No. of Recommendations: 15
This is going to be a long process, as the appeals take place and terms are re-written to try to circumvent the specific rules.
But I think the writing is on the wall that the high commissions in the US are going to come down.
The problem is that the world contains other countries, which demonstrates how different systems create or destroy competition. The ones without the MLS monopoly rule have way lower commissions.
e.g., the average seller in the UK pays the an agent's fee of 1.18% plus 20% sales tax (range from 0.75% to 3%), which goes to the agent selling.
The buyer can either pay zero by going directly to the seller's agent, or start their search by hiring a buyer's agent at roughly comparable cost. Typical buying agent fees may range 0.5% to 3%, but probably average somewhere under 1.5%.
So, round numbers, the total costs are either around 1/4 or around 1/2 the figure in the US.
The story is pretty analogous in a lot of other rich countries: almost nowhere without MLS pays nearly as much in fees as the US.
Bottom line, I think the value of our holdings in BH Real Estate is falling. We're going to take a big loss. It was a nice little oligopoly while it lasted, but I think the future stream of earnings will at some point fall to half what it would otherwise have been. It might take a while. The industry is going to fight rationality tooth and nail, as they have done for 80 years.
Jim
