New Study Details How Real Estate Insiders Control State Regulation and Enforcement

REX Explains New Study Puts Real Estate Foxes In Charge of Consumer Henhouse

 A new report put a spotlight on a troubling statistic: real estate insiders overwhelmingly control state real estate regulatory boards.

The Consumer Federation of America (CFA)’s recently released report entitled, “State Real Estate Commissions: Do They Serve the Consumer Interest,” found that industry members hold 74 percent of state real estate commission seats and of the 378 commission seats, not even one seat is filled by a consumer or housing advocate. 

“The Consumer Federation of America report shows how big real estate serves as judge, jury, prosecutor, and police officer for real estate regulation. This is the definition of the fox controlling not just the hen house, but the entire chicken and egg supply chain,” said Michael Toth, Senior Vice President and General Counsel for REX, the Austin-based real estate tech company. “The solution to the outrageously high cost of selling a home is competition and transparency, not industry cronyism.”

The new CFA research is the first report to focus specifically on state real estate commissions. The report notes that “at a time when the brokerage industry is facing much public scrutiny and criticism, especially for anti-competitive practices … industry-dominated commissions have sat on the sidelines.

Despite interest from the White House, Justice Department, and the Federal Trade Commission, state real estate commissions have taken no action on pro-consumer pushes to allow consumers to negotiate lower commissions. The CFA report found a number of commissions have “supported and defended anti-competitive practices, notably state bans on buyer broker rebates and agent minimum service requirements.” This is especially troubling for consumers as the Justice Department has bluntly stated: “rebate bans artificially inflate the cost of real estate service.” 

Stephen Brobeck, a CFA senior fellow and the report’s author stated: “The lack of independent and effective regulation has contributed to the anti-competitive practices that are the subject of private and government anti-trust litigation.”

Key stats from the CFA Report: 

  • 49 states and the District of Columbia have Real Estate Commissions. 

  • Only 11 states specify that commissions include more than two non-industry members, 

  • Of the 378 seats in these commissions, only 78 percent are held by individuals inside the industry. 

  • Of these 378 seats, none are held by a consumer or housing advocate.

  • Only 11 states provide consumers with adequate information online. 

A large majority of Americans support public and consumer representation on commissions. A September Ipsos/CFA survey found that: 

  • 43% believe there should be equal industry and non-industry representation. 

  • 29% believe the industry should retain majority status. 

  • 28% believe non-industry members should fill a majority or all board seats.