Healthy Capitalism and Competition Have Been Wiped Out
Healthy capitalistic and competitive forces do not drive the residential real estate industry. Although real estate brokers fiercely compete for clients, once they bag their prey it is the consumer’s trust and vulnerabilities that become the commodity most sought after. Partly it is the boycott power Realtors possess to manipulate the investigative work of safeguard industries such as inspection, appraisal, title, closing, and legal services that might otherwise quash a deal and the Realtor’s commission. Partly it is the Realtors’ mangled sense of loyalty that has been polluted with dual agency, anti-competitive practices, contracts of adhesion, bad laws, and a proclivity to provide unauthorized and very bad legal advice. Partly it is the Realtor’s monopolistic control over the Multiple Listing Service, a data base that allows Realtors to price fix the commissions paid to brokers representing buyers. Partly, it is the ancillary services those Realtors “recommend” and wind up steering their clients to that are directly under the control and directly benefit the Realtor and the brokerage firm for whom they work.
Similar issues haunt the residential construction and mortgage industries. When the builder claims that it is more expedient to close with their own title company, they are right – it’s much faster and the deals almost always close. But wouldn’t you rather have a title company that will call attention to an underlying blanket mortgage or mechanic lien issue?
When all tolled, the protections and competitive forces upon which consumers and investors have been encouraged to rely do not exist and have been replaced with an anti-competitive system that’s only purpose is to ensure that commissions get paid and that consumers pay the highest possible price for ancillary services. Practically any safeguard that stands in the way of a commission has been secretly converted to protect the commission.
Boycott, Betrayal and Bribery
The predictable result of switching off consumer and investor safeguards is a system that ensures that almost every transaction closes. When even the bad deals close, an atmosphere is created that facilitates fraud and the volume of “bad” transactions will increase. It also ensures that consumers almost always qualify for and pay higher and higher amounts for their homes, mortgages and ancillary fees. It is the ultimate “Ponzi Scheme” that must eventually collapse.
From appraisers to attorneys, you will see how all industry players have been affected by common themes of boycott, betrayal and bribery that have consumed this industry. Starting with the large real estate brokerage firms and following a trail of other service providers, the exploitation of fiduciary relationships has become a trillion dollar cartel of businesses that continue to sicken our economy, our government and even the basic values of our country.
Almost every safeguard has been neutralized, almost every fiduciary has been compromised and almost every competitive force has been replaced with relationships that capture business unfairly and distribute it to “partners” causing higher prices and excessive fees to abound.
Once a consumer steps into the residential real estate machine, they are typically treated to a menu of betrayals and abuses that would be illegal except for the lobbying success of the giant trade groups that have made betrayal into a legal “marketing strategy.” The laws and even the regulators are often in the “back pocket” of this industry.