Real Estate Commissions; Antitrust; Follow The Money; OPEC; Why It's A Moot Point

OPEC BRINGS AMERICA TO ITS KNEES!

OPEC is probably the most famous “cartel” of all time b/c it effectively brought America to its knees in the 1970s with its oil embargo and price floors.

OPEC or the Organization of Petroleum Exporting Countries was founded in 1960 and by the 1970s it had so much power, it could strike terror into the hearts of world leaders by threatening to push up oil prices (with production limits).

BUT, by the early 1980s, OPEC was all but powerless, as oil production went through the roof and oil prices plummeted, as a result of deregulation and the breaking of inflation in the U.S.

This happened again and again too; the fracking revolution of recent years comes to mind as does the beginning of the COVID crisis when producers literally could not give oil away.

Even in the best of times, OPEC members constantly squabble and cheat with their prescribed production limits (meant to keep prices inflated).

NREP VIDEO DISCUSSES DOJ SETTLEMENT WITH NAR

I thought of OPEC when I watched this short video today from the NREP: Something Fishy With The DOJ; NAR Settlement Pullback.

The NREP guys can find a conspiracy in almost anything, and they have found one here too.

TLDR: The Department of Justice (DOJ) went after the National Association of Realtors (NAR) in an antitrust action, claiming that NAR is a cartel that keeps real estate commissions too high.

A “cartel” is a group of producers or service providers that works in tandem to artificially inflate prices.

Anyway, the DOJ had worked out a settlement with NAR but they recently reneged on the agreement.

WHY THE DOJ RENEGED ON NAR SETTLEMENT

The NREP guys believe it is b/c of pressure from tech firms and iBuyers (Zillow, Offerpad, Opendoor, etc.) in particular.

I think they might be right too, as political commentators remind all of us constantly to “follow the money” whenever we really want to find out what is influencing policy nowadays.

With government regulators now more involved than ever in our economy, influencing lawmakers and regulators is now more important than ever for long-term success within an industry.

And that influence often requires massive amounts of money to pay lobbyists and to “donate” to politicians as thinly disguised political action committees.

And unfortunately for NAR, tech firms have more cash than ever to employ to achieve their desired goals.

The NREP makes the valid point that the iBuyers have little to stand on here too b/c their “effective commissions” average close to 7.5%, compared to the much lower average of 5.0% charged by NAR members.

NAR used to be one of the most powerful lobbies in Washington, so it is fascinating to see them get over-powered by tech firms (assuming the NREP is correct) – a definite sign of the times.

SETTLEMENT IS A MOOT POINT ANYWAY

But – here is my broader point: It’s probably all moot in any case and OPEC has shown us why.

Technology and price competition, particularly in the face of supply gluts, always find ways to break cartels.

So while NAR has had a long and wonderful run (I support NAR btw b/c I am well aware of how hard agents have to work), average commissions will plummet at some point irrespective of NAR, regulations, iBuyers or anything else.

It is just an evolutionary reality that both lenders and agents will continue to face.

TWICE THE VOLUME FOR SAME PROFITS

When rates go up and margins tighten in the mortgage industry, we are forced to figure out how to use tech and efficiencies to close twice as many loans with the same number of people if we want to keep our profits up.

This is a grueling proposition but a reality we all need to face, or we can just plan on playing a lot more golf.😊

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167

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