5 percent to 5 percent, typical brokerage costs per deal increased 26 percent in real terms during the exact same period.140 At the same time, the efficiencies produced by the Web and other technological advances suggest that broker costs must be falling. The proof likewise recommends that increasing per-sale earnings for brokers induce entry by new brokers so that the typical number of sales per broker declines.
Section A takes a look at the structural functions of the property brokerage industry. Area B describes the nature of competitors among brokers and views about the current state of competitors presented by Workshop panelists and commenters. Area C presents the readily available information on actual commission rates and fees. Section D reports one panelist's effort to make sense of the proof provided in Sections A through C. It is clear, nevertheless, that rebate restrictions hurt customers by avoiding price competitors.258 Minimum-Service Requirements Over the last 2 years, numerous states have actually enforced so-called minimum-service requirements on brokers. As the name suggests, these laws and policies enumerate specific tasks that a broker should perform for a client. Missouri's law is agent of these requirements, mandating that all brokers who get in into an unique brokerage agreement259 shall supply, at a minimum, the following services: (1) Accepting shipment of and providing to the client or consumer deals and counteroffers to purchase, sell, or rent the customer's or customer's home or the property the customer or customer seeks to buy or rent; (2) Helping the client or client in developing, communicating, working out, and presenting deals, counteroffers, and notifications that associate with the offers and the counteroffers until a lease or purchase contract is signed and all contingencies are pleased or waived; and (3) Responding to the client's or consumer's concerns relating to the offers, counteroffers, notices, and contingencies.260 Presently, Alabama,261 Idaho,262 Illinois,263 Indiana,264 Iowa,265 Texas,266 and Utah267 have minimum-service laws that need licensees to perform jobs similar to those specified worldmark timeshare in Missouri's law.268 Further, Kentucky,269 Michigan,270 Mississippi,271 and New Mexico272 recently have considered however not adopted minimum-service requirements.273 Competitive Effects of Minimum-Service Requirements As the FTC and DOJ have described in letters to a number of states, minimum-service requirements damage customers in 2 ways (how much does real estate agents make).274 First, minimum-service requirements annoy customer option by decreasing the choices offered to customers in the market; customers who would otherwise choose a lower-cost fee-for-service alternative are damaged if they can no longer pick their preferred option since it does not abide by state minimum-service requirements.
Removal of Customer Choice In states without minimum-service requirements, a customer generally can select an MLS-only package as the most affordable price/lowest service level choice.275 Minimum- service provisions remove the alternative of buying an MLS-only bundle, or any other individual service (what percentage do real estate agents get).276 Fee-for-service brokers in minimum-service states should consist of the enumerated extra jobs in any plan of noting services they supply, which frequently needs the broker to charge a greater price due to the increased costs and time commitments connected with each transaction.277 To show how minimum-service requirements remove choice, consider the example of a customer who is offering his or her home for $271,263 (the average sales rate of a house in 2005).278 A consumer who resided in a state without a minimum-service requirement might select to acquire a fundamental MLS-only plan from a flat-fee broker for about $7,282 ($ 500 for the MLS-only brokerage bundle listing fee plus a 2.
A customer who resided in a state with a minimum- service requirement, nevertheless, would not have that alternative available. Rather, the customer would need to buy a standard plan of brokerage services for $13,563 or $16,275 (at 5 or 6 percent commission, respectively) or, depending on what was allowed by state law, acquire an enhanced MLS-only brokerage or flat-fee package that satisfies the state requirements, which probably would require an extra expenditure of $100 to $1,500 over the basic MLS-only package for an overall of $7,382 to $8,782, respectively.279 Alternatively, confronted with a higher cost for a fee-for-service broker's base level package, a consumer might choose to carry out the entire transaction on his/her own.
To the level that fee-for-service options cost more, full-service brokers will have less need to provide these incentives. Hence, if fee-for-service brokers are required to raise their costs in reaction to minimum-service requirements, customers who pick full-service brokers are likewise likely to pay greater prices for real estate brokerage due to a decrease in the competitive restriction offered by fee-for-service brokers.
As discussed listed below, evidence presented both at the Workshop and outside the Workshop contradicts these validations. Rather, minimum-service requirements dissuade competition and raise prices for consumers. Argument One: Minimum-Service Requirements Are Essential To Protect Customers Advocates for minimum-service requirements declare that ordinary people are "plainly unable" to handle their real estate deals, and hence argue that states need to mandate the variety of services realty brokers offer to guarantee that consumers get help from a skilled expert.282 Along similar lines, a minimum of one advocate of minimum-service requirements suggests that they are needed because customers who employ fee-for-service brokers are subject to so-called hold-up; once a consumer has participated in an exclusive arrangement with a fee-for-service broker, the consumer efficiently is locked into acquiring from that broker all of the additional brokerage services that subsequently may be required.283 Another argument is that customers best way to get rid of timeshare expect real estate representatives to carry out certain tasks, and that these laws merely satisfy customers' expectations.284 For example, one panelist, the executive director of the Texas Property Commission, noted that minimum-service requirements can "avoid [] false claims by those who sign a company arrangement with a customer, guarantee to supply representation, position the residential or commercial property on the Web, and then stroll away from any further participation in the realty transaction."$1285 The proof, nevertheless, does not suggest that consumers who pick to utilize cost- for-service brokers are damaged free timeshare by performing particular aspects of the property transaction themselves or misunderstand the nature of the contractual relationships into which they enter.