It's the oldest rule in the book: Fight one battle at a time. Germany never learned it, twice picking fights on Western and Eastern fronts simultaneously -- and look how that worked out. Now, following in the footsteps of der Kaiser and der Fuhrer, der real estate industry has antagonized the U.S. Department of Justice before finishing their fight with the banking lobby.
Back in June, we looked at the brewing turf war between real estate brokers, represented by the National Association of Realtors (NAR) and its president, Al Mansell (also the CEO of Coldwell Banker Residential Brokerage, a subsidiary of Motley Fool Inside Value pick Cendant (NYSE:CD) on the one hand, and the American Bankers Association (ABA), represented by ABA chairman and Wachovia (NYSE:WB) Executive Vice President Betsy Duke, on the other. Briefly stated, the bankers want a piece of the NAR's realty racket -- and the 6% "commissions" that realtors get to charge for the arduous task of selling houses in the hottest real estate market in recorded history.
But 6% commissions on houses priced into the stratosphere tempt all sorts of profit seekers. In addition to the bankers, the "discount brokers" of the real estate industry also want a piece of the action (and they're willing to give cut-rate prices to do it). That doesn't fly with the full-service realtors, however, so they picked a fight there as well. In late 2003, the NAR adopted "listing rules" for its members, permitting full-service realtors to withhold data on the houses that their clients want to sell from databases accessible to "discount" realtors.
Last week, Justice declared war on the NAR, filing an antitrust lawsuit against the association based on its 2003 listing rules. The NAR quickly responded that it intends to change these rules, so there really is no need for the lawsuit, but it looks like Justice will proceed, regardless.
I see at least three parties who look likely to benefit from Justice's lawsuit. First, obviously, homebuyers and home sellers stand to gain from any holes that can be knocked in the NAR's house-selling oligopoly. The more competition that is introduced, the lower the prices will likely fall. Second, clearly, having Justice on their side (pun intended) will help the discount brokers in their feud with their full-service brethren. Finally, with the NAR now fighting a two-front war, both of the "Allied forces" should benefit. With NAR's efforts divided between two fronts, the likelihood increases that bankers will soon win the right to sell houses, too.
And the losers? Just the NAR, its member brokers, and the companies that employ them: Cendant, Berkshire Hathaway (NYSE:BRKa) subsidiary HomeServices of America, Prudential (NYSE:PRU) Real Estate Affiliates, and the like.
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Fool contributor Rich Smith owns no shares in any company mentioned in this article.
