In the 2008 real estate-linked recession, home values dived, but many prospective buyers were shutout and many consumers were marooned in homes they could not sell. Regulators forced lenders to impose draconian restrictions on qualifying consumers for mortgages. Appraisers were intimidated by regulators into low-balling estimates of home values, infuriating the owners. That led to a vast swamp of homes with mortgages higher than appraised value, so-called underwater properties.
To survive in that low volume market, a few real-estate professionals had to bend their cast-iron rule of 6% commissions. As well, a few entrepreneurs tried to break into the market controlled by the real-estate guild, by offering a la carte services and lower commissions or fees. Resistance from the incumbents was stiff, so one brave person (Aaron Farmer) sued the state of Texas and was helped by the Federal Trade Commission (FTC) and the Department of Justice (DOJ). The DOJ and FTC saw anticompetitive behavior that needed to be checked. The DOJ imposed a 10-year “consent” decree on National Association of Realtors (NAR), limiting many kinds of anticompetitive behavior.
Much has changed since the 2008 decree was imposed. Technologies have improved and cheapened. The internet is nearly ubiquitous. Consumers are tech-savvy and they have much better access to both the information and tools useful for selling their own home. Furthermore, many innovations similar to Aaron Farmer’s 2008 proposed services now benefit consumers. Together these have helped expand consumer choices on where to live.
Promotional help from sophisticated services such as Zillow, Redfin, Realtor.com, Trulia and MLS provide promotional listings posted on the internet, the first place that most buyers visit when they are in the market for a home. No longer is it necessary to read through inky want ads in the local newspaper to find a less than helpful 20-word description of houses for sale.
For sellers who want more help than just a listing, there are services such as homebay.com. Homebay.com will help with crafting the listing, will post it to the best places to achieve wide coverage of prospective buyers, help with a yard sign, lockbox, help with offers and counteroffers, and the closing paperwork. In effect, they act as a seller’s agent for a fixed fee starting at $2,000 (they would not elaborate on their fee).
Some home value estimation sites offer grossly inaccurate estimates. For example, an 18-acre farm was pieced together by buying individual lots and then having the real-estate tax authority bond them into one property. A famous estimation site could not get beyond insisting that the amount paid for the last piece was their estimated value for the whole farm. In another instance, that same estimation site claimed a Florida vacation home bought for $20,000, was suddenly worth $112,000. The estimate was later decreased to $80,000. Even when free, some high-tech services are costly due to errors.
Bad estimates are not the end of buyer-beware warnings, and disappointments are not limited to newfangled real-estate services. Although there are several home value estimate sites (undermining the relevance of paid appraisers), some will not share their estimate unless you give them far too much personal information. Clearly, they want to sell your identity to prospective real-estate agents. The state of New Jersey posts some of the misbehaviors by licensed real-estate agents, along with the lenient punishments they impose (e.g., attend 3 hours of continuing education and pay a small fine). Fortunately, agent misbehavior is uncommon.
The DOJ-NAR consent decree will expire in November of 2018, but some are asking Congress to make it permanent. Unless there is noticeable anticompetitive behavior, we are better off without heavy oversight from federal agencies. The innovations in real-estate sales have reduced the cost and work entailed in selling homes. At this time, the DOJ-NAR consent decree does not need to be extended.