Posted on 08/12/2005 5:36:12 AM PDT by OESY
...[I]n almost every other consumer industry-- booksellers, retailers, home appliances, insurance, banking, stock brokers-- the introduction of Internet and discount sellers has been a phenomenal financial benefit to customers....
Economists call this process of squeezing out transaction costs "disintermediation." If any industry is ripe for this, it is the $70 billion-a-year real estate brokerage market. Yes, fees have fallen modestly to about 5.1% on average in recent years. But a new study... concludes that in an unimpeded free market, fees should be dropping much faster -- particularly amid a real estate boom that has doubled home values over the past decade. Many, if not most, of the services that Realtors provide don't vary with the sales price, so the percentage fee should fall as home price rises.
The problem is that state lawmakers are squashing such competition through two types of laws. First, they make it illegal for brokers to provide rebates on their commissions, which is an overt impediment to price competition. So, for example, LendingTree.com is prevented under these laws in about 10 states from continuing its popular practice of providing several thousand dollars of rebates and coupons at Home Depot to homeowners who use its real estate services. Discount real estate agents would also be prohibited under many of these laws from advertising their lower prices in newspapers.
The second legal device used to restrain trade are "minimum service requirements," which prevent real estate brokers from providing limited services to home sellers for a negotiated fee. These rules outlaw the increasingly popular choice of home sellers who contract with an agent to list their homes for a flat fee of typically around $500, but then handle all the other aspects of the home sale themselves in order to save $5,000 to $10,000 in additional fees....
(Excerpt) Read more at online.wsj.com ...
In some situations a good realtor is worth their own weight in gold.
Unfortunately MOST realtors aren't anything close to good.
If you use a real estate agent, only hire a full time agent. Someone who is a full-time something else and works evenings and weekends as an agent isn't worth your time or trouble and certainly isn't worth 7% commission. You want someone who has sold ten houses in your neighborhood this year and knows what sells and what doesn't and how much you can reasonable get - not someone who has sold three houses this year to get a little vacation money.
I live in a state with a minimum service requirement.
A few years ago we were looking to sell our house and our neighborhood pesky real estate agent got wind of it. So she came by to try to get us to list with her
I told her I would list with her, but with the following conditions: she'd provide me with a market analysis for which I'd pay her $100. That way I'd have a professional help with the price point.
I'd put my home on the market and if it didn't sell in 45 days, the listing was hers.
I spent a few dollars on a nice brochure (printed it myself) and happened to have my open house the same day as a local town festival. That day I had 5 qualified offers (check in hand).
I hired the agent for an additional $500 to help me work through the offers and ended up getting 99% of my asking price (and four months until closing- we were building). I hired a lawyer to draw up the sale...
... and I saved about $14,000.
Most realtors I have met are totally clueless about real estate laws, local ordinances, land use issues, and get paid more than anyone in the whole transaction process.
I have nothing but contempt for most brokers.
Changes in SEC regulations in the late 1970s allowed brokers to set fixed transaction fees regardless of the number of shares traded. Revenues in the securities industry collapsed almost overnight, as the big brokerage houses found themselves competing with smaller new operators in a deregulated environment. But this deregulation was almost certainly a major factor in the stock market resurgence that began in the 1980s.
I look forward to the day when a real estate agent is willing to turn his or her entire industry on its head by offering their sales services for a fixed sales fee of say, $5,000-$10,000. There is absolutely no reason why a real estate agent must get paid twice as much for selling a $400,000 home as he gets for selling a $200,000 home.
The real estate people will argue that there are far fewer prospects for that $400,000 home. While that may be true, people who buy $400,000 homes are almost always already qualified to do so, while the $200,000 home buyer barely squeeks in. And that $200,000 buyer makes the agent work much harder, because it is probably their first home.
The problem is locating a good broker that charges a competitive fee.
If a SELLER is planning to move up and purchase a new home, I do not charge them to list/market their current property... I collect my fee as a referral fee from the builder of their new home.
Most competing agents "dislike" my fee schedule....GRIN....
All I'm saying is that the entire industry needs to be deregulated so as to eliminate this arcane notion that it needs to operate as a cartel with no flexibility in how it generates its revenues.
Got it in one!!!!
Are you suggesting that Real Estate agents/brokers should not be required to be licensed and attend mandatory continuing education?
Maybe, maybe not -- I'd have to think about that a little more. What does that have to do with brokerage fees?
I did something similar when I "moved up" a few years ago. I paid ~$600 for an MLS listing, but did the rest of the sales and buy transaction myself. I knew of some real estate agents who would come over to the house being sold and clean out my flyer bin or steal the for sale sign. What scumbags. They were furious that I wasn't using an agent. I got harrassing phone calls, and was "blacklisted", agents would not show my home, even though I was willing to pay a buyers agent commission (2.9%). I ended up selling the house to another person who also didn't hire an agent. When the dust settled, I estimate that I saved about $14,000 by telling the RE establishment to stick it.
How about a fixed rate of $1,500.00 - $2,500.00. I'm a professional myself and I don't believe they deserve $1,000.00 an hour for what they do.
Yes. I am a smart guy, I could pick up what I need to know in one weekend of reading up on the laws. Explain to me what exactly is learned at these events that suggests they should be mandatory?
Mandatory requirements are not always a good thing. An idiot realtor can hide behind credentials. Whereas, if there were no credentials, people would spend a lot more time getting references and rating their realtors on web sites, etc.
For example, you sound like a good realtor. Do you think that you should have the same credentials as an idiot one? Wouldn't you prefer no credentials, so that people spent a lot more time listening to your references? You would get more business that way.
Until they clean up their act, impliment required 'standards' of service (like a marketing plan, etc) and have a set fee per house....they are not in the realm of "Professionals". They are simply parasites.
I know of no agent or broker making $1,000 an hour... Most of the hours spent in Real Estate are unfunded..... The $1,000 hour happens only if the property is sold....and that may take a week to a year...
You mention that you are a professional...what do you practice?
When "selling" a home, and agent can be much more useful. However, in many areas such as Florida you can find many very good agents that will list for less than 3% -- many will now take the listing for 2%. Here in Texas it is still a bit higher, but I see listing discounts popping up in ads recently.
Always remember, never sign exclusives! That is the key. I assure there is an agent that will take you own as a client in any situation for the chance of a fee.
I bet we can all agree that there are idiots in all professions...but to turn loose thousands of idiots without knowledge of real estate law on the unsuspecting public would be a sad thing. Let's face it, people file lawsuits these days at the drop of a hat...in Texas we must take & pass the required courses, pass the RE test, take continuing education classes & carry Errors & Omissions Insurance....
Frankly, there is no way that the average person can spend a weekend and acquire all the RE law required to protect oneself in a legal transaction that can have consequences long after the sale..... I assume you have that talent & time....
To be brutally honest with you....I had no idea how ignorant I was of Texas Real Estate law until I set out to acquire a license..
I respect your right to market and sell your property as an individual....without the assistance of an agent....you are free to do so in Texas, yet 70% of those that attempt it end up listing with an agent....
Like I said before . . . the "fixed rate" can be anything a realtor wants it to be. A mediocre realtor may only be worth $1,000 to you, while an extraordinary one may be worth $25,000 or more.
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