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The DOJ vs. NAR: What’s the impact to real estate agents?

Senior Real Estate Reporter Matthew Blake answers questions on the battle between NAR and the DOJ

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[Editor’s note: As of November 2022, we no longer use Slack, and we’re happy to share that we’ve moved to Circle for our new community platform. We will be continuing Q&As, live discussions and more in this new community platform. If you’re a member and not a part of our Circle community yet, you can click the link at the end of the article to join.]

The following Q&A comes from the HW+ exclusive Slack channel, where HousingWire Senior Real Estate Reporter Matthew Blake answered questions about his latest coverage on the impact of the DOJ’s decision and how the industry is gearing up to respond. During the Q&A, Blake discussed the ramifications of previous DOJ investigations into NAR and conversations he has had with top-level agents on how they’re feeling about this news.

The following Q&A has been lightly edited for length and clarity.

HousingWire: To start, the Department of Justice allowing itself to pursue a broader investigation into the NAR is a high-level, brewing conflict. How, if at all, does it practically affect agents?

Mathew Blake: This is not an obscure, legal matter. The DOJ repeatedly said in withdrawing from its consent decree with the Realtor’s trade group that it is looking at commissions. Many scholars and antitrust lawyers, but not many agents, say U.S. real estate commissions are artificially inflated by an illegal horizontal conspiracy between NAR and brokerages. So, if DOJ were to believe that, they would be pursuing ways to lower commissions for consumers.

In other words, it could affect the very economic model we know for agents — which is that they are independent contractors who make a living on commissions that can be 3% each of a total home purchase price

HousingWire: Interesting insight. To build on that, would you consider NAR to be a monopoly?

Mathew Blake: I’m not a lawyer so I don’t know, but the lay understanding of monopoly is dominance of one field, and NAR is certainly the dominant trade group for agents. But more than just representing labor, they also represent management (brokerages) and claim to work in the best interests of consumers. So, they have an outsized role in the American real estate market, and, I would say, a unique one among trade groups. The question, though, for antitrust purposes is whether they are a monopoly causing harm to consumers and that’s where you get into full-throated arguments

HW+ Member: Back in May, you did a Q&A over your 3-parts series on real estate commissions. Knowing what you reported and wrote about then, do you think the concerns agents had then are the same? worse? How do those three stories and this new one play together?

Mathew Blake: Back then the DOJ had hammered out an agreement with NAR that seemed friendly to the Trump administration (President Trump himself gave an hour-long speech before NAR back in 2019) and it seemed like if NAR were to be challenged it would come from homebuyers and sellers teaming up with lawyers to file lawsuits.

Now, however, the Biden administration is basically saying A.) Real estate commissions are a big deal and B.) We don’t know what we want to do about them, but we want to put resources toward conducting a broader investigation. In short, Trump admin thought NAR was manageable, Biden admin wants to check a little more.

HW+ Member: My question on commission, since there are discount brokers offering low commission, isn’t this more about the marketing of the commission rather than the commission structure? People have choices to go to lower commission brokers.

Mathew Blake: People do and don’t. Homebuyers I’ve spoken to are largely not aware that they can negotiate commissions, and may not be aware that they can use a Redfin agent for less money, much less a Clever or REX agent.

So, yeah, I partly agree it’s marketing but “discount brokers” are an exceedingly small part of the market less than 1% if you look at RealTrends sales volume numbers. Many brokerages profess to have different business models, and some genuinely do, but when it comes to the consumer, almost all push the seller or buyer to a 2.5/3 percent commission

HousingWire: Separate question. The DOJ has investigated NAR before. What were the ramifications of those investigations?

Mathew Blake: The closest precedent to this was in 2008 when DOJ in the twilight of the George Bush administration hammered out an agreement with NAR. That agreement, in effect, prohibited NAR from prohibiting websites with access to Multiple Listings Service data, eg Zillow, from posting those listings.

It basically put into the public all the homes on the market, and commentators at the time wondered if it might be a death knell for agents. Of course, it absolutely wasn’t — agents are doing better than ever. Anyway, what’s different this time is that it is the start of an administration, and the antitrust division has at least the next 3 years here with their current leadership and personnel to probe everything and anything about NAR.

HW+ Member: So for NAR, is it critical to understand the strains between this new leadership?

Matthew Blake: Probably — I think NAR is understandably confused. As my article reports, they are blindsided by what the Biden administration is doing here. And it’s not clear who is doing it. Richard Powers, who has been a DOJ antitrust lawyer since the Obama administration, has been the one who has given prepared, public statements on withdrawing from the consent decree.

But Powers doesn’t lead the DOJ Antitrust Division. In fact, President Biden has yet to appoint a division leader. So it’s really unclear who at DOJ is saying, “Man, that NAR settlement didn’t go far enough”

HW+ Member: What do you think NAR’s argument against this DOJ action will be?

Matthew Blake: NAR has by its own admission has been caught flat-footed here and their arguments have not advanced beyond, “DOJ has breached its word and our policies are good policies.” NAR is stuck between its customary role of explicitly instructing agents, listing services, and brokerages how to do their job and seemingly not having a read on what of their powers DOJ is investigating.

Ultimately, though, I think their argument will be “The consumer has spoken” — Like Logan said there are alternatives in the market, and consumers are choosing the traditional commission model even amid so much access to information about what homes are on the market.

HousingWire: We want to know more about some of the different opinions on this issue since you talked and emailed with several agents for this story. What are agents feeling right now about both this investigation and their confidence in NAR?

Matthew Blake: Agents are of a few general camps. One is that this is too preliminary and abstract for them to deal with right now. Another is they are confused, particularly about what they must disclose now when it comes to commissions. NAR settled with the DOJ back in November in a way that forces more agent transparency on commissions.

Now that settlement has been withdrawn…so can local MLS’s return to not posting commissions? Finally, many agents are very angry with the Biden administration. They already feel exposed — many tell me, “In what other industry does the public know exactly what you make? Maybe journalists should have to disclose what they make!”

HW+ Member: Now, there are couple or few places that have actually been disclosing commission, right? Have you talked to agents in those areas about their thoughts on these changes? Or thoughts on how that serves as a case study in a way?

Matthew Blake: Yeah, so Redfin, which has positioned itself as an alternative commission model, does post commissions, but they’ve yet to publish a study on how that has changed what consumers are paying. Again, I think agents are OK with commissions being posted — a little miffed that their possible paycheck is publicly known, but OK with that aspect of the DOJ/NAR settlement. They are less okay with the uncertainty of what might come next.

HousingWire: Then what is NAR’s next step?

Matthew Blake: I think their next step is to fight fire with fire here — I don’t see them negotiating with DOJ. Pure speculation, but I could see, for example, an ad campaign about the value of your local real estate agent. I think this is where NAR puts together its considerable resources to protect a commission model that’s been around for 100 years.

HousingWire: That sounds intense. To wrap up this Q&A, What is the DOJ’s next step? What might be the next revelation — and next news story — we see on this topic?

Matthew Blake: I think the next news story could be DOJ attaching itself to private lawsuits. Another possibility is DOJ files its own lawsuit, one that may specify what they see as an anti-competitive monopoly with NAR. That’s what antitrust lawyers who know more than I hypothesize, but it’s not clear – the Biden administration has not yet laid out a path forward here.

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