154 "alternative" brokers in 1979. One panelist who is a fee-for-service broker describes this as his "flat-fee plus" option, where, in addition to listing the home in the MLS and placing it on several websites, he provides the seller assistance once the buyer is found. How Does Co-Broking Work in NYC? - Medium NARs operating values, long-term goals, and DEI strategic plan. *Relates to Point No. Id. You can post color photos. 061-0267; Monmouth County Ass'n of Realtors, Inc., FTC File No. 102. at 113-14. Further, proponents of minimum-service requirements have failed to present evidence that this risk is either unique to fee-for-service brokers or so prevalent as to warrant minimum-service requirements. For example, 1% Realty offers buyers a rebate of approximately 1 percent of the purchase price in states that have not prohibited rebates.68 Brokers sometimes also pay rebates to home sellers. 50. A-00-CA-154 JN, 2000 WL 34239114, at *4 (W.D. The subagent, because of this extension of the agent's authority, is also an agent of the principal. Id. Brokerage entry appears to be more difficult than agent entry. While states properly are concerned with issues of consumer fraud, there is no evidence that rebates have harmed consumers or that rebate bans improve service quality. In addition to the MLS-only package, many fee-for-service brokers offer other services.
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