Posted on December 24, 2024
Authored by Jonathan Hammer Levy
The Department of Justice (DOJ) has recently focused its scrutiny on the real estate industry, alleging that agents are engaging in practices that harm consumers by obfuscating the negotiability of commissions. This has been framed as an antitrust concern, with the DOJ arguing that such practices unfairly limit consumer choice and transparency. While consumer protection and transparency are indeed noble goals, the selective focus on real estate professionals raises serious questions about the DOJ’s priorities, particularly when juxtaposed with its lack of scrutiny of personal injury attorneys, who similarly engage in commission-based compensation structures that are often equally opaque and impactful on consumers.
The real estate industry has long operated on a commission-based compensation model, where agents typically earn a percentage of the sale price of a home. Critics argue that these commissions are not adequately disclosed as negotiable, potentially leading consumers to overpay for services. The DOJ’s intervention seeks to increase transparency and ensure that consumers are aware of their ability to negotiate these fees, ostensibly to foster competition and protect consumers from being “shafted.”
However, this narrative fails to acknowledge several mitigating factors unique to real estate transactions. Real estate agents provide a wide array of services beyond merely facilitating a sale, including market analysis, negotiations, marketing, and compliance with legal requirements. These services are often critical to achieving a successful transaction and maximizing value for consumers. Moreover, the commission structure is inherently performance-based, aligning the agent’s financial incentive with the consumer’s goal of obtaining the best possible price for their property. While there may be room for improvement in how commission structures are communicated, the assertion that this model inherently disadvantages consumers oversimplifies the complexities of real estate transactions.
In stark contrast, the DOJ has shown little interest in scrutinizing the practices of personal injury (PI) attorneys, who commonly charge a one-third contingency fee on gross settlements or judgments. This fee structure, while standardized and widely accepted, is similarly negotiable in theory but rarely presented as such to clients. Many consumers are unaware that they could negotiate lower fees, particularly in cases where liability and damages are clear and the likelihood of settlement is high.
Unlike real estate commissions, which are often publicly disclosed in contracts and can be compared across agents, PI attorney fees are less transparent and are typically negotiated (if at all) in private consultations. Additionally, PI attorneys often deduct their fees from the gross settlement amount, leaving clients responsible for additional costs, such as medical liens or litigation expenses. These practices can significantly reduce the net recovery for clients, yet they have largely escaped DOJ scrutiny.
The DOJ’s selective approach creates an apparent double standard that undermines its credibility as an impartial enforcer of consumer protection laws. If the DOJ’s primary concern is ensuring that consumers are not disadvantaged by opaque or inflexible fee structures, then it should apply this principle uniformly across industries. The absence of similar scrutiny of PI attorneys, whose clients are often among the most vulnerable—injured parties seeking justice and financial relief—raises questions about the consistency and fairness of the DOJ’s enforcement priorities.
Moreover, PI attorneys’ practices can have an equally, if not more, significant impact on consumers than real estate commissions. In many cases, accident victims rely on their settlements to cover medical bills, lost wages, and other essential expenses. The lack of transparency around negotiability and the high standard fee of one-third can leave clients with far less than they need to recover fully. By failing to address this issue, the DOJ is allowing a substantial segment of the legal profession to operate without the same level of accountability it demands from real estate professionals.
The DOJ’s focus on real estate commissions, while well-intentioned, risks unfairly singling out an industry that operates under conditions of significant transparency and alignment with consumer interests. Real estate agents’ commissions are not hidden; they are clearly stated in contracts and are subject to market forces and consumer choice. Personal injury attorneys, by contrast, operate under a fee structure that is similarly negotiable but far less transparent, with practices that can leave consumers financially disadvantaged in ways that merit equal—if not greater—scrutiny.
If the DOJ genuinely seeks to protect consumers and promote fairness, it must adopt a consistent approach that addresses inequities across all industries. Selective enforcement not only undermines public trust but also creates an uneven playing field, allowing some professions to escape accountability while others are held to an unreasonably high standard. By applying its principles uniformly, the DOJ can ensure that its actions are guided by fairness, transparency, and the best interests of consumers, rather than by selective targeting of specific industries.
In conclusion, while the DOJ’s efforts to improve transparency and competition in the real estate industry are commendable, they must be part of a broader and more consistent strategy. Addressing similar practices in other industries, such as personal injury law, would demonstrate a commitment to fairness and reinforce the principle that all consumers deserve equal protection, regardless of the context in which they seek professional services.
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