Many might guess that real estate commission rates paid to agents might fluctuate with the increase in housing prices, especially in a free-market competition system. However, amidst this housing boom, the rates of commission fees for real estate agents rarely fluctuate below 6 percent. Many may consider this to be not much of an issue. However, a closer look at the government policies instituted to maintain this system goes against the very notion of a competitive free market.
The real issue is that various states throughout the United States have passed what are called “anti-rebate” laws that essentially create a system in which a pre-determined percentage is placed for a commission when services like real estate are offered. Even if a real estate agent or broker wanted to give a buyer or seller a rebate for the brokerage commission, such laws would prohibit them from doing so.
If free-market principles are truly the aim of good policy, anti-rebate laws need to be removed, or at the very least, strongly reformed. The Cato Institute has conducted substantial research on this issue, finding that the practice of government “steering” the real estate market is, in effect, a tax on mobility: “It penalizes a worker who wants to move for a better job or parents who want to relocate to build a better life for their family.” The system stands against those who desire to relocate, purchase a home, find better lives, and, in essence, the American dream.
This problem has also seen legal ramifications as various companies have either filed lawsuits against these laws or supported these legal claims. For example, the Consumer Federation of America and the Oregon State Public Interest Research Group have supported REX’s lawsuit against anti-rebate laws arguing that they stifle competition and ultimately harms consumers that are seeking to sell their homes. In REX’s lawsuit, in particular, an online brokerage firm that had a 2-3 percent commission fee, challenged Oregon’s policy that banned the firm from refunding commissions back to the buyer when they exceeded the desired amount.
While the outcome of cases like these is still to be determined, the seriousness of the issue in protecting the interests of companies and consumers cannot be overestimated. The Department of Justice has spoken to this issue in recent years and highlighted the anti-competitive nature of anti-rebate laws.
Mississippi is not exempt from this issue. According to Mississippi’s real estate regulations, no individual can receive a rebate for the commission costs of buying or selling a home. This stands against everything a free-market system is supposed to accomplish and only aids in the government’s incessant compulsion to control such markets.
Mississippi needs to return to a simpler economic scheme of allowing competition to dictate the rates and prices of the marketplace. The beauty of the free-market system is that problems often fix themselves when given enough time. Unfortunately, Mississippi has not given the free market any opportunity to do so in this area. It would be beneficial to at least give the free market a fighting chance.