The Consumer Federation of America (CFA) and its former CEO, Steve Brobeck, have a long history of advocating for policies that protect consumers. However, in recent efforts to curb real estate professionals, the CFA has seemingly lost sight of its core purpose: advocating for those most in need of consumer protection.
Ending broker cooperative compensation unfairly favors wealthier sellers and buyers.
Broker cooperative compensation, in which the seller’s and buyer’s agents split the seller’s agent’s commission, has been a standard practice nationwide for over a century. This practice allows homebuyers to choose their agents without incurring out-of-pocket costs and broadens the pool of potential buyers, benefiting both buyers and sellers.
CFA has stated that it believes the payment of agent commissions should be “de-coupled,” meaning buyers would pay their agent fees independently of sellers. Underpinning this approach is the assumption that this would position buyers and sellers to negotiate commissions better. But this is far from certain.
However, a much more likely scenario is that by ending broker cooperative compensation, buyers will have to pay for agent representation out-of-pocket, a significant expense that would make homeownership out of reach for many first-time buyers. Considering that homeownership is the primary wealth source for most middle-class families, any change in housing policy that negatively affects first-time buyers could substantially exacerbate wealth disparities in America.
Changes favor older, wealthier individuals over new generations.
CFA’s proposed changes benefit older, wealthier individuals less affected by paying for agent representation. In contrast, new generations and first-time homebuyers who rely on accessible homeownership pathways could find these changes insurmountable. This shift risks excluding a new generation from homeownership, perpetuating economic inequality, and limiting upward mobility.
Benefits to the rich rarely trickle down.
Brobeck and CFA have no clear answer for how eliminating broker compensation will benefit first-time homebuyers. They speculate that lower seller commissions will result in lower home prices, but these assumptions lack crucial details of how this would play out. There is no evidence that agent commissions influence home prices one way or the other. The reality is far more complex. Supply and demand principles are much more influential in setting home prices, and sellers will almost always sell to the highest bidder. The belief that reducing commissions for sellers will somehow trickle down to less affluent buyers in the form of lower home prices is wishful thinking.
CFA’s position risks minority-led homeownership growth
CFA and its political allies have called the current process for purchasing a home “broken” and “anti-competitive,” but the current system, with all its imperfections, created a 75% homeownership rate and trillions of dollars of wealth for White Americans, far greater than anywhere else in the world. It would be unfair to suggest that race is a motivator in any of this, but it would be equally as irresponsible not to acknowledge that these radical changes that CFA supports are gaining traction when, for the first time in U.S. history, the majority of homeownership growth is expected to come from minority communities. Now is not the time to experiment with unproven and potentially damaging theories.
Proposed changes also negatively impact small businesses.
Unlike many other economic sectors, housing is not dominated by a handful of behemoth corporations; it is primarily served by hundreds of thousands of small businesses – real estate brokerages, mortgage brokers, home inspectors, and settlement services providers that, in many cases, have been in families for generations. One of the possible outcomes of CFA’s proposed changes is that buyers unable to pay for an agent will attempt to go without representation, exposing themselves to a slew of risks and negatively impacting small businesses across the country.
Well-intentioned organizations sometimes make mistakes.
CFA has not adequately considered the disparate impact on minorities and low-wealth consumers. Homeownership is the cornerstone of the American dream, a stabilizing force, and a gateway to the middle class. Advocates and policymakers must carefully consider the potential impact on first-time homebuyers, especially from communities of color, when contemplating major housing policies and industry practices. There is simply too much at stake to roll the dice based on speculative theories.
Gary Acosta is the Co-Founder and CEO of the National Association of Hispanic Real Estate Professionals (NAHREP).
Courtney Johnson Rose is the President of the National Association of Real Estate Brokers (NAREB).
Hope Atuel is CEO of the Asian Real Estate Association of America (AREAA).
Ryan Weyandt is CEO of the LGBTQ Real Estate Alliance.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
To contact the editor responsible for this piece: [email protected]
