Talking About Prices

By
Education & Training with ActiveRain

In light of recent news articles highlighting the state of real estate commissions many members on this network have engaged in tangential discussions with their colleagues. Many of these discussions have gone into areas that the put participants at risk.

I have brought to you the consequences of talking commissions before. We've had it re-featured a few weeks ago. Since then I've had a few members disagree with me on the content of that post. I've even had some tell me that this is a conspiracy propagated by The National Association of Realtors, to keep prices high.

To clear things up a bit today I spoke with Deputy Assistant Director Of The FTC's Anticompetitive Practices Division, Patrick J. Roach.

Mr Roach stated it very clearly for me. Do not discuss prices with your competitors. Anything beyond that opens you up for an investigation for possible criminal conduct.

Mr Roach offered a second piece of advice. He said do not sit there quietly while such a (price) discussion is going on. Make a loud demonstration of stating that you will not be a part of this conversation and then leave. I'd like you to flag the post and tell us why you did so that it can get taken care of it as soon as possible.

Mr. Roach referenced the National Association of Realtors saying that they very wisely talk about not engaging in discussions & agreements about pricing.

I am encouraging you all to review NAR's Field Guide to Antitrust. And once again I am saying that you cannot discuss pricing with each other. Leave that for a talk with your clients and your office.

Thank you,

Caleb

 

Update.

A reminder everyone The purpose of this is to protect the community.  You may had these discussions off-line legally or not.  But this is a new medium where your discussions are recorded and public.  You may not be accustomed to this but what you say is permanent record here.

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Rainer
96,615
Fred Pickard
Fred Pickard Innovations Realty Inc - Hershey, PA
Hershey, PA

I'm sure I'll be told if I'm wrong here, but my understanding of the "price fixing" type of laws is that if we all got together and said something like we all would charge the same price, that would be price fixing.

If I say I charge X and you say "I charge X+1" and someone else says "I charge X-1" that's just a discussion of business models and practice. People in this business advertise price every day in print, on the web and in mailers. Usually these are in the context of some kind of "discount brokerage model". But since there is no such think as a fixed commission rate, there is no benchmark from which to discount .

I'm sure the FTC guy looked at this in the manner of risk reduction for brokers. I clearly would walk away from any discussion that morphed into talk about all charging the same fee. That clearly would violate the law. But a discussion of business models and services provided should not be a problem.

Why don't they look at Redfin which continually states that 6% is a standard commission. They even use a 3% co-broke as their benchmark in the advertising. Anyone who has been in this business longer than a week knows that there is no "standard commission" in real estate.

I turned on the new comments notification and am awaiting the barrage.

May 19, 2007 05:19 AM #62
Rainmaker
223,559
Laurie Mindnich
Centennial, CO
Thanks for the additional clarification.  When responding to posts regarding commissions, I guess that it's very easy to take that "competitor" word and decide that a broker in California, or Florida, or wherever, is not MY competitor- thus, no worries.  If a broker in NY were having a specific discussion with me, also in NY, I'd see the point more clearly (and also wouldn't get into that discussion).  Because this site has national viewer and responder-ship (not a word) it's rife for misinterpretations.  Nonetheless, the government entities tend not to look at specific circumstances- they'd rather invoke a fine- so I suppose to "err on the side of caution" is the best approach.  You've provided a valuable service; in order to participate, this is a rule that you have every right to request be respected.  It's just that darned "competitor" word... 
May 19, 2007 05:58 AM #63
Anonymous
Anonymous
A good reminder and one to keep us out of difficult situations.  Thanks for posting.
May 19, 2007 06:12 AM #64
Rainmaker
210,989
Lucky Lang
Mel Foster Co. - Davenport, IA
SRES, Davenport, Iowa Real Estate

Hey, Fred,

How about sending me "X+2" of those great Hershey bars!  They really are awesome, especially when you buy them right from the factory!

Lucky :)

May 19, 2007 06:52 AM #65
Anonymous
Anonymous
This is so true for other industries as well.  I'm a member of another trade association and while members typically charge hourly or 'project' prices, we are not allowed to discuss actual numbers, period.  It's even harder in that association as most newcomers don't have any idea what to charge, there is no perceived 'standard' in that industry.
May 19, 2007 08:35 AM #66
Rainmaker
41,293
Jay Burnham
Coldwell Banker - Beverly, MA
The Coldwell Banker Guy

Caleb...You are so right and I appreciate your taking the time to check into this issue and then posting it.  The consequences are enormous!

Regards...Jay

May 19, 2007 08:38 AM #67
Anonymous
Anonymous

It's even harder in that association as most newcomers don't have any idea what to charge, there is no perceived 'standard' in that industry.

UNLESS I AM WAY OFF BASE HERE, THERE IS NO PERCEIVED "STANDARD" IN THE REAL ESTATE INDUSTRY.

May 19, 2007 09:43 AM #68
Rainer
122,017
Christy Powers
Keller Williams Coastal Area Partners - Pooler, GA
Pooler, Savannah Real Estate Agent

I think for my own safety, I will just avoid the issue all together. It's better to be safe than sorry!

May 19, 2007 10:36 AM #69
Rainmaker
662,997
Jim & Maria Hart
Brand Name Real Estate - Charleston, SC
Charleston, SC Real Estate

Caleb, I know there are many different opinions here, but I for one am glad that you've taken the time to put the word out there again.  You're just trying to keep us all from getting.in trouble, and I appreciate your effort. 

May 19, 2007 10:37 AM #70
Rainmaker
50,548
Jonathan Dalton
Realty ONE Group - Glendale, AZ

> Jonathan D.  You can't say what you charge to competitors, only to customers.  I did not say that advertising prices is a violation of antitrust.  I said talking about it with competitors opens you up to the possibility of criminal investigation.

Ummmm ... if you're one of my competitors, kindly close your eyes. My advertising is directed at the public at large. I apologize for the inconvenience.

I see the point if it's a members only post as there's little doubt who the intended party is. But on a general post or (shudder) a post or a website not connected to AR ... I can't stop competitors from looking at my sites. I look at theirs all the time - part of being, well, competitive.

I'm not condoning discussions that border on collusion, Caleb. Never have. But I disagreed with you before and I disagree now with the notion that if I say I charge X, a competitor sees it and they also decide to charge X, then we're price fixing. There's no agreement. There's no intent.

 

May 19, 2007 11:26 AM #71
Rainer
80,534
Greg Cremia
Shore Realty of the Outer Banks - Kitty Hawk, NC
If they don't heed the warnings their posts need to be deleted. The same with stolen content. Why should the majority suffer for the infractions of the few?
May 19, 2007 12:29 PM #72
Rainmaker
769,627
Mike Jaquish
Realty Arts - Cary, NC
919-880-2769 Cary, NC, Real Estate

'Thanks for the reminder Caleb.

Seen some pretty astounding statements around AR.

The Q & A has seen a few responses that precisely identify standard commission rates.

Keep working at warning us about ourselves.

May 19, 2007 08:01 PM #73
Rainmaker
132,791
Ana Connell
G & C Properties - Burbank, CA
Burbank Real Estate Agent
Thank you Caleb, this is a great post and reminder!  I don't think it's fair, but it's not worth losing my career over.
May 20, 2007 12:06 PM #74
Rainmaker
608,773
Teri Eckholm
REMAX Results - White Bear Lake, MN
Acreage & Lakeshore REALTOR Minneapolis St Paul

Caleb--

It is sad that this is a reminder that is all too necessary. As Realtors, we are held to a higher standard than the general public. There are rules: ability to negotiate on a commission is a private discussion between broker/agent and client.

While some discussions on AR will feel like sitting on your back porch over a beer, they often can be viewed publicly. Other than when our broker has a meeting to set our office rules, I don't discuss what I charge with anyone in my office other than client and manager...The end.

Beyond full service and discount as terms in general, the discussion should end on AR. No percentages should be discussed or eluded to as every market, every neighborhood and every client is different.

May 21, 2007 08:25 AM #75
Rainer
70,338
Caleb Mardini
Bellevue, WA
Teri E.  Thank you for putting it that way.
Ana. Thank you.  But remember this stuff affects all industries, it's not that it's being directed at real estate agents.
Mike, Thanks for the update.
Jonathan, I never said there was intent. I do say that if one engages in a discussion with a competitor on these issues, then they are opening themselves up to the possibility of investigation.  
Of course there's nothing wrong with a competitor seeing your advertisement.  To insinuate that companies don't shop their competition is ridiculous.  What a business wishing to be compliant will not do however, is engage in a discussion of prices, or what they ought to be with a competitor.  That is illegal.  
A post discussing pricing shouldn't be members only you are right, it should also not be checked "for professionals," and lastly members shouldn't engage.
Mott, There's no big hush, everyone else can talk about it all they want.
Thanks Jay, Jim, Diane, Marc, Lucky, Jason, Sally, Mariana, Joan W, Joan M, Marlene,
Thanks for the extra perspective Christina.
Laurie, I know what you mean about "competitor"  and I wonder about that myself.  I do know however that it's just as likely that one of the comentors is  the competitor next door.
Fred I don't think you've got it and I would encourage you to look further into this.  Your assumptions aren't correct as far as I know.  I've written the FTC asking about that very question on a company advertising a standard commission rate.  Everything I know tells me it's a violation.
Patrick I wish i could get into a philosophical discussion on this. :)
Cynthia, that's what I hope everyone gets from this.
Randy thank you for sharing your experience.
Michelle, they have jurisdiction where laws are being broken in the U.S.  I of course don't know about Canadian law and what it says about this.
If anyone has an issue with the law then please take it up with the Justice department this isn't Caleb's law here. :) 


May 21, 2007 03:18 PM #76
Rainmaker
210,989
Lucky Lang
Mel Foster Co. - Davenport, IA
SRES, Davenport, Iowa Real Estate

Caleb,

Right ON!

But Caleb's Law does have a nice ring to it.

Lucky :)

May 21, 2007 05:04 PM #77
Rainer
70,338
Caleb Mardini
Bellevue, WA
Len and Fred  I questioned the FTC guy about this and he said that the "traditional" remark wasn't a violation.
May 23, 2007 09:51 AM #78
Rainmaker
206,783
M. Suzi Woods (Gravenstuk)
NOW Sharing the life and spice of the GC one day at a time - Grand Canyon, AZ
Suzi Woods, Prior Independent REBroker in MS
Since the excitement has died down with this post, I have a question. Actually, its been a question for a long time. I think it may be more on the "Truth in Advertising" area than the Anti-trust. Every day we read ads, websites and profiles here and other places in which the agent or REO is advertising "We will or (I will )save you thousands. Or, even the more general "save on commissions". If we don't know what figure we are comparing to--how can anyone, ever claim to save any amount?" Check out some of AR profiles to see what I mean. Surely, it must be legal because so many people do it. But, is believing it without a point from which to save, logical?
Jul 16, 2007 09:53 PM #79
Rainer
70,338
Caleb Mardini
Bellevue, WA

Suzi,

Thanks for the question.  I do think it has more to do with advertising.  The thing is "saving" can ultimately end up being pretty subjective.  It would really depend upon the specific claims of a specific ad.  I know that when I've worked with people, my claims of "saving" them money were about what I could offer them in terms of time, preparation, and negotiations.  So regardless of my fee, I knew I was, "saving" them quite a bit. 

Jul 17, 2007 02:20 PM #80
Rainmaker
206,783
M. Suzi Woods (Gravenstuk)
NOW Sharing the life and spice of the GC one day at a time - Grand Canyon, AZ
Suzi Woods, Prior Independent REBroker in MS
Thank you for your response Caleb. I think I am too literal at times. It seemed to me that saving had to have a starting point. I think I need to chill out and claim savings myself:-)
Jul 17, 2007 04:42 PM #81
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