Inman 10-point real estate reform list: Love it? Hate it? Tell us why ...
By Daniel Rothamel, Inman Community Manager, Wednesday, March 4, 2009.Bookmarking Sites
Last week, the editorial team at Inman News published a list of 10 real estate industry reforms. The list generated some good discussion, and we know that there are a lot of people out there who still have something to say, but might not have had the chance.
That's why we created the "Reforming Real Estate" group in the Inman Community. Join the group, and you will find discussion topics having to do with the list and the suggested reforms.
For the benefit of those who aren't Inman Premium members and can't access the archive of the full article, here is a summary of the list:
1. Create a more effective regulatory framework for real estate and mortgage professionals.
2. Reform the mortgage origination process.
3. Promote a more efficient real estate industry, reducing costs and promoting services that favor the consumer.
4. Ensure competition and transparency in the way real estate agents are compensated.
5. Consolidate MLS information into a single national database.
6. Real estate professionals should provide buyers and sellers with vastly improved market analytics.
7. Reform the mortgage securitization process.
8. Reduce settlement services costs, regulate bundling of services to prevent price gouging.
9. Ensure affordable housing, smart development.
10. Remove barriers to alternative business models.
If you agree with any or all of the items on the list, tell us why. If you hated them, tell us that, too. Heck, if you want to come up with a list all your own, you can even share that with everyone.
Inman Community membership is open to anyone with an Inman News account. If you don't have one, simply sign-up. It's free, and the discussion is sure to be interesting and enlightening . . .
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Submitted by Brian-Logan Reid on March 4, 2009 - 2:36pm.
1. Create a more effective regulatory framework for real estate and mortgage professionals.
- Absolutely. The licensing requirements for real estate agents is ridiculously low and needs to be raised.
2. Reform the mortgage origination process.
- Yes.
3. Promote a more efficient real estate industry, reducing costs and promoting services that favor the consumer.
- The consumer-centric era is well underway and there is no going back to either the broker-centric or the agent-centric eras. Agents and agencies need to adjust to the technological advancements, increase transparency and push for ultimate efficiencies (like we do here at http://www.CondoDomain.com :)
4. Ensure competition and transparency in the way real estate agents are compensated.
- If buyers of real estate actually understood that they are paying the commission (through their down payment or through their financing), they might approach the table differently. We are allowed (in most states) to refund part of our buy-side commissions because we receive our flat fee and return the balance to the buyers. In terms of transparency, we believe that our model is one of the most transparent out there. We have absolutely NO financial incentive for our buyers to purchase a more expensive property - we get compensated the same. This will be a hot button issue (yet again).
5. Consolidate MLS information into a single national database.
- Lovely idea, but so frustratingly unlikely. Also, creating a national database might result in a monopoly, thereby decreasing competition. Have to admit though, a national MLS would be fun to play around in!
6. Real estate professionals should provide buyers and sellers with vastly improved market analytics.
- Couldn't agree more. Some agents do, but the vast majority do not (see point #1).
7. Reform the mortgage securitization process.
- I believe this is in the works.
8. Reduce settlement services costs, regulate bundling of services to prevent price gouging.
- Efficiency, efficiency, efficiency (see point#3)
9. Ensure affordable housing, smart development.
- Agreed. And believe that with the bursting of the housing bubble, this is already on that trajectory. Would add 'smart' and 'green' buildings and buildout.
10. Remove barriers to alternative business models.
- :) Yes please!
Submitted by Paul Howard on March 5, 2009 - 6:42am.
1. Create a more effective regulatory framework for real estate and mortgage professionals.
===
Brian-Logan Reid- Absolutely. The licensing requirements for real estate agents is ridiculously low and needs to be raised.
==========
PaulHoward - No comment regarding mortgage industry (I'm a real estate broker). The regulatory frame work is vast and differs greatly by state.
The hodge podge of disclosure laws is inadequate and ineffective.
The 'framework' includes institutionalized assumptions that require alternative 'business models' to circumvent. Ex. The assumption that the list side offers compensation to the buy side. Indeed the IRS 1099 requirements require a listing side company to send a 1099 to a buy side independent contractor broker ignoring the fact that the buy side broker may have a commission agreement with the buyer separate from (independent of) the co-op offer requiring the SELLER to pay the buy side commission rather than the listing broker.
Rebate laws: If the buy side and list side are really independent what would there be a need for rebates - don't over charge to begin with. Rebates are a symptom of a larger problem.
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2. Reform the mortgage origination process.
===
Brian-Logan Reid- Yes.
===========
PaulHoward - no comment.
///////////////
3. Promote a more efficient real estate industry, reducing costs and promoting services that favor the consumer.
===
Brian-Logan Reid- The consumer-centric era is well underway and there is no going back to either the broker-centric or the agent-centric eras. Agents and agencies need to adjust to the technological advancements, increase transparency and push for ultimate efficiencies (like we do here at http://www.CondoDomain.com :)
===========
PaulHoward - ok - In part this is an information management problem involving collecting and providing information to consumers in such a way that it improves their ability to make decisions in their own interest. It is also a problem of acquiring information by agents/brokers. What would make you more efficient? Since I am exclusively on the buyer side (I'm a member of NAEBA)I think not having to deal with list side offers of compensation expectations would help a great deal. MLS systems that promote offers of compensation help to maintain the status quo and facilitates list side brokers attempts to fix buy side commissions.
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4. Ensure competition and transparency in the way real estate agents are compensated.
===
Brian-Logan Reid- If buyers of real estate actually understood that they are paying the commission (through their down payment or through their financing), they might approach the table differently. We are allowed (in most states) to refund part of our buy-side commissions because we receive our flat fee and return the balance to the buyers. In terms of transparency, we believe that our model is one of the most transparent out there. We have absolutely NO financial incentive for our buyers to purchase a more expensive property - we get compensated the same. This will be a hot button issue (yet again).
===========
PaulHoward-see my comments in #1 and #3. The offer of compensation is a roadblock to innovative commission agreements with buyers and promotes a rebate workaround that deceives buyers into thinking they are getting something for free.
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5. Consolidate MLS information into a single national database.
===
Brian-Logan Reid- Lovely idea, but so frustratingly unlikely. Also, creating a national database might result in a monopoly, thereby decreasing competition. Have to admit though, a national MLS would be fun to play around in!
===========
PaulHoward - I'll wait and see. There are so many different systems and data field structures and needs, that I'm unconvinced that is viable or even useful.
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6. Real estate professionals should provide buyers and sellers with vastly improved market analytics.
===
Brian-Logan Reid- Couldn't agree more. Some agents do, but the vast majority do not (see point #1).
===========
PaulHoward- I agree, and it won't change significantly till the agent mills actually have to supervise their agents.
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7. Reform the mortgage securitization process.
===Brian-Logan Reid- I believe this is in the works.
===========
PaulHoward - no comment - mortgage issue.
////////////
8. Reduce settlement services costs, regulate bundling of services to prevent price gouging.
===
Brian-Logan Reid- Efficiency, efficiency, efficiency (see point#3)
============
PaulHoward - don't know - maybe if you identify a specific instance....
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9. Ensure affordable housing, smart development.
===
Brian-Logan Reid- Agreed. And believe that with the bursting of the housing bubble, this is already on that trajectory. Would add 'smart' and 'green' buildings and buildout.
============
PaulHoward - Sounds related to Mount Laurel II. Do we want/need to go beyond that? Maybe. Need more specifics.
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10. Remove barriers to alternative business models.
===
Brian-Logan Reid- :) Yes please!
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Exactly which barrier should be removed. Some regulation is needed for consumer protection. Get rid of the 'offer of compensation' model and you will see a lot more real disclosure and price competition on the buyer side.
Paul Howard, Broker
NJHomeBuyer.com Realty
Cherry Hill NJ 08002
Submitted by Jonathan Phan on March 6, 2009 - 9:25am.
I agree with Jason
Jonathan Phan
http://www.jonathansellshomes.com/
Submitted by Jennifer Giraldi on March 9, 2009 - 6:58pm.
Reducing settlement closing costs is a must. The general public feels gouged on a regular basis by this. Hopefully this change will occur.
Atlanta Real Estate
Woodstock Real Estate
Submitted by Jolynne Ash on March 16, 2009 - 7:47am.
When I see reduce the settlement costs (which I agree with) I can't help but mention the cost on the West Coast to perform this service is significantly less than on the East Coast. In the West, we don't use attorneys (who charge a percentage of the sales price) to do the title work or perform the closing. We use the escrow office at the title company who charges the clients about $400. each for the service. I believe Title Insurance costs the same across the country?
Do East Coast Properties require more than West Coast properties or do attorney's have a good thing going and don't want to loose it? In my 19 years of Real Estate experience in Oregon, I have never heard of a dispute that traced back to the Title Search.
Jolynne Ash, Broker/Owner
DreamStreet Real Estate
www.jolynne.com
Submitted by Alec Hagerty on March 17, 2009 - 4:19pm.
It's long past time (maybe 10-15 yrs. past due) for the Industry to get, finally, out of the sub-agency mind set!
If I could, I would eliminate all offers of compensation placed in the MLS. How can it make any sense for another Brokerage to determine the worth of the co-op agent, in all cases long before the agent comes to the table. I have 31 yrs. of experience, yet I'm offered compensation by someone who likely doesn't know me or what I bring to the table! MY client buyer should determine what I'm worth to them, and I should decide what I'm willing to work for and negotiate my fee accordingly. When offered a fee that is lower than my buyer client and I have agreed upon I will call the other agent (before showing the property, as is required ethically) reject their offer of compensation and explain that my buyer will be responsible for my fee, that the buyer "may" elect to negotiate the fee as a function of the sale price and then make arrangements to show the property. If the buyer then wants to write and offer the terms will include the following language: "Seller agrees to have the amount of $______ deducted from their side of the proceeds, to be paid to the Buyers Broker, on behalf of the buyer, as an accomadation to the transaction" That folks takes care of all the controversy raging these days about what fees are and are not paid to co-brokes, and should end the antagonism in the marketplace between agents and brokerages and the consumers!
Alec Hagerty, ABR-M,CNE,C-CREC,CRB,DREI,e-PRO,GHS,SHS,SRES,
Broker/Speaker/Trainer
www.KnowledgeSpongeSeminars.com
Submitted by Julie Yates on March 24, 2009 - 7:56am.
Yes Please to number 5! I would support that whole-heartedly!
Julie Yates
Dallas Highrises Condos & Lofts
Submitted by Ron Redlich on April 25, 2009 - 3:11pm.
Concerning:
"4. Ensure competition and transparency in the way real estate agents are compensated."
I don't know about other states but here in Florida we have both competition and transparancy. I expect commissions will rise as the market continues to soften.
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