Obstacles to Price Competition in the Residential Real Estate Brokerage Market

Abstract

Traditional residential real estate brokers have long protected the industry’s commission formula – typically six percent of the sale price of the home – and revenue stream -- now about $90 billion/year – against price competition from non-traditional entrants. They have used a few anti-competitive business tactics to frustrate the success of new entrants. This article contends that prohibiting these practices would enable effective price competition from non-traditional brokers, with fee formulas better aligned with the quantity and quality of the services rendered and the value that they provide, thereby dramatically reducing the commissions consumers pay by an estimated $50 billion annually.

Keywords: antitrust, broker, agent, commission, real estate