The National Association of Realtors (NAR) and real estate tech startup REX are duking it out over the value of Realtors and competition in real estate, in the pages of The Wall Street Journal.
Jack Ryan, CEO and co-founder of REX, and Jonathan Friedland, a brand and public policy manager for the company, penned a March 3 opinion piece for The Wall Street Journal titled, “When You Buy or Sell a Home, Realty Bites.”
The piece opens with a summation of the U.S. Department of Justice’s fight with NAR over a decade ago, that ended with a settlement that the trade group not discriminate against real estate brokers using virtual office websites, like Redfin’s listing site. The decree that came in the wake of the settlement recently expired.
“While the nation’s roughly 1.3 million residential brokers no longer monopolize the flow of housing information, they’ve shielded themselves with a skein of anticompetitive practices, such as restrictive ‘all or nothing’ membership rules and commission tying practices,” the authors argue. “These have kept the high fees they charge unchanged since 1991.”
The piece compares fees in the United States — an average of 5-6 percent of transaction value – to those in other countries like Canada and Belgium, where the fees are three percent and Denmark, Finland and Australia where fees are 2 percent. Fees in the United States remain so high as a result of lobbying and anti-competitive practices by NAR and other trade associations, according to the authors.
“The high fees might make sense if residential Realtors always offered an extremely valuable service,” the authors write. “But according to NAR itself, most buyers do the work themselves, spending months on the Internet identifying attractive neighborhoods and homes before calling a real-estate agent simply to open the door. While agents no longer routinely drive their clients around for consecutive weekends showing them homes, their fees remain as high as ever.”
REX, a Los Angeles-based startup — which recently nabbed a $45 million funding round — charges a 2 percent transaction fee for sellers. The company relies on artificial intelligence and operates outside of any multiple listing services. It uses technology to target to analyze and identify potential buyers then targets those buyers with web-based ads.
John Smaby, the 2019 president of NAR, wrote a letter to the editor in response to the Op-Ed that was published on March 10, in which Smaby defends the role of the Realtor and the fees associated with a transaction.
“Messrs. Ryan and Friedland claim that ‘most buyers do the work themselves,'” Smaby writes. “This shortsighted assumption infers that the only ‘work’ that goes into this transaction is the search for property itself.”
“NAR’s members showcase their value in guiding buyers as they sift through a sea of misleading information found online, while also helping clients navigate inspections and appraisals, secure reliable mortgage lenders and effectively prepare their homes for sale, along with so much more,” Smaby added.
The defense of the value of a Realtor comes at a time when NAR is pushing out its own campaign to highlight the value of Realtors versus non-dues-paying real estate agents in the industry.
The conversation also comes on the heels of a massive lawsuit against NAR and a number of the industry’s top real estate brokerages and holding companies. The lawsuit alleges that requiring sellers to pay the buyer’s agent fees has inflated costs for sellers.
The lawsuit also alleges the multiple listing services and defendant franchisors use agreements with local franchisees and their influences among Realtor leadership to require brokers to adhere to NAR’s rules, including the Buyer Broker Commission Rule.