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How Did Realtors Arrive At 6% Commission Rate?
Posted by Matt Newbill in For Sale by Owner, News, Tips on December 4th, 2006
In 1950, the National Association of Realtors (NAR) code of ethics stated that “every Realtor . . . should maintain the standard rates of commission adopted by the board and no business should be solicited at lower rates.” Realtors justified this as necessary to protect the public against excessive rates. Although, a 1950 Supreme Court decision found the brokers guilty of price-fixing in violation of antitrust laws, this holding did not end such price fixing.
Many brokers argued, rather, that the federal antitrust laws only applied to Washington, D.C. brokers in that case, and not to brokers in the states. It wasn’t until 1971 that the NAR officially adopted a policy of “hands off” regarding commission rates. Furthermore, the Department of Justice (DOJ) had to bring antitrust actions to end “suggested fee” schedules, which, the FTC noted, continued to have a lingering effect. Brokers recognize that lowering their fees would not likely increase demand for their services, but would primarily reduce their revenues, possibly a lot.
Isn’t it funny that this is similar to the environment the FTC found for state regulators in the funeral industry? This history blip courtesy of: A Critical Assessment of the Standard, Traditional, Residential Real Estate Broker Commission Rate Structure. Published by the AEI-Brookings Joint Center For Regulatory Studies, 2006
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