Recently, there has been an outcry from analysts, media outlets, and policymakers about the alleged anti-competitiveness of the real estate industry. Describing the industry as a “cartel,” these so-called experts claim that real estate professionals protect their pocketbooks using unscrupulous tactics, such as price fixing, limiting consumer choice and blocking access to information. Blah…blah…blah.

As a consumer looking to purchase property myself, I’ve experienced a broad range of options and found information readily available. From choosing a REALTOR® to determining the level of service that suits my needs, those decisions are mine. I don’t have as many options when selecting my local telephone service or deciding which cable company to go with. (Wait, you mean there’s more than one? Talk about limited competition!)

Looking at the issue of competition in the real estate industry, I couldn’t help but think about the lack of competition in other industries. Take the nationwide wireless operators. According to the S&P, four wireless operators control approximately 85% of the market share.

Don’t even get me started on the media. The concentration of ownership among media groups has placed five global giants in control of nearly everything we see and hear from mass media outlets. What about the banking industry? Concentration in that arena has also increased dramatically in recent years. But the real estate industry has little concentration, with the top 100 firms holding a mere 17% of the market share. In fact, here in Texas, more than 50% of all agencies are independently owned and operated. Seems to me competition is fierce.  

Just the facts
So what’s the problem? Are these accusations surrounding a real estate “cartel” true? As a consumer, you may be wondering why you should even care. Let the analysts and policymakers duke it out.  But buying or selling property is an enormous undertaking, both emotionally and financially. Knowing something about the industry’s structure may help you feel a bit more secure when delving into what may be the biggest financial transaction of your life. Below, I’ve debunked some myths about the Texas real estate industry. 

Myth: There is a standard commission.
Fact: There is no standard commission. Texas REALTORS® do not collude to set commission rates. The majority of Texas REALTORS® are non-salaried agents that actively compete for clients. In the real estate industry, natural market forces determine the cost of doing business. Sure, there is a range. Most services in any industry are offered in a general price range. Think about accountants and plumbers and lawyers and landscapers. Their rates may vary a bit from one person to the next, but you would generally expect to pay an amount within a certain range for similar services.

If you want very basic real estate services, you can find an agent who offers just that. If you want a REALTOR® who will sell your house and wax your car, well, you’re going to pay a little more. Look at it as similar to the cost for getting one’s hair done. (I am definitely qualified to speak to that!) If you want a simple haircut, there’s a price for that. If you tack on a shampoo, blow-dry, deep conditioning or highlights, that price will increase with each service that you add.   

Myth: Consumers are forced to pay for services that they don’t want.
Fact: There are bundled services and unbundled services. You are free to choose from brokers who offer a full spectrum of options – from extremely limited to full-service. If you don’t want marketing services, you don’t have to have them. If you don’t feel like holding open houses, just say no. No one is forcing you to use a “full-service” broker or requiring you to pay a so-called full commission. In fact, you can choose to sell your home yourself if you like. Although I don’t recommend it.

Myth: The lack of competition in the real estate industry limits consumer choice.
Fact: Did you know that Texas is home to more than 140,000 real estate licensees? That’s 4.3 agents for every 1,000 Texans. And some say the industry is anti-competitive.

That myth is perpetuated by claims that consumers have only one choice when it comes to finding a REALTOR®. It’s all or nothing. That is simply not the case. There are a variety of business models out there. While one firm may do it one way, another may not. If you’re not interested in a full-service traditional broker, do your homework. Your options are not limited.

But just remember that like any other service, though you can negotiate, you can’t dictate the price. I don’t recommend walking into someone’s office and demanding to pay $100 for a full-service listing. It’s important to note that there are a variety of business models, and fees and commissions typically vary accordingly. Find one that works for you.

Myth: Minimum-services laws have forced brokers to charge consumers more.
Fact: OK. Let’s clear this up once and for all. I don’t think I can stand to hear another agent whine about being forced to communicate with his client. And, for your information, that is basically all that the minimum-services law says: Brokers must communicate offers and counteroffers to their clients and answer their clients’ questions. Can you imagine a broker saying that is too much to ask? Without this clarification to the law, brokers were actually arguing that it was acceptable to take an offer on your home and toss it in the trash. I’m pretty sure that’s not what we, as consumers, want.

There is little doubt that competition exists and is thriving in today’s real estate market. With more access to information and a variety of business models to choose from, you can make an informed choice when selecting a Texas REALTOR® who best meets your needs. From the onset, I was reminded to interview several REALTORS® until found one that was right for me. I am passing that little piece of wisdom on. You have more choices than you know when it comes to buying or selling your home.