Out of curiosity, do you feel the real estate industry, as a whole, is competitive? I don’t think anyone in the real estate world would doubt that the business is very competitive. But the federal Department of Justice (DOJ) and the Federal Trade Commission (FTC) were not so sure, so a few months ago, they held a “workshop” on the state of competition in the real estate brokerage industry. The National Association of REALTORS^® (NAR) was among those groups invited to testify at the workshop. NAR General Counsel Katie Johnson summed up NAR’s position as follows: “NAR believes DOJ and the FTC should conclude that the residential real estate industry is robustly competitive with multiple business models offering consumers the prices and services to fit their needs.” Robustly competitive. I think that sums it up well.

What proof did NAR offer? To start, NAR pointed to dramatic changes in technology over the past decade, which have enhanced the real estate consumer’s experience. As evidence, NAR pointed to the thousands of websites and mobile apps available to consumers to view property listing data. NAR explained to the federal regulators how REALTORS^® help consumers create, market and ultimately close real estate transactions utilizing consumer- friendly technology. NAR also explained the intense competition for leads and listings that exists in today’s market.

NAR also described the role of MLSs, after a listing is created, and how the rules and policies of MLSs create efficient marketplaces for consumers by organizing and standardizing listing information. NAR also addressed head-on the argument made by some that MLSs hurt consumers and market competition by denying third-party aggregators like Zillow access to MLS data. NAR argued that because Zillow and Trulia don’t provide brokerage services to consumers, denying aggregators access to proprietary MLS listing data is not exclusionary. NAR rightfully pointed out that third-party aggregators are in the business of getting “internet eyeballs” and not providing brokerage services, and therefore limiting the aggregators’ ability to access MLS data does no harm to consumers of brokerage services.

But beyond technology, listing data and MLS functions, NAR made the case for the human side of real estate — and that’s us. NAR rightfully explained that despite the positive contributions of technology and data, consumers still choose to hire real estate professionals to help them buy and sell homes. In fact, a whopping 92 percent of consumers used the services of a real estate professional in their transaction. No one, or rule, forced them to do so. NAR reported that 87 percent of buyers bought their home through a real estate agent or broker! Another 7 percent bought directly from a builder or their agent. That leaves a mere 5 percent of consumers who did not work with a real estate professional. 

So what’s the takeaway? The fact is consumer-facing websites provide home listings, which empower consumers with information and data; but when consumers are serious about buying or selling, they continue to seek professional assistance to navigate the process. Despite the great advancements in data details and access, people still want the help and counsel of a professional. This is a testimony to the value REALTORS^® bring to the process of buying and selling a home. 

To further demonstrate that competition is alive and well in the residential real estate space, NAR pointed out the multitude of business models operating in today’s market. Consumers can choose everything from doing the transaction themselves to hiring full-service brokerage assistance and everything in between, including different brokerage models such as discount, flat-fee and full-service hybrid — and even iBuyer brokerage models too. And with low barriers of entry to obtain a license or open an office, it’s hard to imagine an industry that has more robust competition!

NAR also raised the issue of commissions and compensation to demonstrate just how vigorous competition in the real estate marketplace can be. NAR explained that consumers enjoy such diverse choices for services and fees that consumers can also negotiate prices for the services they receive. Moreover, agents don’t get paid in the MLS unless there is a successful transaction! NAR argued that this “contingent fee” model is perhaps the most pro-consumer aspect of the residential real estate market. 

NAR also cautioned regulators to keep a close eye on the “advertising platforms” like Zillow. While these platforms offer consumers an easy and sometimes entertaining home-shopping experience, they can add confusion and introduce potentially anti-consumer information into the marketplace. For example, NAR pointed to one platform product, Zillow’s Zestimate, which often misrepresents the price or value of properties. Even by Zillow’s own admission, Zestimates have a median error rate of about 8 percent. Most consumers don’t understand this wide margin of error, which often causes confusion and conflicts for sellers when pricing a home for sale or for buyers in determining what price to offer.

NAR should be congratulated on its full-throated defense of the competitiveness in our industry. By demonstrating the industry has multiple business models that offer consumers a variety of prices and services to fit their needs, it’s hard to conclude that there’s an industry more competitive than real estate. Hopefully the government regulators heard the message loud and clear. Robustly competitive indeed.