Editor’s Note: Inman News readers are sharing their views on a path forward for the real estate industry as a part of the Roadmap to Recovery editorial project. Click here for more details. The following is a guest essay by Bruce Hahn, president of the American Homeowners Grassroots Alliance.
By BRUCE HAHN
A number of factors will change business models and practices in real estate services, but how those models and practices will be changed is much more difficult to predict. Obviously the march of technology development and growing consumer technology proficiency will continue to increase the level of disintermediation between more and more consumers and various types of real estate services professionals.
Consumers will increasingly procure required real estate services on an a la carte basis, and there will be growing numbers of niche markets tied to real estate service specializations. It is very difficult to predict which business models and technologies will be created and which will succeed.
Another significant change factor lies in how the real estate brokerage sector itself deals with the inherent internal tensions between large vs. small companies and traditional vs. new business models. Successful industry trade associations are able to strike a balance between the competing needs of various types of members, which is a reality in almost every type of business.
However, in some cases a specific member segment can become disproportionately dominant and a national, state, or local association can favor that segment at the expense of the others. Service offerings, pricing and policy objectives can become more skewed to increasingly benefit the favored types of companies.
From an outsider’s point of view, that appears to be happening in the real estate brokerage sector. The larger, traditional franchises and companies appear to be increasing their domination of the industry’s national, state and local associations. Evidence of that includes those associations’ promotion of laws and regulations that undermine the nontraditional business models of their own members.
The U.S. Justice Department, the Federal Trade Commission, consumer organizations, and major media organizations have all correctly concluded that the real estate brokerage sector’s current self-regulation processes and procedures have in many cases led to violations of U.S. antitrust or anti-competitive laws, and/or worked against the best interests of American homeowners.
What happens next is up to the real estate brokerage industry. I used to work for the National Association of Manufacturers, and at one point the Fortune 50 companies became so dominant that NAM’s small members threatened to quit en masse and form their own, new manufacturers association.
Will the small, independent real estate brokers that make up the heart and soul of the industry and the new-business-model brokers ever get to that point and join together and rebel against the corporate suits in any of the national, state and/or local associations? If they do it would probably reduce or eliminate industry violations of antitrust laws.
That would be a good thing from a consumer perspective and would also help restore the real estate brokerage industry’s reputation. Based on past practices, the status quo will lead to increased dominance of the large real estate brokerage firms and more violations of the nation’s antitrust laws. If such antitrust violations continue, it can only lead to an increased role for the federal government in the regulation of the real estate services sector, and more bad press.
Bruce Hahn is president of the American Homeowners Foundation and the American Homeowners Grassroots Alliance.
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