Blacklisted
Last fall, Marjorie Deprez decided that she didn't need a traditional real estate broker to sell her Chappaqua, New York, home. After all, she had bought the house as an investment and wanted to maximize her profit any way possible. So she paid an online discount broker a flat fee of just under $1,000 to list her home on the Internet.
Deprez would handle everything else. She'd pay the buyer's agent a 2.5 percent commission but save on the usual seller's commission -- in this case, about $25,000.
Smart idea, except when she held an open house for brokers, only a few showed up. When Deprez joked with one of them that she'd been blacklisted, the agent replied, "Who told you?" To Deprez's amazement, she was then informed that a local real estate executive had been calling brokers and urging them not to show her house.
Sure enough, Deprez got very few nibbles, even though her house was priced to sell quickly. Frustrated, she finally took her home off the market.
"It was an organized boycott," says Deprez, who reported her experience to the New York Attorney General's office. Put another way, it was a case of insiders rigging the system to protect their sweet deal. In a traditional home sale, the brokers for the buyer and seller split a commission that usually amounts to around 5 to 6 percent of the sale price. This broker fee doesn't just hit the seller's wallet; the buyer pays more because the commission gets built into the price of the home.
Without question, many sellers are quite willing to pay those commissions, since they want to benefit from services ranging from promoting and showing the property to negotiating the sale. "You also get an arbiter -- someone who can help a husband and wife agree on what price to set and which bid to accept," says Barbara Corcoran, owner of a prominent real estate firm in Manhattan.
Still, plenty of homeowners are eager to reduce their costs by using Web-based discounters to cut out the middleman -- a formula that has worked for sales of books, stocks and travel deals. But some traditional brokers have found a way to resist this threat.
Nothing is more important to real estate cartels than controlling the Multiple Listing Services (MLS), the databases of homes for sale. Real estate websites often allow home-buyers to peruse local MLS listings on the Internet. Yet they sometimes censor or omit listings sponsored by a discount broker. And many established real estate agents won't allow their own listings to appear on a discount broker's site. That spiteful move led the U.S. Justice Department to sue the National Association of Realtors (NAR), the industry's ultra-powerful lobbying group, for allowing members to discriminate against Web-based brokers. (The Justice complaint is expected to take years to resolve.)
Deprez would handle everything else. She'd pay the buyer's agent a 2.5 percent commission but save on the usual seller's commission -- in this case, about $25,000.
Smart idea, except when she held an open house for brokers, only a few showed up. When Deprez joked with one of them that she'd been blacklisted, the agent replied, "Who told you?" To Deprez's amazement, she was then informed that a local real estate executive had been calling brokers and urging them not to show her house.
Sure enough, Deprez got very few nibbles, even though her house was priced to sell quickly. Frustrated, she finally took her home off the market.
"It was an organized boycott," says Deprez, who reported her experience to the New York Attorney General's office. Put another way, it was a case of insiders rigging the system to protect their sweet deal. In a traditional home sale, the brokers for the buyer and seller split a commission that usually amounts to around 5 to 6 percent of the sale price. This broker fee doesn't just hit the seller's wallet; the buyer pays more because the commission gets built into the price of the home.
Without question, many sellers are quite willing to pay those commissions, since they want to benefit from services ranging from promoting and showing the property to negotiating the sale. "You also get an arbiter -- someone who can help a husband and wife agree on what price to set and which bid to accept," says Barbara Corcoran, owner of a prominent real estate firm in Manhattan.
Still, plenty of homeowners are eager to reduce their costs by using Web-based discounters to cut out the middleman -- a formula that has worked for sales of books, stocks and travel deals. But some traditional brokers have found a way to resist this threat.
Nothing is more important to real estate cartels than controlling the Multiple Listing Services (MLS), the databases of homes for sale. Real estate websites often allow home-buyers to peruse local MLS listings on the Internet. Yet they sometimes censor or omit listings sponsored by a discount broker. And many established real estate agents won't allow their own listings to appear on a discount broker's site. That spiteful move led the U.S. Justice Department to sue the National Association of Realtors (NAR), the industry's ultra-powerful lobbying group, for allowing members to discriminate against Web-based brokers. (The Justice complaint is expected to take years to resolve.)
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