Denial, some people think that certain things last forever. however those people eventually learn the plain and simple truth. many many years ago the dinosaurs roomed the earth alongside real estate brokers and agents who held the "holy grail". "the mls book" but then came along came the world wide web. dinosaurs extinct and brokers and agents wondering when people would notice that they in fact did not hold the "mls" anymore.

We successfully sold our house with a local flat-fee company in 2003. They provided us with a lockbox and an MLS listing. I think we paid as little as $200 at the time.

I extensively studied comps and knew what price would be right for our house. I had interviewed an agent and she was $25K below what I thought was the right price at the time, and I was correct, plus I didn't have to pay a large commission. (It was a $300K house, so at the time the $25K difference plus the commission seemed like a lot of savings).

To make a long story short, the only problem I see with the whole sell-it-yourself scenario is the question of safety and security of valuables. I felt more comfortable having the lockbox. It provided for flexibility for us when we left the house, and the buyers were more comfortable viewing the house without us being there. I felt that if an agent accompanied the buyer, there was some recourse if something was stolen or broken. And with young children at home, I would not have liked to invite any Tom, Dick, or Harry into my home to show it.

One size does not fit all for the consumers but it also doesn't necessarily fit all for the agents and brokers, either. Even if flat-rate options appear, if there is still a business segment supporting the percentage structure then percentages will remain.

Flat-rate seller listings (I won't say representation as there's often little to no representation in these scenarios) have been available for years but it has not forced a sea change among those whose core message is service and knowledge, not price.

> If any seller or buyer wants to know the true value of a property, they should hire a qualified real estate appraiser.

In a word, not really. An appraisal is nothing more than one person's opinion, and this person is not whatsoever concerned with the intrinsic or market value of a property. Their lone concern is whether there is sufficient value to justify the banks' risk in offering the loan.

> my fiancee is trying to sell his condo via FSBO because no one would take a flat fee

Apparently someone did, if he paid $400 to have the condo lisited in the MLS. More accurate would be to say no full-service broker was interested in assuming the liability associated with a listing for $400. Which is neither right nor wrong ... it is their business choice, just as it's the choice of the flat-rate broker to offer MLS listings for $400.

Alby ~

I'm guessing that you are not in real estate, based upon your comments about appraisals.

After 34 years of real estate, I can say for certain that appraisals are not absolute determinants of value.

In fact, they are one person's opinion of value and they are very subjective.

Appraisers are under enormous pressure to "bring in" the price by the lenders who give them their appraisal assignments.

If you're an appraiser and you repeatedly blow deals for the lender who's giving you business ~ guess what happens?

Appraisals are like statistics; you can make them say just about anything you want to.

All of us in real estate routinely see borrowers who have been buried by aggressive lending tactics that include overstated appraisals ~ just so the lender can book the loan, meet their numbers, and generate their fees.

The lending industry is already experimenting with AV (automated value) appraisal systems in order to eliminate the expense/subjectivity/time lag of human appraisals.

Yes, we need to go to ala carte, task-based fees in real estate, but it will be difficult for the exact reason you mentioned in your post ~ if you remove any of the traditional buyer agent compensation, your listings do not get shown and the property does not sell.

The challenge with this is that all of the cutting must be borne by the listing agent and that agent often gets stuck with doing the buyer agent's work because they just move on to their next client after getting their offer accepted.

And, this is all intertwined with our system where the seller provides the buyer agent's compensation ~ another problem that needs to be addressed.

I think it is highly likely that we will see some form on non-MLS national (global?) listings database appear within the next 2-5 years; perhaps an outgrowth of something like Google Base, with FSBOs, listed properties, etc.

Visualize this massive database offering search capabilities (like MLS search now), a matching service for buyers/sellers, online appraisals, online financing, etc.

Someone (like Google) could easily monetize this system by charging (all) sellers a low flat fee to "list" their property, then provide mortgages, home warranties, home inspections, etc. and make a LOT of money on those services.

If it comes to this, Realtors will be severely marginalized after having lost their MLS monopoly.

If we get to that point, Realtors will HAVE to get real about what they charge instead of clinging to percentage commissions.

I believe we are at the forefront of massive, wrenching changes in the real estate profession and they will be for the best of all concerned!

Phil

Merv ~

If you like my refrigerator magnets, you're gonna love my Halloween helicopter pumpkin program.

It's terrific for name recognition !

Phil

Merv - I really liked your choice ideas. Giving buyers and sellers the ability to choose what they want with service is a great idea. Right now my fiancee is trying to sell his condo via FSBO because no one would take a flat fee. This includes the company the our buyers agent works for. It's either pay 5 to 6 percent or take the highway. It was easier to pay $400 to list on the MLS and say he would pay 3 percent for buyers agent than deal with paying a full 6 percent on a 240,000 condo.

Yes, the days of real estate commission need to end. Flat fees should become the future. Although implementation might be the hardest part. Agents who represent sellers can tweak their cut, but if anybody messes with the 3% going to a Buyer's Agent, good luck trying to sell your property. There might be a certain code of conduct, but I'm almost certain that if the commission to a buyer's agent reads anything less than a 3% cut, that agent will never bring that property to the attention of the buyer. You would have to get all the major and minor firms to agree that on day X, all commissions will be turned into a flat fee system.

Or maybe at least a commission sharing system. Where the buyer pays 3% to their agent and the seller pays 3% to their agent. Instead of sticking the seller with the whole 6% bill.. If not for the Commission and Monopolistic MLS/MRIS database, I'm sure the majority of homes would be foresale by owner.

One last rant... I never understood why people take advice from Real Estate Agents on the value of a property. If any seller or buyer wants to know the true value of a property, they should hire a qualified real estate appraiser. Banks use them in drafting up a loan, so they can be assured of the property's value. Whereas a real estate agent is for the most part, guessing. Yes some might be good at guessing a price. But to be certain, you should pay the few hundred bucks to know for certain the true value of a property. Then price your home accordingly if selling, or know if you are being screwed or getting a deal if you are a buyer.

jf: seems a lot of us are raising the focus on this issue. Thanks for pointing out the AEI-Brookings study. Good bedtime reading. 2010

Merv,

Another twist on your perspective is to consider a model where your fees are based on the perceived value received by your client.

Rather than a cost + model where your margins can be cut by a competitor willing to "do it for less," value based pricing really makes it much harder to be compared to your competition.

Your job, of course, is to become better and more articulate at conveying the value of what you are providing.

This idea has been around forever in the consulting world, but it seems to be slow to catch on in some worlds, like the legal profession, where value actually has to be delivered and communicated in order to receive a high fee :)

Merv, we couldn't agree more. I think the Mark Nadel paper spurred a lot of creative thought to exactly what you correctly perceive as the "One size does not fit all" commission model. We have put our spin on it as well. You're welcome to visit and take a look 2010: A real estate odyssey.

Thanks Phil...I did notice you are being innovative as well when I visited the BOISEBLOG. (ha ha ha ha ha...I love the gotta go...)

Great post, Merv!

It correlates to my post on BoiseBlog the other day about changes the real estate profession is likely to undergo in the near future.

I think true professionals will develop solutions that are far more innovative than saying "I charge X%" when a client asks about their fee.

Many (most?) consumers are a lot smarter than some Realtors® these days, and they're demanding more creative/effective/appropriate/flexible levels of service and corresponding fees.

The real estate profession needs to comprehend that its tired old "same size fits all" business model is broken.

I have long offered flat fees in various situations and my clients love the simplicity and underlying logic vs. being charged a percentage fee.

More later ~ gotta go deliver my refrigerator magnets this morning! (just kidding!)

Keep up the good work!