Banks Should be Allowed to Offer Brokerage Services
The U.S. Congress has again delayed action on proposed regulations that allow banks to engage in real estate brokerage and related legislation that would prevent the change. The real estate industry has fought ferociously against banks in real estate dubbing it "The Big Grab". Similar to their actions on many other issues confronting the industry, the real estate establishment is entrenching themselves on the side of maintaining their current commission rates. Consumer benefits and increased efficiency seem to always take a back seat when it comes to change and/or innovation in the real estate industry.
In response to a GAO Report issued in September the American Bankers Assocation stated the following:"The GAO report released today confirms our belief that consumers are getting short changed in the current real estate market. This report, following similar complaints from the Justice Department and the Federal Trade Commission, is the latest voice supporting greater competition in real estate brokerage. The GAO found that fees paid for real estate brokerage services have increased well beyond the rate of inflation. By closing out competition from discount brokers and banks, consumers are forced to pay high commissions with little opportunity to shop around for a better deal. With each home sale, real estate brokers are pocketing thousands of dollars that should be staying in the hands of consumers. With housing prices at an all-time high, there is no better time to bring greater competition into the marketplace. "In their efforts to stifle competition, it is clear that the National Association of Realtors is more concerned about protecting their own business rather than serving the customer."
The "industry" argues that their primary goal is to protect the consumer and that their interests are only preserved when protected by the services of a real estate professional. Of course this is the same argument they make when campaigning against discount brokers, commission rebates, for sale by owners, etc.
It is hard to understand how banks could harm consumers of real estate services. They would bring much needed infusions of capital and talent to an otherwise fractured and stale industry. And contrary to many fears, banks could not just take over the industry. More likely they would work within the existing framework to gradually bring efficiency and enhanced services to the industry.
Given the fact that the National Assocation of Realtors now boast that they have over 1 million members, I am confident that more than a few would not survive the introduction of more and better competition. That would be the first big consumer benefit of the change.
