Hot Real Estate Commission Debate
March 13, 2006
Evidently Brad Inman of Inman News touched off a hot debate about real estate commissions last week in one of his blog entries. Quite a variety of comments and lots of them (over 200). Brad has another regular news article discussing his remarks and the comments. Very interesting to see the various reactions to what seems to be a very touchy subject.Here are my top
- Commissions are not sacred.
- Brokers and agents do not have an inherent right to anything including commissions.
- The consumer has a right to negotiate.
- Consumers have a right to understand what they are paying for.
- Innovators have a right to interject themselves into our business.
- FSBO's have a right not to pay anyone.
- Consumers are tired of the old models.
- The old models are dying.
- New models will provide enormous competition.
- Change is good for the consumer.
- Consumers generally don't want cheap, they want to understand the value delivered for the fee paid.
- All agents have a right to present themselves to consumers.
- The agents with the highest quality, professionalism and VALUE driven fee structure will be chosen by consumers.
- Transparency in fee structure will win.
- This is still a relationship business.
- Relationships are built on trust.
- Trust is attained by being trustworthy.
- Trustworthy (worthy of trust) is attained by being honest, looking after your clients best interest and not your own, and delivering on commitments.
- Prospering in this business is dependent on doing the right things and doing things right.
- Consumers will do business with people that deliver value and people they trust.
- We should not feel threatened...we need to innovate.
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Brad:
I'll share another "dirty little secret" with you that consumers need to be aware of. It's the practice of re-listing.
Essentially, if a house is on the market for a period of time and not selling, the Realtor can withdraw it from the market, wait a few days then put it back on the market under a new listing number and often a reduced listing price. The result is that the house appears to the consumer as a new listing and the days on the market (DOM) before it is sold is considerably less. Statiscally, it looks like houses are selling much faster than reality and selling prices are much closer to listing prices. What the consumer doesn't realize is that the house has actually been for sale longer and that the price may have been reduced several times.
There are some MLS's that have taken steps to stop this practice by showing accumulated DOM's unless the property has been off the market for 90 days.
Ask the seller what the original listing date was and what the original listing price was.
Dave K
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made the following comment on March 15, 2006 1:45 PM
Mark and Dave support my views. Where are the dissenters?
Great post...couldn't agree with you more.
Successful realtors will embrace, adapt, and excel in the new environment. However, many of the marginal realtors will continue to embrace the old way of doing business until they are no longer in business...that is how the business cycle works and in any kind of down cycle the marginal agents are going to be moving on or just scraping by.
The NAR is not doing any favors for the profession by failing to accept times have changed. Consider this recent quote from an NAR article "Why Should You Use a Realor?" "Transactions today usually exceed $100,000. If you had a $100,000 income tax problem, would you attempt to deal with it without the help of a CPA? If you had a $100,000 legal question, would you deal with it without the help of an attorney? Considering the small upside cost and large downside risk, it would be foolish to consider a deal in real estate without the professional assistance of a REALTOR?
Foolish is comparing a $100,000 income tax problem with a $100,000 home sale. Foolish is attempting to somehow link the expertise of a REALTOR with that of a lawyer or CPA. Compare a "rookie" realtor/lawyer/CPA. The 60 hour licensing course (which can be knocked out in a few weeks) compared to 4+ years of college + CPA standards or undergrad+law school+the bar exam...come on.
While I am sure that many educated consumers can see the value in having a REALTOR, reasonably compensated, calling an educated consumer foolish and providing ridiculous comparisons between CPAs, lawyers and realtors is truly foolish.
Again, great post. You get it and are successful/will continue to be so because you do get it!
Brad:
Just read your 21 responses to the commission debate. As a Realtor from Connecticut I really don't think you "bullet'd" anything wrong. Frankly, I think the real estate industry exemplifies the 80/20 rule. Eighty percent of the Realtors should not be in the business and the remaining twenty per cent are good realtors.
A good Realtor will not have any difficulty defending his commission and bringing value to the consumer. Those who scream about commission errosion are the ones who have nothing else to offer.
Let the consumer beware, however. There are compromises with a price reduction. There is an old saying that goes: "it takes three things to make a sale; price, quality and service. You can have any two!"
Let the consumer beware also of the agent or company that claims to be number one! There are two many "number ones" out there. Personally, I would rather find a Realtor that is looking for some work and will be dedicated to my property. The great Realtors don't have to brag.
Keep it real, Brad.
Dave K.
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