With more than 1 million people licensed to sell real estate one would expect to encounter intense business competition among brokers. While there is competition it is so structured as to be of little value to most consumers.
Real estate competition can be compared to the shape of an hourglass. At one end is a broad structure where great hordes of licensed people seek listings and sales. On the other side are vast numbers of owners marketing their homes. Rather than compete fully for these sellers, most brokers offer their services only within a tight "zone of competition" defined by peer pressure and past practices - the bottleneck of the hourglass.
The zone of competition is marked by uniform commission schedules, listing contracts, and selling techniques. While there is competition among brokers to sell these virtually identical service packages such competition is largely indistinguishable in terms of cost to the consumer.
The monolithic nature of real estate "competition" has not begun to change. Largely as a result of the Justice Department and its continuing suits against the real estate industry, a number of alternative brokerage firms have been established. Today brokers can generally be divided into three categories.
Full Fee: Brokers who charge the "standard" rate for a complet package of services. This group may well represent nearly all brokers and agents doing business.
Discount: Brokers who offer a full or partial package of services at a reduced commission. May be members of local real estate boards and participate in multiple listing services. Fee schedules may vary according to services performed.
Flat Fee: Brokers who offer a partial set of services at a single established price regardless of the value of the property.
It could be argued that since real estate commissions are entirely negotiable the distinctions above are cosmetic. While there is an element of truth to this idea (a small element), the argument fails because it does not consider the ralities of the marketplace. Between 1970 and 1974 alone, the Justice Department filed price fixing suits in Pittsburgh, Portland, Atlanta, Los Angeles, Long Island, Cleveland, Memphis, St. Louis, Virginia Beach, New York, and Rochester.
If the hourglass system of marketing exists (it does) and if the Justice Department has brought so many suits against the brokerage community (it has), where are the real estate regulators?