Real estate brokers in the hot seat

CNN.com ^ | 7-26-06 | Les Christie

[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.

[calljack]

There are over 500,000 real estate agents in california.
Thats 1 for every 55 people.

[agrace]

Well actually here in OK....one realtor can do both sides of the deal. And surprisingly it happens alot.

It happens in NJ a bunch too; in fact when we bought our first house in NJ, our realtor was dual. It's funny - we bought it for what I considered a ridiculous 150k in 1999, then turned around and sold it - using the same realtor - for 270k less than 5 yrs later when we moved to OH. Although she wasn't dual in that transaction.

That was 2 1/2 years ago, and our ex-neighbor just sent us a link to its new listing - it's on the market again, this time for a whopping 329k, and I had to laugh to see our old realtor's familiar face on the webpage. She's doing just fine with that house!

Can you believe that price?

[kidd]

Im in the minority here.

My real estate agent saved me money at his 5% rate.

He had inside info about a house that was going on the market...and because we avoided a bidding war we saved thousands on the purchase...while at the same time selling our old house at $13K over the asking price.

[Loud Mime]

point well taken.

My experience with MY lawyers is 50-50.

[Always Right]

That was a good attempt to try to show how much work is involved, but most of that stuff involves a phone call or filling out a form. Perhaps 3 hours of work. The benefit of listing is to get access to all the buyers who use realtors. There is still a majority of people whose mentality is they need a realtor.

[jaydubya2]

"It's amazing, every FSBOer Freeper can sell a home like nothing. But in America, over 8 out of 10 fail. In my experience, I practically never see a FSBO sell at a price higher than what they would have netted with a Realtor."

I'm just stating my experiance. Both of my FSBOs were low priced homes that sold realtively quickly for cash. The Closings were very easy. My Realtor sold homes were higher priced homes that sat on the market for quite a while.

It's funny, whenever there is a Realtor thread on FR the non Realtors all seem to have negative experiances, and the Realtors get very defensive of their 6% commission and all the hard work they do.

[stainlessbanner]

I think there is a time and place for both FSBO and realtors. Realtors can be helpful when looking out of state, they can be your eyes and ears. I prefer FSBO when I know the local markets. I've bought and sold more FSBO - each it's much smoother than with a realtor. Too many parties involved muck up the communication lines.

Advice: get a good RE attorney to review the contract!

[atlaw]

Perhaps 3 hours of work.

LOL. I suppose if you have the only house for sale, and you're selling it "as is", and you have a line of buyers desperately bidding up the price, you can just "fill out a form" and rake in the dough. Makes it real easy. Funny how that doesn't seem to happen very often.

[EnquiringMind]

"But in America, over 8 out of 10 fail"

Let's see the facts to back that up.

[Ganymede]

"You had a 2.5 million dollar home?"

Uh, no.

[Rb ver. 2.0]

I don't think you're reading me correctly. I've been in and out of the RE business for years, both as a Realtor and not and have seen agents come and go, some to soaring heights and others to failure.

My comment about spending money to advertise an overpriced listing was meant as constructive criticism, not an insult.

Understand that "Realtor" doesn't make character and I seldom see the organization police it's ranks for incompetance. Paying annual dues and MLS fees are more important.

[jetson]

Realtors are a bunch of sleaze balls. Like allot of the rest of the slimes in the US they break laws for greed. In Calif. real estate has been turning over like no body's business. Disclosure statements are not scrutinized, Illegals are obtaining property through sleazy agents and realtors are passing on the deals to friends and coworker's. It is going to be interesting to see if massive law suits pop up due to the housing market slowing down and buyers finding that what they bought is not up to snuff. Illegal additions and improvements ( built by allot of illegals )that are not up to code, encroachment on county property ( like stone walls and new additions ) and flood zones are not mentioned on many disclosure statements as required by law. This country is full of greedy people who think nothing of rules and laws.

[EnquiringMind]

"My real estate agent saved me money at his 5% rate.

He had inside info about a house that was going on the market...and because we avoided a bidding war we saved thousands on the purchase..."

Yes, you were forunate. But what about the seller? The realtor cheated HIM out of thousands because of the "inside info" he slipped to you. That realtor did not have the seller's interest at heart.

[Hydroshock]

I know, it is only a matter of time.

[Rb ver. 2.0]

"I practically never see a FSBO sell at a price higher than what they would have netted with a Realtor."

Funny, My banker tells me that it's more common for a FSBO to under appraise than do realtor listings, meaning they FSBO were overpriced to begin with.

[webstersII]

"If I had my druthers it would be law in TX that you can not charge more the 3K to sell a house."


Ah, the gov't should fix this for me. Not much on capitalism, are you?

[Hydroshock]

I am a Theodore Roosevelt republican. I do believe that there is a place to government to help keep all sides honest and the playing field level.

[HereInTheHeartland]

"The biggest mistake people make is not interviewing enough agents and going with one that don't feel right in their gut"

I would agree with that. I am a mortgage lender with a national lender who works with many Realtors. Most Realtors work very hard and have a high degree of professionalism. Many don't make a lot. And the full service companies are are in denial about the fact that their business model has changed.
I do see many people going to the sell it yourself or a small flat fee arrangement. It's a gamble but a huge payoff if it works. But there are many sellers who just don't understand how to do on their own.

[webstersII]

"I am a Theodore Roosevelt republican. "

Your statement sounded more like a FDR type.

If you don't want to use the services of a RE agent, then it's your choice not to. But having the gov't decide what they can charge is absurd and is not a conservative thought process, as there's nothing illegal going on in the pricing. If the prices are that ridiculous then they will be adjusted downward as time goes on. Ever heard of Adam Smith?

There are lots of brokers who will negotiate their commission, BTW.

[Vision]

I bet you'll do great