The price isnt right Price fixing

First of all no rule says that a real estate agent must be paid on a commission basis. Just to be sure you're clear on this, a commission generally is a percentage of the final sale price of the property that usually is paid upon completion of the sale. Technically a commission is earned when a meeting of the minds occurs between a buyer and a seller. (See "How Does a Real Estate Broker/Salesperson Get Paid?" earlier in this chapter for more.) Although commission payments are common practice all across the United States for most transactions, they've developed into the norm over time rather than by any rules or regulations.

No such thing as a standard commission exists. No state that I know of sets commission rates. No local real estate board or other association of real estate agents has the authority to set commission rates or create any standardized fees for services. In fact, any attempt among real estate agents to create a standardized fee schedule is and has been viewed as violating federal antitrust laws.

The Sherman Antitrust Act, which is a federal law that prohibits activities that are considered to be in restraint of trade, forbids any type of price fixing in any industry. In simple terms, what that means is that if I own an appliance store and you own an appliance store, we can't get together once a month and decide that we're both going to charge the same price for a washing machine.

In the real estate industry, antitrust laws essentially have been taken one step further as a result of a famous court decision in a case called United States versus Foley. The result of this case determined that even if no actual consultation occurred between individuals about price fixing, the mere discussion among competitors of prices for services is considered an invitation to fix prices and therefore violates antitrust law. As a result, the industry operates on the principle that discussing fees between brokers is illegal unless the brokers are cooperating on the same deal. Fees may be discussed in-house between brokers and salespeople and brokers, salespeople, and clients. In other cases, the courts determined that local Boards of Realtors can neither dictate, recommend, nor publish rate schedules.

Real Estate 101

Real Estate 101

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