Tuesday, January 8, 2008

Series: Post #4 Realtor Association, "Group of 40 analyze bills weekly for potential effect on industry."

Realtors are careful to mix assertions of clout with arguments about sound public policy. They invariably say they are representing not just their own industry but the property rights of homeowners in general, and that those are a fundamental tenet of American democracy. "I don't have to be that skilled as an advocate," Kyler says. "I don't want to sound cocky, but I think the primary reason we win is we're right."

But just in case a legislator might stray from the path of common sense and try to interfere with the inalienable right to pursue property, Kyler has a group of forty (40) Realtors who meet each week to analyze bills in the legislature and their potential effect on the industry. The association backs up that analysis with a lot of money. During the 2004 election cycle, the Utah Association of Realtors donated $226,930 to state-level political candidates and causes--a figure matched almost dollar for dollar by individual Realtors and other people in the business. That made real estate the largest single donor to Utah politicians that year, except for political parties and self-financing candidates. Nationwide, the real estate industry contributed $69.5 million to state-level campaigns in 2004, making it the fifth-most-generous sector overall. "It's safe to say that when it comes to coordinated giving to political candidates, real estate interests are some of the most focused in the country," says Edwin Bender, of theNational Institute on Money in State Politics. Bill Malkasian, president of the Wisconsin Association of Realtors, brags openly about the impact his group has on state politics and policy. Malkasian's "little tool kit," as he calls it, includes not just the usual hefty campaign contributions but a nonprofit association called the Wisconsin Homeowners Alliance, which conducts polling and keeps the broader public engaged in issues of property rights. The most recent effort came this spring, after the state Departmentof Natural Resources decided it wanted to regulate large piers that may cause pollution, especially the so-called big "party platforms."Most piers would have been exempt, but Realtors viewed the new rules as a threat anyway. "We went directly to the public and fought them big time," Malkasian says--and sure enough, legislators voted to block the agency from moving forward with its plan. There are huge incentives for licensed agents to sign on with the trade group, starting with the listings they gain access to by joining. Realtors sign up with their local, state and national associations simultaneously.

The national association now claims close to 1.3 million members--an increase of about 75 percent over the past decade. The massive influx of new members in the face of soaring home prices is one reason why average Realtor income actually hasn't gone up much lately. Most of the ground rules that govern Realtors today have been in place since the 1920s. It was then that the group registered the brand name of Realtor, which only members can use, and created the familiar 6 percent commission fee structure and the all-important multiple-listing systems. (Because of discounters and other factors, the average commission has shrunk to 5.1 percent in recent years--which is still enough, given rising property prices, to translate into more than $60 billion per year worth of fees nationwide.)

For decades, Realtors tried to keep the multiple listings--and commissions--all to themselves. As a condition for joining the association and getting access to the multiple listings, real estate agents had to agree to a set of terms or code of ethics, a provision of which inevitably would be an agreement to charge a commission of at least a certain amount. "These were just naked price-fixing agreements," says Hawker, the business professor. But they were eventually brought to a halt by a pair of U.S. Supreme Court decisions that found Realtors enjoyed no special exclusion from federal antitrust laws. If overt price-fixing has gone out of style, however, Realtors still have many tricks up their sleeve to bring mavericks back into line. Real estate agents who try to foster new business models threatening the commission structure have generally been brought to heel through boycotts and other pressure tactics. Court outcomes in cases alleging such behavior have been mixed, but complaints from the 1970s would sound familiar to the discount brokers of 2006 trying to use theInternet as a means of challenging Realtors' power.

After the New Mexico Real Estate Commission approved minimum service regulations in February, "I had to turn down business immediately,"says Donald Blunkett, a discount broker with operations in several Western states. "Long term, I may have to exit New Mexico as a market. Prices are going to be definitely higher."

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