Buyer’s real estate agents often claim that they work for free when helping you buy a home. This is false.
On November 19, 2020, the Department of Justice has entered a proposed settlement requiring the National Association of Realtors® to repeal and modify certain anticompetitive rules in the real estate industry. Among other conditions, this settlement aims to curb the widespread abuse of the notion that buyer agent works for free when helping a consumer to buy their new home
Why does this matter? The fact is that ALL brokers work for fees, better known as commissions, and these fees are all too often highly uncompetitive. In my recent article, I addressed this issue by focusing on the Five Real Estate Commission Myths often promoted to consumers as a way to misinform and capture hidden or uncompetitive fees from the home purchase or sale. All uncompetitive practices directly increase the costs of buying and selling homes in the United States.
The number one myth in real estate is that the buyer agents work for free. This myth in itself yields Zillow Group 2.7 billion USD (2019) annual advertising revenue. There are zero disadvantages to negotiate a buyer commission refund with a fully qualified, licensed, and motivated real estate agent but self-serving platforms like Zillow do not want homebuyers to know this. Zillow is entirely silent on the existence of buyer commission rebates, while the Department of Justice aims their best to educate consumers about rebates as one of the most important and legitimate savings mechanism when buying a home
Buyer agent commissions are paid by buyers, indirectly, through their mortgage, and these commissions silently reside in your mortgage payments - this is an essential element that allows the buyer to negotiate a competitive commission refund with their agent.
Another misleading myth about how brokers work for free has to do with referral fee networks that claim that their "matching service is free and unbiased." Not only do these paper brokers blatantly violate the Sherman Antitrust Act by allocating consumers to random independent brokers, but they DO also cost consumers billions in hidden commission kickbacks each year.
The legal settlement at hand, proposed by the DOJ, does not address the broker referral fee problem. The only way to solve this problem is to stop them entirely. Referral fee networks have exactly zero reasons to exist because collusion is illegal in the United States due to a set of strong antitrust regulations. Referral fee networks are "paper" brokers that operate on the idea of illegally monopolizing the brokerage industry via the Internet.
DOJ's proposed settlement is not entirely complete, and there is a loophole left unattended. To help the government to resolve it, I have asked the Department of Justice to add a separate notion that prohibits buyer brokers from claiming that someone else pays for their fees. This notion aims to protect the buyer from the idea that the seller pays for their commissions. Homebuyers pay for all closing costs when buying a home and all commission fees are eventually paid by buyers.
The proposed settlement by the Department of Justice is an important step that helps the HomeOpenly team fix the broken real estate industry practices. HomeOpenly Open Marketplace™ brings transparency to the most risk-averse transaction in consumers’ lives and we all need help from the protection laws in the United States.
Real estate brokers must legally advertise their services. A fair housing marketplace allows consumers to make informed decisions about all of their available options and clearly-understood fees. Brokers never work for free. Referral fee networks never collude for free. These are the facts. At HomeOpenly, we stand by these facts, promote them, and we build our product in accordance with the law.
Here is another fact: HomeOpenly is an Open Marketplace™, HomeOpenly is not a broker, and HomeOpenly will never become a broker. HomeOpenly is an impartial database of savings information for financial services associated with your home that spans across 130,000,000 properties in the United States. All our revenue comes from optional ads, clearly labeled. Brokers never pay us to advertise. Brokers never pay us a cut of their commissions. We are a deliberately free and unbiased environment for consumers to meet highly competitive service providers.
At HomeOpenly, our mission is to improve your homeownership experience from the day you buy your home, during the entire time you live in your home, while you work hard to improve and maintain your home, to the day you decide to sell.
Our mission meets the efforts of the Department of Justice, Consumer Financial Protection Bureau, and the Federal Trade Commission. All of these federal agencies work hard to protect open markets and consumers in the United States from deceptive practices and advertising methods, and especially with the use of the Internet. Those of us who believe, support, and defend the free markets and fair advertising principles are at the heart of personal and business success in America.
If you have a question or comment about an antitrust issue, you may submit it to the Bureau of Competition at the United States Federal Trade Commission and/or to the Antitrust Division of the United States Department of Justice
If you have a question or comment about federal consumer protection financial laws, including RESPA, you may submit it to the Office of Enforcement of the United States Consumer Financial Protection Bureau
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Feel free to contact us if you need further assistance. At HomeOpenly we aim to make the opportunity of homeownership transparent, affordable and an open experience.