Consumer advocacy group details inequity in real estate commission pricing
A report released today by the Consumer Federation of America (CFA) detailed real estate commission pricing practices and what the group termed "inequity" in commission structures.
In a statement, the group referred to current practices as "inefficient."
“The research provides additional evidence that the structure of agent compensation is both inequitable and inefficient,” said Stephen Brobeck, a CFA senior fellow and the report’s author.
The report listed a number of reasons why current pricing structures are not equitable. These include:
· Limited seller information about agent compensation, as documented by consumer surveys and by research on the lack of information on rates provided by agents and firms.
· Preoccupation of sellers, especially those trying to match the sale of one home with the purchase of another, with sale price and timing.
· Concern that trying to negotiate a lower commission rate will result in less than optimal agent service.
· Unwillingness of most listing agents to negotiate lower commissions – about three-quarters of agents in an earlier CFA survey.
The report suggests that uncoupling listing agent and buyer agent commission rates would significantly increase rate competition and eventually lower fees paid by both sellers and buyers. Uncoupling would also begin to align rates more closely with agent quality of service. Today, there is little relationship between rates and agent service.
Several class-action antitrust lawsuits are challenging the coupling of listing and buyer agent rates, DOJ is investigating the issue, and both conservative (CATO) and liberal (Brookings) think tanks have published reports critical of coupled rates.