Sherman Antitrust Act is the law which is intended to encourage the freedom in pricing so that a few big players would not collude to take advantage of the customers. For example, if Microsoft, Google and Apple reach an agreement to all raise their mobile platform price by 200% and keep the prices fixed for the next 5 years, the consumer would not have much choice but to pay the higher prices because there is really not much other choices other than those three providers in terms of mobile platforms. If they work together and try to fix the price so that they would make much more money at the expense of regular consumers, they would subject to severe penalty under the Sherman antitrust act.
In real estate, the antitrust law also applies in that no two or more real estate brokers or sales person should work together with the intention to fix prices on real estate transactions. For example, they can not say that they'll all charge 3% for buyer commission and never lower the price. As a result, all real estate professionals are recommended to price their service as they see fit.
That being said, I am really struggling to understand why in maybe 99.9% of the residential real estate transactions I see on mris in metro DC region, all of the real estate publications had priced the buyer commission at 3%? Why everyone is adopting this 'industry default' pricing? I know some real estate processionals gives rebate so that the 3% is absolutely not the final price: but still, the fact that almost all transactions had the 3% buyer commission is kind of strange under the free pricing principal.
More importantly, does that mean that the residential real estate industry pretty much failed to honor the metric of the Sherman Antitrust Act?
I actually had a pretty length discussion with a lawyer friend of mine on this issue and below are the summaries of the discussion.
1. there is no evidence that anyone is trying to intentionally fix the buyer commission at 3%. Instead, everyone seems to choose to follow the 'industry default' pricing at 3% volunteerly. This basically says that there is no violation of the antitrust law;
2. as long as there is no proof of intentionally fix prices at 3%, it's very hard to win the case in front of the judge on who is responsible for the fact that everyone is actually charging 3% at buyer commission;
3. there are a lot of other industries that people usually charge a 'industry default' price. For example, you'll find a lot of plumbers charges exactly $80 or $100 per hour, or a bottled water regardless of the brand is priced at $1.50 at most vendor machines. That is another case of choosing the 'industry default' pricing volunteerly;
I have to agree with the summary above that real estate is indeed priced freely. But at the same time, I am really struggling to believe that everyone seems to accept the 3% as the default industry buyer commission. I'd love to hear your opinion on this. Please leave me a note here.
