US Realtors Act As ‘Cartel,’ UC Berkeley Study Says

BERKELEY, CA — America's real estate industry operates under a business model that would likely make Pablo Escobar blush.

That’s according to newly published UC Berkeley study, the findings of which compares the National Association of Realtors to a “cartel” that is says bilks customers out of $50 billion annually.

The UC Berkeley Business Law Journal published the study, which was authored by independent researcher Mark Nadel.

Nadel’s report, titled “Obstacles to Price Competition in the Residential Real Estate Brokerage Market,” accuses the NAR and its members of engaging in anticompetitive practices.

The report says the NAR uses a monopolistic stranglehold over the industry through Multiple Listing Service (MLS) to maintain a 6 percent commission fee against competitors charges lower commissions.

The 6 percent fee is based on an outdated early 20th Century business model, the report says, noting that technology has dramatically reduced the costs associated with real estate transactions.

"So, why haven't new entrants with lower and different pricing models undermined the current pricing structure of the approximately $90+ billion/year residential real estate brokerage market and led prices to spiral downward?,” Nadel’s report says.

“The problem for those entrants is that the residential real estate industry is structured to require peer cooperation to complete transactions. Thus, innovative entrants offering to compete on price have been stymied by traditional real estate brokers acting as an informal cartel."

An online realtor that operates outside the MLS cited Nadel’s study in a news release assailing the NAR.

Artificial intelligence and improved search functions enable are among the technologies today’s realtors use that have cut costs, REX Homes CEO and co-founder Jack Ryan said in a statement.

Ryan said his company has reduced commissions to between 2 percent and 2.5 percent.

"This important research shows that real estate fees should be tied to valuable service, yet according to the National Association of Realtors, most consumers already do the work themselves,” Ryan said.

REX Homes filed a federal antitrust complaint against Zillow, Trulia, and NAR.

The NAR disputes Nadel’s findings.

“The study in question is based on false premises and not grounded in facts or reality,” the NAR said in a statement.

The MLS system incentivizes cooperation between brokers who share listings in one place, giving buyers the most options and sellers access the largest possible buyer pool, the NAR said.

The NAR said Nadel’s assertion that it works to protect the 6 percent commission is inaccurate.

The group said the buyer’s broker can negotiate the commission with the seller’s broker.

“The cooperative broker MLS system levels the playing field, allowing smaller brokerages to compete with larger ones,” the NAR said in a statement.

“Within seconds of logging into an MLS, you have instant exposure and access to the largest, centralized database of residential real estate listings.

“By having all properties listed in one location, even the smallest of brokers have access to the same listings, information and pool of buyer brokers as the largest brokers. Without the collaborative incentive of the existing MLS, brokers would create their own separate systems of cooperation, fragmenting rather than consolidating property information. REX is trying to take benefits of the MLS system without contributing to it. the NAR said.”