Posted on 07/27/2006 5:37:21 AM PDT by Hydroshock
NEW YORK (CNNMoney.com) -- The fight over competition in the real estate industry went to a new battlefield this week as representatives of consumer groups, brokers and government agencies clashed before a House subcommittee.
Few participants pulled any punches.
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Steven Brobeck, executive director of the Consumers Federation of America, told the subcommittee on Housing and Community Opportunity that the real estate business model is a "cockamamie system . . . nonsensical and ridiculous."
Among Brobeck's beefs: He claims prices are rarely advertised, that restrictive state laws and anti-competitive practices prevent consumers from getting discount service, and that there are roadblocks to securing key product information through the Internet.
Aaron Farmer, a discount broker in Texas, described how full-service brokers discriminate against discounters: They refuse to show discounters' listings, Farmer said; pressure home magazines to not accept advertising; and refuse to allow discount brokers' clients to view home listings full-commission brokers control. They even destroy for-sale signs.
The full-service brokerage industry, as represented by the National Association of Realtors (NAR), has fought to maintain the status quo. In nine states, for example, there are minimum-service laws that effectively force all agents to provide full service - discounters would otherwise be willing to offer limited services and charge home sellers much less than the traditional 6-percent commission. There is move to pass such a law in Michigan.
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How about a brief rundown of the cost of marketing a $750,000 home in a good community, good schools, low crime...etc.
My realtor made a whopping $31,500 on my house in April. She listed it on the MLS, put up a sign in front of my house and held one open house a few days later. It was listed on a Wednesday and under contract the following Thursday. The buyers saw it the day before the open house. So, I don't see anything that my realtor did to earn $3100 let alone $31,000!!!
FSBO next time.
I can't figure out why commissions are based on percentages instead of flat fees. There can't be a huge difference in costs listing, advertising and showing a $300,000 over a $150,000 house (or $3 million vs $1.5 million in California money).
Over the past 25 years, we have sold all 5 of our homes FSBO, and saved thousands and thousands (and thousands!) of dollars. Never had a problem ...it is amazingly simple, you just need a good title company or attorney, who will even write the contract for you! Nowadays, you can easily create your own market analysis with the help of the internet, so no worry about being over/underpriced.
If everyone tried it just once, no one would EVER list with a realtor.
You are incorrect here. The broker is not charging you 6%. The listing agent is taking up to 3% and the buyer's agent is taking 3%. Some listing agents will do a 4.5% listing which means that they are only taking 1.5% of the transaction.
The realtors are adding tens of thousands of dollars to the cost of the house purchase though. Agents on both sides of the transaction can add value to their client but the practice of sellers having to pay for the buyer's rep is garbage.
I'm with you, selling without a Realtor makes tremendous sense. Have similarly saved thousands, and the process left me assured that I would never use a Realtor again.
In fact - the hardest challenge was getting beyond a few sleazy Realtors who told their Clients that my home was sold (when it was not). This happened three times in my last experience and could prove it. Also had a Realtor refuse to honor their Client's request to submit a Purchase Offer because she wouldn't be collecting (I had even offered her a small finders fee).
Similarly, I purchased my most recent home without a Realtor from a FSBO - saved a ton of time and money for everyone.
"One other thing. The MLS was created and is maintained by Realtors. So please don't compare it to the RIAA."
Not a problem. One pays a fee to belong to MLS and access the data. It's racketeering and collusion for MLS or any realtor to set a "standard" real estate commission fee, let alone enact "penalties" for those who don't comply to the "set" fee.
So with regard to the whining by Realtors against the discount guys, yes they are very simlar to the RIAA.
I've had good realtors who were worth every penny and bad agents who I felt got paid for very little work. I'm surprised so many freepers paint with such a broad brush.
We used an agent on a sale and purchase earlier this year, and she was an invaluable guide through the process. She recommended a listing price $20K over what another realtor recommended, and we had two offers the first weekend we were on the market. She knew the market and it showed. In a town where the average house sits on the market for 3-6 months, our home sold in two days.
We also used her on the purchase of a new construction home, and she was a very tough negotiator with the homebuilder and got us numerous incentives that were not offered to us outright. Could I have done this on my own? Sure, but I don't know the market like she does and I don't think I would have gotten the deal I did without her.
I suggest you don't stop interviewing Realtors until you find one that feels good in your gut.
"Because it takes years of skill, resources, insurance, and out of pocket money to get get a contract at the limit of market value for a home"
I've been in and out of the development, selling and finance end of business for over 20 years and will say, in my experience maybe 4 in 10 Realtors have that skill. The other 6 simply take the figure the seller want's for his property and tack their commission onto that. Then it's put into MLS and the first of next week the listing agent's office caravan stops by the property while on their weekly "tour". After that it sits in MLS and is shown by other companies who have access to the MLS data.
If the agent is in the 40% that know what they are doing they'll be proactive in getting the seller to lower the price if there's no activity after a short while. The other 60% will call the seller at the end of the listing to get them to relist, hopefully at a lower price, but if the seller is adament about his price, the 60% will let it sit on the market in MLS for another several months.
Any Realtor that wastes their own money advertising an overpriced property is a fool, IMO.
Fortunatly, my Realtor is a lifelong friend and did do a very good job for me. Although, at a previous house sale, the realtor I used practically ran me over while leaving the closing, as soon as he recieved his commision check.
Say that again?
It might be different in other parts of the country, but in my pond the extent of the services are: 1) Giving the homeowner a quasi market analysis to establish a listing price; 2) Listing the home in the MLS; 3) Running a single ad with picture in the local paper; 4) Having an "open house" showing; 5) Showing the home several times to prospective purchasers. The actual knowledge and expertice required to perform these "services" are minimal.
If you add up the actual costs of this, including the agents time and gas, you might generously come up with $1,000. With an average selling price of $100,000.00 (yeah, depressed market here), the homeowner is paying $6,000 for these services (many are paying $7,000 at a full 7%). In most cases, higher priced homes require and receive no greater services, so the disparity grows.
This "system" is way out of whack and is in desperate need of an adjustment.
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