The Consumer Federation of America and the Oregon State Public Interest Research Group argue that prohibiting rebates to buyers and sellers stifles commission competition and harms consumers.
Consumer watchdog groups are lining up to support an antitrust lawsuit filed by discount brokerage REX Real Estate against Oregon’s anti-rebate law.
The Consumer Federation of America (CFA) and the Oregon State Public Interest Research Group (OSPIRG) announced Tuesday that they are filing an amicus brief in favor of REX’s suit challenging an Oregon law that prohibits real estate agents from offering rebates to homebuyers, arguing that the law prevents discount brokers from offering consumers reduced real estate commissions from the typical 5-6 percent split between listing and buyer brokers.
An amicus brief is a legal filing by someone who is not a party to a lawsuit, but has a strong interest in the matter. Such “friend of the court” briefs are often filed in cases concerning matters of broad public interest.
“CFA and OSPIRG believe that this [rebate] prohibition harms Oregon home purchasers and restricts price competition in a brokerage marketplace where this competition is already severely limited,” the brief says.
While some of the brief’s points echo those recently made in a study commissioned by REX that argues that real estate commissions are inflated due to the lack of price competition created by having listing brokers set co-op fees for buyer brokers, CFA and OSPIRG said in a press release they “have no institutional or financial relationship with any element of the real estate brokerage industry.”
The brief, written by CFA’s Stephen Brobeck, argues that prohibiting buyer rebates reinforces commission levels that are high relative to other countries and nearly uniform across the U.S. because of a multiple listing service (MLS) rule requiring listing brokers to offer buyer brokers “a fixed, non-negotiable commission.” This rule is being challenged by multiple lawsuits against the National Association of Realtors (NAR), Realogy, Keller Williams, RE/MAX and HomeServices of America.
“Despite widespread industry opposition to negotiation of commissions, sellers do have the opportunity to secure a rate below the prevailing one, either by finding a traditional listing agent who will reduce their commission or by employing a discount broker such as Redfin,” the brief says.
“Buyers in Oregon, however, do not have this opportunity. As explained earlier, the buyer broker commission is relatively fixed and not negotiable. And since it is typically built into the sale price, the buyer ends up paying most or all of it. Rebates provide some relief to buyers unable to negotiate lower commissions, then having to pay for them through a higher sales price.”
The brief notes that rebates could save buyers thousands of dollars in a market where the large majority of renters want to buy a home but can’t afford to.
“Without the rebate prohibition, other discount brokers, and possibly even some traditional ones, would make available rebates to home buyers,” the brief says. “In Washington State, next door, many agents offer rebates. Those working for just one company, Redfin, participated in an estimated five percent of all Seattle home sales in 2016. Recently, the company has offered buyers an average refund of $3,500.”
The brief points out that 40 U.S. states and Washington D.C. allow buyer rebates. Maryland, for instance, prohibits rebates to unlicensed people who provide brokerage services, but allows buyers and sellers to receive rebates because it doesn’t consider them as having provided any services, according to the brief.
“We urge the court to find a way to make these rebates legal to foster price competition and benefit consumers,” the brief says. “Other states with laws that prohibit commission-sharing to non-licensed parties, similar to Oregon’s, have made exceptions for customer rebates. Insisting that Oregon make such an exception would serve the public interest.”
Read the brief: