Reforming real estate
Editorial: 10 action steps
By Inman News, Friday, February 27, 2009.
Flickr photo by yoppy.Editor's note: Inman News has compiled a list of 10 reforms for the real estate industry. The list incorporates ideas shared by readers in our Roadmap to Recovery project, in which we asked you for your input. We were overwhelmed with the response. The compilation below is our best effort to summarize these reforms. This mold can be reshaped with your input. It is a starting point for evolving discussions. We invite your views on how it can be improved. We will offer in-depth, focused coverage on topics that appear on this list over the course of the year to surface ideas, insight and innovations that we hope will assist you in your business. You can view our plan for future coverage in an editorial calendar that is published online: http://www.inman.com/editorialcalendar. Through the month of February, for example, we engaged in a discussion about real estate compensation. Readers shared their views about various compensation models, including the traditional commission-based pay structure, services based on hourly fees, and an employee vs. independent contractor model.
It was a painful exercise for some: Discussions about compensation in the real estate industry are akin to talking politics. There is tension and emotion. The conversation makes some industry participants defensive, with some others going on the offensive. We wore some of you out with the dialogue -- some said there is plenty of choice and the compensation system is working just fine for them and their clients. Our purpose here is not to add to your pain but to identify a variety of business strategies and tools and let you decide which ones make sense for you. In March, we will offer focused coverage on the form and function of real estate offices and explore virtual-office technologies (see "Beyond brick and mortar"). We seek your continued feedback and participation as the industry moves through this historically difficult time.
The 10 Points List
1. Create a more effective regulatory framework for real estate and mortgage professionals. From licensing requirements to continuing education to enforcement, the rules governing real estate and mortgage professionals are too relaxed. In the boom, too many unqualified professionals were proffering poor advice. Since they play such an important role in this large consumer transaction, they should meet a much higher professional standard.
The federal government should pass minimum national standards to ensure that real estate and mortgage professionals receive a level of training that truly prepares them for work in the industry and weeds out the treasure-seekers and scam artists. States would then be allowed to pass tougher rules.
A strict set of examinations should be required and on-the-job apprenticeships, while not mandatory, could be counted toward fulfilling the minimum licensing requirements.
Progressive companies and trade groups may require performance disclosure forms that clearly state to clients a detailed transaction history and references including past clients.
A centralized, national licensing database for real estate and mortgage professionals will help consumers understand the work history and complaint history for all licensees, regardless of which states they have worked in, and to view details about past and pending complaints. There must be improved mechanisms to report and record complaints, and adequate budgets for investigations and enforcement actions.
Trade groups also must improve their systems for reporting bad behavior and revoking membership for violations. Consumers need to know when there are companies and individuals with extensive rap sheets and other bad marks.
2. Reform the mortgage origination process.
The mortgage origination process must be more transparent to consumers, and loan originators should not be rewarded for placing them in riskier, costlier loans. The new standardized loan disclosure forms and procedures being implemented under the Truth In Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) are a step in the right direction, providing some protection for consumers from risky loan features and helping them shop around for the best deal.
The Federal Reserve and U.S. Department of Housing and Urban Development must come to an agreement over the treatment of yield-spread premiums, rebates paid by lenders when borrowers take out loans through a mortgage broker with higher interest rates than they might otherwise qualify for. When borrowers choose to take out a higher-rate loan, yield-spread premiums should go toward their closing costs -- not in the mortgage brokers' pockets.
Disclosures should allow consumers to make an apples-to-apples comparison between offers from banks and independent mortgage brokers.
3. Promote a more efficient real estate industry, reducing costs and promoting services that favor the consumer.
Too many parties are involved in the real estate value chain -- directly or indirectly earning sales commissions, in some cases disguised in fees. This adds expense to the transaction, discourages sales in a low-inflation housing market and creates confusion for the consumer.
The down market will winnow out many of these inefficiencies but more must be done. Tort reform and aggressive enforcement of the settlement between the U.S. Department of Justice and National Association of Realtors should create more competition and allow for one-person broker shops to operate more efficiently.
Technology adoption allows for agents and brokers to conduct business virtually, and can eliminate the expense of office space. Online home-shopping tools can help consumers narrow the focus of their home searches even before contacting an agent.
The current broker model is in disrepair and should not be fostered by broker inaction and industry enablers.
Brokers who run "body" shops -- warehousing agents, no matter the skill level, in massive offices -- must slim down their agent pools to the best and brightest. This is for survival's sake. Those brokers who provide true value in their services will have an easy time recruiting quality.
Wasteful advertising spending also contributes to the cost of the transaction and could be minimized by improved measurement around successful online ad investments. Agents should be encouraged to adopt social media and mobile technologies into their businesses to communicate more instantly and transparently with consumers.
4. Ensure competition and transparency in the way real estate agents are compensated.
The current reward-based compensation model has many advantages, as sellers can transfer all of the risk: They can walk away from a deal and an agent without paying a dime. And buyers can do more or less the same. Even so, the industry must ensure that consumers and real estate professionals have the widest possible variety of options.
Rebuilding trust is essential to a better-functioning real estate market. The dominant compensation model represents a glaring area of public mistrust and confusion. Some consumers believe that agents are overpaid and that the sale price does not reflect the time and effort that goes into a sale, nor does it reflect on the quality of the agent. Allowing the listing broker to set the buy-side compensation is a blind offer of payment that does nothing to distinguish the quality of the broker representing the buyer and the effort that broker puts into the deal.
A compensation marketplace based exclusively on a percentage of the sale price of a home leaves the consumer with a narrow number of choices. The variance in home prices across the country points to the problem. It may take a similar amount of time, effort and marketing dollars to sell a $100,000 home in a given market area as it does to sell a $1 million home in another market area. Also, real estate professionals may receive the same compensation while investing different amounts of time, money and energy to market and complete a sale on homes of the same price but in different market areas. Compensation options should be available that are based around the actual cost of providing real estate services and the quality and variety of the services provided.
The industry must embrace a robust marketplace with a range of pricing options, including full commission, flat-fee and reduced commission models; hourly fees; and a low fixed fee with a success bonus if certain agreed-to benchmarks are met. Restrictive pricing rules and practices -- that have no obvious benefit for consumers and seek or serve to squelch competition -- should be banned, including anti-rebate rules and boycotts of companies with alternative pricing models. Buyer's agents should work directly with buyers to negotiate compensation for their services.
Real estate agents should be required to provide up-front, detailed disclosures on how they are compensated in the real estate transaction process, and the best agents should demand and command more money for the quality of the services they provide.
5. Consolidate MLS information into a single national database.
Accessible data helps create a more transparent and better-functioning housing market. Existing MLS boundaries do not serve consumers or real estate professionals, nor do overlapping jurisdictions and conflicting rules for neighboring MLSs. Federal antitrust law enforcement agencies will have an easier time policing MLSs when there are fewer sets of rules and there is a self-policing ethic built into MLSs. The industry, in partnership with third-party companies or on its own, must free the data -- both to ensure it remains the most relevant source of real estate information to consumers and to allow real estate agents and brokers to refocus on the core services they provide to their clients.
The force of innovation will ultimately bypass the current MLS structure if the industry ignores the needs and demands of consumers, agents and brokers.
There are few technology barriers to prevent a transformative national system -- perhaps a network of massive regional or statewide MLS systems -- from seizing control a within a matter of weeks if those tied to the current structure fail to budge. Data standardization and rapid consolidation are key. Those MLSs that seek to preserve isolation will find that stance a self-fulfilling prophecy. A common complaint by industry professionals is that consumers have better access to real estate data through third-party public online sites than real estate professionals have through industry channels.
The Houston Association of Realtors in Texas and the Washington, D.C.-area regional Metropolitan Regional Information Systems (MRIS) MLSs offer up models for investing in public-facing Web sites, which can be beneficial for consumers and industry participants.
Relaxed VOW rules and new VOW innovators should ensure that more data gets to the public. The CALMLS statewide database effort in California may quickly grow up as a model for a national database.
And in improving the structure of the MLS system, the industry should maintain a broad and diverse MLS oversight group to ensure that consumers' rights and interests are not overlooked. The industry must be mindful of the trust that consumers instill in real estate professionals when they open up their homes to the world.
With universal data access, innovation and competition should be encouraged among traditional companies, the National Association of Realtors, local trade organizations and online real estate firms.
6. Real estate professionals should provide buyers and sellers with vastly improved market analytics.
Despite the availability of property information, consumers are not receiving enough detailed data and sophisticated real estate data analyses before entering a transaction. Like the format in a well-done appraisal report, real estate professionals should provide each buyer and seller with a set of comprehensive real estate reports that detail costs and valuation trends, quantify risk, and account for market conditions.
The reports should be updated as conditions change. Real estate professionals should stand by the analyses and be held accountable for claims about the market and for unqualified forecasting. Tech companies that provide robust qualitative information at the micro-level should partner with MLS organizations, brokers and other tech companies to give consumers robust market data analyses.
7. Reform the mortgage securitization process.
A functioning, healthy secondary mortgage market is a prerequisite for a housing recovery. While the government will continue to play a direct role in the securitization and guarantee of loans for some time through Fannie Mae, Freddie Mac and the Federal Housing Administration, there is a proper place for for-profit companies in the secondary market.
A major cause of the loose lending practices and price inflation of the housing boom was the ability of mortgage originators to divorce themselves from the risks involved with the loans they arranged, transferring that risk to secondary market investors. Although loan originators cannot be expected to retain all of the risk of the loans they make -- this would limit the number of loans they could arrange, and defeat the purpose of having a secondary loan market -- they should not receive greater rewards for placing borrowers in higher-risk loans.
Secondary-market investors also need better transparency in the process, so they can demand rewards that are commensurate with risk. This could be accomplished by changes to the way rating agencies are compensated and limitations on the complexity of the investments mortgages and mortgage-backed securities can be packaged into. Investors can more readily assess the riskiness of mortgage-backed securities that contain a relatively homogeneous pool of home loans than a collateralized debt obligation that depends on a number of underlying assets.
8. Reduce settlement services costs, regulate bundling of services to prevent price gouging.
Lawmakers and regulators should take steps to insure that title insurance and settlement services are marketed to consumers, rather than real estate brokers and others in a position to steer consumers to a particular provider. The new RESPA rules -- which allow lenders to offer home buyers a competitive package of settlement services with loans -- are a step in the right direction.
The sales infrastructure of title companies adds to the cost structure and should be overhauled from top to bottom. New lower-cost title policies should be promoted and an environment for more competition should be fostered.
Bundling of title, mortgage and real estate services is a black box that should lead to a simpler transaction but in some cases hikes costs, confuses consumers and can spawn fraud.
Affiliations among industries that are not straightforward can steer business based on company benefits, not consumer choice and savings. There must be disclosure to explain to consumers when companies playing a role in the same real estate transaction share a roof or are active partners.
While the bundling of services in a real estate transaction may not inherently inflate costs, consumers need better online methods for comparison-shopping. Standard terms and the rationale for the costs must be better explained and better policed.
The various fees that consumers pay in closing a real estate transaction must be standardized, with better estimates of closing costs and enhanced enforcement of laws to prevent illegal kickbacks and affiliations that harm consumers.
9. Ensure affordable housing, smart development.
Commit funds and preserve truly affordable housing options for those who cannot otherwise afford housing. There must be housing options beyond rental units for teachers, firefighters and nurses alike to enable them to live in the communities they serve. Community groups and government agencies should expand spending and other incentives to encourage affordable housing developments and programs. Some of the sprawl-to-sprawl developments that built up during builders' latest housing "Gold Rush" are now modern ghost towns. In addition to promoting more redevelopment projects to ensure an adequate and varied housing supply near job centers, communities should work to actively limit overbuilding that has led to fallow fields of foreclosed homes.
A substantial segment of the population will be banned from homeownership for a time after foreclosure and bankruptcy -- we need to consider clemency as they seek new housing, and make sure those unable to buy again have an ample supply of affordable rental units. Those former renters who lost the roof over their heads through foreclosure must have housing options. Building codes must be relaxed to make it easy for owners and developers to convert condos to rental units, and for homeowners to add second units and complete remodeling projects to make room for unemployed family and friends.
Builders are looking for things to build. There is an opportunity for local governments and community groups to act quickly to develop programs to convert vacant, foreclosed properties and empty, stagnant lots from axed construction projects into affordable housing or other projects and prevent a foreclosure domino effect from gutting entire communities. This can be facilitated through grant money and other forms of assistance.
With more energy crises in store, growth and urban planning should concentrate on population centers and public transportation corridors. So-called "green" building techniques that promote energy efficiency and conservation will be more about economic realities than environmental-mindedness among consumers.
10. Remove barriers to alternative business models.
Innovative new companies break the mold of tired real estate practices -- from experimenting with low-cost title policies and new business models for real estate sales, to pushing money-saving technologies. These companies need to be encouraged at every step of the way. Both federal and state governments should vigorously police industry antitrust behavior that restricts innovation, while keeping safeguards in place to prevent fraudulent practices by newcomer ne'er-do-wells.
The industry culture must embrace and promote innovation. The National Association of Realtors should promote policies that allow for greater innovation among its members and affiliated organization. Innovators should step up to leadership roles within the industry to be a part of the decision-making process.
***
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Submitted by Bill Fooks on February 27, 2009 - 3:56am.
Bill Fooks
TFT realty Marketing Service
Warwick, RI http://www.fooksteam.com Looks like inman wrote and picked the issues that best fit the results a person is looking for. Regulate, regulate , regulate. Sounds like the motor vehicle department. Once regulated even the good are punished and service drops off. We regulate to the lowest position on the pole. Seems backwards to me. The issues of encouraging competition is foremost in my eyes and these suggested changes do not seem to do it. If educating someone to measure their skills is the bar we use for entry, how come we have so many educated fools?
Submitted by Catherine Read on February 27, 2009 - 4:46am.
I think Inman has done a great job in fostering an open and productive dialogue among many different players in this industry regarding change. This collaborative approach to reform is the foundation of "being the change we seek in the world." Those with a vested interest in continuing to do business in real estate need to be part of shaping what that future will look like. If we aren't proactive in shaping our own future, others will do it for us - regulatory boards, associations, the biggest industry players, and most certainly the consumer. Let the conversations continue to foster healthy debate and constructive solutions.
Catherine S. Read
Creative Read, Inc.
Submitted by Doug Patterson on February 27, 2009 - 4:47am.
I'm sorry to sound blunt, and this post may be deleted, but does this author really know anything about the Real Estate business? You have hit all my hot buttons. I can't be the only one.
Good grief, this sounds like a bunch of liberal campaign promises. Get the Federal government involved in yet another are where it has no right to be? As Ronald Reagan said, "Government is not the solution to our problems; government IS the problem."
Force settlement costs down? So, you want the government to tell lawyers, home inspectors, pest control companies, and surveyors how much they can charge?? Sorry, this is pure socialism. I know that destroying the capitalist system is popular today, but I for one won't take that lying down. In my experience, clients shop for these services already.
"Commit funds and preserve truly affordable housing options for those who cannot otherwise afford housing. There must be housing options beyond rental units for teachers, firefighters and nurses alike to enable them to live in the communities they serve." WHY? A lot of people have to rent. Hey, I can't afford a new BMW right now. Maybe taxpayers should commit funds to help me with that.
"Community groups and government agencies should expand spending and other incentives to encourage affordable housing developments and programs." EXPAND SPENDING? What do you think is causing our problems in the first place? Are you volunteering my tax money?
Cut the agent pool down tho the best and brightest? So, ignoring the fact that unproductive agents will leave the business (they are not earning a salary!!), you want to dictate to people what they cannot do to make a living?
FYI, a $100,000 home and a $1,000,000 do NOT sell in the same amount of time! The $1,000,000 home takes a LOT longer, and is a lot more expensive to market. WE all know that.
"Restrictive pricing rules and practices -- that have no obvious benefit for consumers and seek or serve to squelch competition -- should be banned, including anti-rebate rules and boycotts of companies with alternative pricing models." Here's a newsflash: THEY ALREADY ARE BANNED!!
"Real estate professionals should provide buyers and sellers with vastly improved market analytics." Have you seen any presentations from top agents lately?
"A major cause of the loose lending practices and price inflation of the housing boom was the ability of mortgage originators to divorce themselves from the risks involved with the loans they arranged, transferring that risk to secondary market investors." Have you forgotten that it was CONGRESS that required these lenders to make loans to marginally-qualified low-income borrowers?
There is too much more that needs to be squashed here, but I don't have all day.
Submitted by Robert A. Hulme on February 27, 2009 - 5:23am.
These were all great issues to debate and form opinions on. I agree with most, but some still would be very hard to implement. At least we have been given some very important dialog that needs to be evaluated in the future to find a successful model that might help to bring our industry back to where it needs to be.
Robert A. Hulme
Realtor, GRI, e-PRO
Prudential Utah Real Estate
Loan Officer
Mortgage Xpress
www.UtahCountyRealEstate.us
www.UtahHomesForSale.ws
801-885-2586
Submitted by Paul Howard on February 27, 2009 - 5:28am.
I agree with the second post. Catherine Read said, "I think Inman has done a great job in fostering an open and productive dialogue among many different players in this industry regarding change."
The post by Doug Patterson (Doug Patterson on February 27, 2009 - 4:47am) is important too as it reflects the attitude in the industry that maintains the status quo.
He is right about one thing though. The regulatory system is part of the problem. It is not the existence of it though - it is the part that has frozen the system into it's present form. Look at a HUD-1. It is premised on the institutionalized commission split which is based on the listing side determining the buy side commission. It does not require it but the 700 lines section assumes it. Further: the mortgage and appraisal industries also support it.
===========================================
Ex1. Current system. Sales price: 100,000
seller pays commission: 3000
seller gets 97000.
FHA DP: $3500.
Mortgage amount 96500.
-============================================
Ex2. alternate: Sales price. 97000.
seller commission---------- 0.0
seller gets.------------------97000.
commission --------------------3000.
Total cost of purchase.-------100,000
Down payment:----------------- $3500
Mortgage amount ---------------$96500.
=============================================
Either way the buyer pays the same, the lender finances the same amount and the seller gets the same amount.
The second example allows separating the buy side commission from the institutionalized 'offer of compensation' model currently used in virtually all MLS systems which are supported by lender and appraisal requirements as well as HUD's own HUD-1, and RESPA. Ex2 can't happen within the current institutional framework.
It is not that the industry as a group or even company by company via selection from among a number of choices, can 'just decide' to do things differently. The institutional framework within which it operates must change. If it doesn't real reform possibilities are very limited.
The FTC, DOJ and consumer organizations up to this point have blinders on. When they take them off reform can happen.
Paul Howard, Broker
NJHomeBuyer.com Realty
Cherry Hill NJ 08002
Submitted by Ton Ali on February 27, 2009 - 5:31am.
I think this list is a great best practices for agents and mortgage brokers, but I don't think there is an industry out there that regulates practitioners to this degree. Certainly not the financial industry.
What about the market. We have seen limited service companies come and go. Clients have options now, but if they want better representation, they need to hire better agents. We are out there and offering quality service, highly technical and detailed CMA's and transparency.
I do agree that Brokers need to be held accountable for inexperience and poorly trained agents.
Submitted by JoAnne Mercer on February 27, 2009 - 6:13am.
This is insane. I agree with Doug Paterson. This sounds like the major monopoly Branded Brick and Mortars, along with other venues of the Real Estate Industry are trying to regulate a Free Enterprise Market. If you play by the rules that are in place in NC and keep your Continuing Education requirements current you will be more educated than most Professional Industries that are in the field of Entrepreneurship in our state. More is required of us than any other Licensed Business Professional Organization in the State that I am aware of. This would only harm the small offices that do not want to be apart of the Old and Out dated on the Street corner Real Estate Office. This is a horrible idea that I would go kicking and screaming to the end to fight against.
JoAnne S. Mercer
RaleighCaryNCNewHomesRealty
Cary, NC
Submitted by Bruce Hahn on February 27, 2009 - 6:13am.
American Homeowners Grassroots Alliance
GREAT JOB!!!!
These are all needed reforms that will ultimately benefit both consumers and the players in the real estate services food chain. They will be opposed by many of those who benefit from the status quo, but the many other real estate professionals who are currently doing a good job and are appreciated by their clients will make out just fine.
Not all of these excellent ideas will be implemented any time soon. However, as they are the public image of real estate professionals will begin to improve, and consumer appreciation for the value their services will be restored.
As the philosopher/musician Bob Marley once sang "Get up, stand up, stand up for your rights." YOU and other real estate professionals can help make that happen by standing up and vocally supporting reform and opposing anti-consumer efforts in your local, state, and national real estate organizations and in your contacts with legislators and regulators at all levels.
Bruce Hahn
American Homeowners Grassroots Alliance
www.AmericanHomeowners.org
Submitted by Susie Blackmon on February 27, 2009 - 6:40am.
I think the points in "Reforming Real Estate" are excellent; implementing, of course, is another story. However, I am all for transparency and much stricter licensing requirements. It is more than obvious that allowing just anyone to obtain a license very easily has done nothing for the reputation and/or respect of realtors.
Susie Blackmon
http://www.BuckingtheRealEstateTrend.com
Submitted by Glenn Roberts Jr. on February 27, 2009 - 7:16am.
Thank you for your commentary and keep it coming. This is a dialogue and we welcome all input.
Glenn Roberts Jr.
Managing Editor
Inman News
Submitted by Vincent Spoto on February 27, 2009 - 7:51am.
Vincent Spoto
Doug Patterson has it mostly right. But we do need to improve the level of Professionalism in this business.
All this change that is going on...one would think that this Bangladesh and not the greatest country in the history of mankind.
We should always strive for improvements but lets not throw aout the baby with the bath water.
Submitted by Todd Held on February 27, 2009 - 7:52am.
Are you kidding? This list would be the demise of our industry. Over regulating is not the answer.
I am a firm believer in providing "top notch" service to my clients. My definition of "top notch" might not be the same to someone else, but if my clients are happy, they will come back in the future and refer me to others in the meantime (and they do). All commissions are negotiable, and as most of us know, the good agents get the good commissions.The slackers go back to their previous careers. Even groups such as CRS teach value versus cost.
Throw this list out and try again.
Submitted by Doug Patterson on February 27, 2009 - 8:03am.
I'm certainly not against regulation, and I'm not trying to defend the status quo. I'm against BAD regulation, and against government interference in free markets. I'm also opposed to CHANGE for the sake of itself. The discussion is good, but let's be sure we use our brains and THINK about the consequences of change.
MORE GOVERNMENT never helps anything because governments are not subject to, and therefore don't understand, free markets.
The whole reason for regulation is consumer protection, and it should be. However, a lot of what passes for consumer protection is just political grand-standing to get media attention and contributions. Left to itself government would regulate every free market into the ground, and many of the proposals in this editorial would do that to real estate.
The article contains incorrect or unsubstantiated "facts" such as:
"In the boom, too many unqualified professionals were proffering poor advice." Such as??
"Too many parties are involved in the real estate value chain..." Who are they, and which ones would you do without?
"Promote a more efficient real estate industry, reducing costs..." Competition does this by its nature. Every one of us tries to cut costs almost daily.
"Wasteful advertising spending also contributes to the cost of the transaction and could be minimized by improved measurement around successful online ad investments." DUH? The only reason we use any print ads anymore is because the clients don't understand that they don't work.
"Real estate agents should be required to provide up-front, detailed disclosures on how they are compensated in the real estate transaction process..." Don't we do that?
"The various fees that consumers pay in closing a real estate transaction must be standardized..." Price controls, anyone? Let's just drive all those service providers out of business!
"The industry, in partnership with third-party companies or on its own, must free the [MLS] data.." I know the debate is huge on this. IMHO, an MLS exists for the exclusive use of its Board dues-paying members. It was never meant for public access. Part of that is to protect sellers from everyone knowing how much they agreed to pay the listing agent and other private data. I think much more info could be disclosed on IDX sites, but not the full boat.
"Remove barriers to alternative business models..." What barriers (except for the tendency of many to cling to tradition) do you mean? In the next breath you say, "Innovative new companies break the mold of tired real estate practices." There's your answer.
"Both federal and state governments should vigorously police industry antitrust behavior that restricts innovation." What antitrust behavior?? This one probably ticks me off more than most. Real estate is not an oligarchy. We don't fix commissions. We compete.
I agree with this one, though he makes it sound like it isn't happening:
"The industry must embrace a robust marketplace with a range of pricing options..." That is happening before our eyes, even if progress is slow. It will happen. To me the best thing that could happen is for BUYERS to pay their own agents, and SELLERS to pay theirs. I agree that the current system of listing agents paying buyer/sub agents makes no sense.
The biggest problem with the public on compensation is the mistaken idea that, "we make 6%." I WISH!
OK, folks...wail away! :)
Submitted by Marcia Canady on February 27, 2009 - 8:35am.
In response to #3:
"Technology adoption allows for agents and brokers to conduct business virtually, and can eliminate the expense of office space. Online home-shopping tools can help consumers narrow the focus of their home searches even before contacting an agent."
Agents need to accept the fact that due to the Internet, the consumer is now in control and can search for homes on the Internet without ever speaking to a Buyer's Agent.
"Wasteful advertising spending also contributes to the cost of the transaction and could be minimized by improved measurement around successful online ad investments. Agents should be encouraged to adopt social media and mobile technologies into their businesses to communicate more instantly and transparently with consumers."
The FACTS:
*Only 3% of buyers found a home from a Print Ad.
*32% of buyers found their home via the Internet.
*87% of real estate Buyers start their
property search ONLINE.
*73% of Sellers say they would be more willing to list with an Agent who offered to shoot a property video.
Again, Agents need to learn about Online Marketing & Social Media...but no one is really SHOWING Agents how to use these tools to secure listings and sell more homes.
We at 2media have real estate backgrounds AND have been in the Online Marketing & Social Media field for many years.
That is why we created a comprehensive Online Marketing Program using Social Media (Agent profiles, property videos, sharing tools - send to a potential buyer via email, post to Facebook, Twitter etc) and a link to Charity (to drive the Affluent Market to the site) for Agents with listings over $1million.
In April, we will start our "Social Media Marketing Toolkit" weekly, online coaching sessions for Agents who become Members of our program.
The website is: www.LuxuryRealEstate4Charity.com and has been launched in Southern California. We will be expanding nationwide by the end of 2009.
I would encourage Agents to seek out programs like ours that have been developed by experts in the Online Marketing & Social Media industry.
It's much easier to pay a low monthly fee to experts than to try and figure out these new technologies on your own.
The Agents that have joined our program are thrilled. They are able to get more listings because they are exposing their properties to the largest group of Affluent Buyers online.
I received this email from a top Agent in Beverly Hills last week:
“I just got a listing for 6% because of the LuxuryRealEstate4Charity Program! The seller was extremely impressed with the video/marketing and the fact that I will donate to Habitat for Humanity. I have NOT been able to get a 6% commission in a VERY long time. Thank you so much for sending the Listing Presentation and creating this amazing program! It’s wonderful.”
*Sources: National Association of Realtors Profile of Home Buyers & Sellers, August 2008 & Realtor.com
Marcia Canady
President & COO
2media.us
www.LuxuryRealEstat4Charity.com
marcia@2media.us
Tel: 949.544.1740
Submitted by John Sullivan on February 27, 2009 - 8:40am.
Bravo Doug Patterson! Ronald Reagan's comment can't be repeated enough: "Government is not the solution to our problems; government IS the problem."
Somebody please tell us what industry the Federal Governement has done a good job regulating? Maybe we should have every consumer service industry regulated and licensed by the Federal Government - Car Salesman, Homeowner and Car insurance salesman, etc., etc. Yeah, that's how we can protect the public.
Last time I checked, State Goverments have RE commissions that regulate RE Agents & Brokers. The problem is, there's always going to be a licensed or unlicensed individual not practicing ethically or violating existing regulations. More regulation, laws, rules or whatever, is not going to protect the consumer or give them a better deal! The consumer has to educate theirselves and make informed decisions. Sounds like a good job for American Homeowners Grassroots Alliance, educate consumers on how to make good desicions and take personal responsibility. You can't legislate common sense and good choices!
The industry does support various pricing models. Look around, I see them all the time. There are many successful Brokers/Agents who have fee for service models. Those who do not do a good job of marketing there services whether the "traditional model" or a new pricing models, fail and move on to something else.
By the way, doesn't the Buyer's agent negotiate the fee for their service when the have their client agree to a Buyer Representation agreement? In my state, there is a blank to fill in for fee for service.
Doug's comment comparing the sale and commission of a $100,000 home to a $1,000,000 home is spot on. It takes longer and cost more to sell the $1,000,000 home. Please don't tell me it's not fair to the agent selling the less expensive homes, because there is nothing stopping any agent from selling in whatever market they want, except their own ambition. Of course they must be licensed in the State they practice and follow state regulations, RESPA, Fair Housing, Truth in Lending, local laws, Association regulations, etc.
Many sellers are negotiating the best commission deal or service fees possible. Most sellers see the value in using a RE professional, for an agreed upon fee and the majority are happy with the service they receive. If Sellers can't find a RE professional who meets their needs, guess what, they have a choice to sell it on their own.
I have to go take blood pressure pill and get back to ensuring my clients get the best price, with the most protection and the least amount of stress.
Submitted by John & Helen Graham on February 27, 2009 - 9:08am.
John & Helen Graham
Let the market drive changes to our business and business models. The good agents will lead or keep pace and the others will bite the dust.
If I wanted to work in a highly regulated environment, I would be giving the President a call and go to work for the government.
Never forget, the government is the root cause of this issue going back to President Carter, President Clinton, Chris Dodd and Barney Frank. When government over regulates, bad things happen to good people.
John Graham
Dickson Realty
775-530-1728
tahoejg@netzero.com
Submitted by Jerry Hoffman on February 27, 2009 - 9:15am.
There is an obvious slant and preference the author is trying to offer. Doug is right on the money and those of us actually doing business in this market don't have time to point out the obvious holes large enough to drive a bus through.
There is nothing "blind" about an upfront offer of compensation to the buyer side of the transaction. The only side blind to the compensation is the buyer. If you want buyers to pay the buyers broker - go for it. You will without any doubt remove a majority of buyers in a "normal" market. The proverbial cut off your nose scenario. All of the money paid by the seller at closing, is the sellers money - there is no debate. Appraisals donot adjust "value" based on expenses.
Paul's simplistic model is well taken, but it assumes the seller should or would take less money. That could be debated, but why should a seller agree to less than market value? The value of the property is not determined by related expenses for selling.
I have an idea, the next time any of these, "buyer brings the money" pundits makes a stock trade, ask the company whose stock they purchase, to pay the traders broker fee - after all, the trader is putting up the money.... I bet that goes over like a fart in church.
Much of the rhetoric is there to sound like it means something, but when you put lipstick on a pig, it's still a pig.
Change, merely for the sake of change, in the guise of "helping" the consumer, will only make money for a few connected people and entities. Remember how bad the phone system in this country was? The government decided it was unfair and had to break it up so the consumer could get better, cheaper service. Sounded good - but in reality, a few companies and well connected people made a ton of money; my service became more expensive and less reliable; every couple years there was a merger. Now it seems all these more efficient, less expensive, smaller companies have managed to consolidate nearly all the way back to what they were.
Real Estate is local. This national nonsense is largely voyeuristic. Every state has its own idiosyncrasies that cannot be nationalized.
Lending does have national implications and will never be effectively addressed as long as congress receives campaign funds from lenders. Congress will help themselves first and tell you it is for our benefit.
In most of these positions, somebody is urinating on our legs and telling us its raining.
Submitted by William Metzker on February 27, 2009 - 9:20am.
This article and discussion is an example of why I subscribe to Inman. Well done! A couple of points, though.
The concept of more training for licensees needs to be fleshed out. I think most agents and brokers would agree that much of what has to be learned to pass licensing tests ranges from silly to irrelevant, and could only have arisen from focus groups of bureaucrats sitting around with nothing else to do. Continuing education classes need to be more substantial than a presentation of someone's new lead capturing system.
Second, appreciation of risk needs to be taught to the homebuying public, either in high schools, community colleges or through local Realtor office seminars. A higher degree of financial literacy would have gone a long way towards minimizing people signing up for ridiculous mortgages. Besides financial risk, people buying a home should be aware of what goes into building a house. An example is the construction defect issues that have been so pervasive, at least on the West Coast, over the last ten or more years.
Collectively, we need to revisit the mantra that a home purchase is the best long term investment most people can make. A smarter consumer is a better and more loyal one.
Finally, thanks for clarifying the compensation issue by defining it a how-to-do, not how much. Too many people, including a prominent Inman columnist, saw the discussion as reducing compensation, which in fact it was not.
Submitted by John Goldsmith on February 27, 2009 - 12:57pm.
Bravo! I’m an appraiser and would bet most every Realtor and Mortgage Broker has a story about an appraiser who didn’t know what he was doing. They can probably also remember how much it costs them in commission. I do not remember Reagan supporting waste and corruption. Some simply cannot see the forest for the trees. I think what we all need to consider is that on a level playing field, there’s plenty for all. Rules and regulations are bad idea, assuming everyone’s playing fair to begin with. They’re not. Rant and rave all you want, but at least offer a solution that resolves the mess we’re in and explain how we got here. It’s survival of the fittest time and I’m in.
Submitted by Doug Patterson on February 27, 2009 - 1:08pm.
to Bruce Hahn
American Homeowners Grassroots Alliance --
The so-called "reforms" you think are so wonderful would do nothing but drive good people out of this business into some other field where they can excel without artificial roadblocks from politicians and bureaucrats. It won't be worth staying in the business for the best agents. All that will be left are the underachievers.
Look at our government's idiotic new Medicare rules that drive good doctors out of medicine; there are states where it is about impossible to find a specialist, and they're even trying to crush home health care now. Has that been good for consumers?
Most of what this editorial suggests are BAD THINGS for real estate agents and the public. This has nothing to do with keeping the status-quo, but with the predictable result of government interference in free markets. If you get what you're asking for, you won't like the results.
We're already looking over our shoulders for lawsuits every time we write a contract. Coordinating every closing is like walking on hot coals. Please try working in this business for a year; your perspective will change.
Submitted by Dale Stouffer on February 27, 2009 - 2:14pm.
Respectfully,
Please change your first item to reflect "mortgage professionals" instead of "mortgage brokers". You're inaccurately targeting a sector of the mortgage industry.
Mortgage brokers were not the sole problem to the mortgage meltdown yet your headline for 1. professes reform for mortgage brokers. While reform is welcome to keep the riff-raff out and to upgrade the proffered advice, this reform is not solely needed for "mortgage brokers".
Many mortgage originators - i.e. the mortgage professionals that you are referring to that not only work for mortgage brokers and small mortgage bankers, but also work at some of the largest mortgage operations in the industry like: Countrywide, Citi, Wells Fargo, Bank of America.
These companies are not mortgage brokers - rather banks - and the folks who work for them have not historically had to be licensed. In fact, loan officers/originators working at these institutions do not have to disclose to the consumer what kind of money they make on the Yield Spread Premium or Service Release Premium like mortgage brokers do.
I have quoted against many of these institutions over the years and have been highly competitive and have disclosed my Yield Spread Premium.
For more information on this topic and why mortgage brokers should continue to be used please read: Should I Use A Mortgage Broker?.
Dale Stouffer
GetPreQualified.com
Your First Step to Buying a Home
Submitted by Glenn Roberts Jr. on February 27, 2009 - 2:38pm.
Mr. Stouffer, you are correct that the item was not intended to single out "mortgage brokers" or "real estate agents." Instead, it should read: 1. Create a more effective regulatory framework for real estate and mortgage professionals. Thank you.
Glenn Roberts Jr.
Managing Editor
Inman News
Submitted by Paul Howard on February 27, 2009 - 3:03pm.
I can sum up many of the comments here with:
--"Hey, the system we have works, I just want it to work better and all the people that don't do it right should learn so they can do it like me or get out of the business and that will be good for consumers.--"
By the way, it may take more work to market a 1,000,000 home than a 100,000 home if you are listing it but not if you are on the buy side. Buyer's at that level are MUCH more labor intensive -- and they look at A LOT more homes.
Besides can you really justify a 30,000 commission from a buyer or seller for a $1,000,000 home and only $3000 for a $100,000 home. You can't be serious.
Trying to improve the system while ignoring the context of the institutional framework within which it exists if futile.
Jerry's comment: "Paul's simplistic model is well taken, but it assumes the seller should or would take less money. That could be debated, but why should a seller agree to less than market value? The value of the property is not determined by related expenses for selling."
My 2 examples didn't have the seller taking less money - the amount was exactly the same in both. In Ex2 the commission was (out in the open) financed into the mortgage. That can't happen without regulatory (ie institutional) change.
Look at the big picture.
Paul Howard, Broker
NJHomeBuyer.com Realty
Cherry Hill NJ 08002
Submitted by Wenceslao Fernandez Jr, BS, Realtor, CDPE on February 27, 2009 - 4:08pm.
Wow! It sounds like another political melee between Democrats and Republicans!
Regulation vs De-regulation
Free market vs All-For-One-And-One-For-All
Joe The Hard-Working-Plumber vs Jim The Wealth-Spreader
What is happening to us all?!?!
How many more industries will we nationalize?!?!
Who exactly are we bailing out now?!?!
http://MiamiRealEstateKing.YourKWAgent.com
Certified Distressed Property Expert
Miami-Dade County, Florida.
Submitted by Jerry Hoffman on February 27, 2009 - 4:14pm.
Paul - ex 1 sale price $100,000; ex 2 sale price $97,000 - assumes the seller takes less. Further, if the $3000 is taken out of the seller side who pays it? If the buyer brings it in after the sale price, you've just doubled the buyer expenses; if the seller is going tp pay it after all, you just reduced the seller net. Or are you suggesting the $3000 commission isn't really a cost?
Submitted by Ruthmarie Hicks on February 27, 2009 - 10:50pm.
I posted this before as comment, but I'm going to post this again. I guess this is in the form of a "a pox on all your houses" statement. We've got one camp screaming that the public has no viable "choices" which is ludicrous and another who won't admit that there are serious problems that either must be SOLVED or someone will solve it for us (read REGULATION.) Free disclosure....I am a relatively new and struggling agent. I work with a traditional model although I am open to new ideas that are WORKABLE and REALISTIC. Most of what was presented here represented a distinct "agenda" by Inman and I have little respect for the series. The suggestions are not practical or workable in the real world.
Here is what I wrote before:
Camp 1 - Let's think outside the box - get the old-timers who dominate and obstruct OUT of the way and we will take over the world with lower commissions/flat fees and slick websites. It will be done in VOLUME - so we won't have to worry about how low the fees are. But the service will be the same - even though the volume required will force you to stay in the office (on your butt) lead generating your heads off.
Are you guys smoking crack? Moving a home is VERY expensive. The transaction has a million places to fall apart and there is no simple or easy way to do it particularly in a down market. The only thing most of these models will do is front-load the fees, but actual sales will stall because these glorified FSBOS will be negotiating for themselves. You think this offers "value?" Get out in the trenches in this crazy market and try and sell a few homes and your tune will change. Also, recognize geography as limiting. Understanding neighborhoods, working with skittish buyers and nervous sellers is TIME CONSUMING, EXPENSIVE, and intensely LOCAL. The fact that is local limits the capacity for building volume. Thus the cost is higher. You can't get around that metric which is why so many of the "models" fall flat on their faces.
Camp 2- "The cream rises to the top group." These are angry and established agents many of whom have worked many years to establish a "name" and have carved out a business.
Cream does rise to the top - but so does SLUDGE. Those who post on places like Inman are generally excellent at what they do - but I have met many an agent who fits the definition of "cream" in the form of closed deals and stats - but how they got there defines them as SLUDGE. Just because you are pulling in the big bucks and doing a lot of transactions doesn't mean you are doing well by your CLIENT. It's not about YOU. It's not about the NUMBER of transactions - its about the quality. I know an agent in my area who works the system. Brokerages want this person - he has well over 30 listings (a huge number for our area.) By the number of transactions this agent is defined as successful. Dig a little deeper and you've got a problem. Over 50 cancelled listings in the last few months. His system is "buy" the listing, disappear, reappear for price reductions. If you lose the listing - refer it to a friend and on it goes....
Camp 2 needs to redefine success...Success is being profitable while STILL DOING THE BEST BY THE CONSUMER - who is what it is all about. Yet repeatedly this group sites "survival of the fittest" and "top producers" as metrics of success. Don't confuse the number of closed transactions with success. That road is fraught with peril and it is what got us into this mess in the first place. After all, this entire discussion would be moot if camp two had kept track of what true success was in the eyes of the public.
Submitted by Cleo Shahateet on February 28, 2009 - 12:13am.
I think that having a national MLS is a great idea and takes the way business is done in the U.S. to another level. After working overseas for the last few years, I have come to appreciate all of the systems in America. National MLS # 5 is the only issue that jumped out at me. I am sure there are alot of great ideas, but I don't think that our system is broken and probably the best one by far.
Cyprus Marketing Solutions Ltd. providing proven internet marketing solutions specializing
in properties for sale in
Cyprus to families relocating and
Submitted by Sandy X Woodard on February 28, 2009 - 12:42am.
I totally agree with Doug Patterson in his post . It is also true that to market 1 million dollar home takes more effort and is more expensive!
Can I justify a 30K commission? Of course I can!, I do not want to offend anyone but the marketing of a Luxury Homes are far more extensive and expensive that just a average home. You need to market your property not just locally also outside your state and even Internationally..Paul do you think that is cheap?
The high quality of my service is the same, it does not matter the price!..About Rules, I have seen so many agents not complying with RESPA rules, kickbacks? lots...just look at some of the agents marketing materials!..
I am so lucky and proud to be a Keller Williams family, we have the best training...
It is true that we need more qualify agents. Many agents they just do the 15 hours of MCE o what ever hours they need in their state to renew their license only! Is so much to learn. Someone said to me once Knowledge is power!
One more thing,,,, don't mention a country if you haven't been there....crooks,unscrupulous people are every where, just look around; with just saying the magic word "I'm sorry" you can be the head of the IRS! I have to admit he was good in hiding it!
Doug keep posting!
Well it is 2.40am! time for bed!
Sandy X Woodard
REALTOR®/CONSULTANT
AHS, AREP,ePRO,GRI,QSC
Accredited Home Staging Specialist
Buyer Council Member
Accredited Luxury Home Specialist Member
Member of The International Real Estate Specialists
Keller Williams Realty
Katy-Texas
713-960-2977
http://search.har.com/engine/dispSearch.cfm?MLNUM=1503940
Submitted by Bill Fooks on February 28, 2009 - 4:48am.
Bill Fooks
TFT realty Marketing Service
Warwick, RI http://www.fooksteam.com
Do some of these postings read what they are writing? In one post, we can work on lower fees, get off our buts and prospect, and then in the same post states that the number of transactions should not be considerd in the success equation. How do you get high volume with out high numbers of transactions. Oh, you sell only expensive homes and ignore the less fortunate. Sounds like a true liberal.
Dough your are right on and I could not agree more. How come elected officilas think they have all the wisdom, just because someone elects them to office.Now we regulate with this dumb group? Give me a break.
Submitted by Dave "Utah Dave" Robison on February 28, 2009 - 11:23am.
I still dont understand why a national database is going to benefit anyone. Thats like saying...lets create a huge monopoly. Now you have this giant behemoth that controls what happens and they dont adapt quickly to change that is necessary. Having a national database doesnt benefit me anything. If you want numbers...why not have a company gather national data. They would have to gather it themselves and provide data. Thats different.Still the biggest change in our industry which is going to happen isnt legislature. Its companies forcing change because they become the new model. http://www.kahunarainmaking.com is the source for info on this. Your Friend,
Utah Dave
http://www.utahdave.com
Submitted by David Allen on February 28, 2009 - 1:56pm.
This is a very timely topic, thanks Inman News.
#9: Ensuring affordable housing, smart development is a particularly good point.
I believe that this new economy has created the opportunity for all of us to again recognize home ownership as a social fabric and not an investment speculation vehicle. A re-commitment to this ideal will pay off in many ways.
David
www.barronrepartners.com
http://www.squidoo.com/davidhenry
Submitted by Paul Howard on March 1, 2009 - 6:28am.
Jerry said: "Paul - ex 1 sale price $100,000; ex 2 sale price $97,000 - assumes the seller takes less. Further, if the $3000 is taken out of the seller side who pays it? If the buyer brings it in after the sale price, you've just doubled the buyer expenses; if the seller is going tp pay it after all, you just reduced the seller net. Or are you suggesting the $3000 commission isn't really a cost?"
Jerry the seller gets $97,000 in each case. In the first case after paying a 3000 commisssion on a 100,000 sales price. In the second case the seller doesn't pay a commission so gets the entire 97,000 sales price.
-------
The buyer pays the same too. In the first case the buyer pays the 100,000 sales price. In the second case the buyer pays the 97,000 sales price and also the $3000 commission which is included in the mortgage. The total the buyer pays is 100,000. The house is the same, the numbers for every participant are the same. The second model is not possible though in the current regulatory environment - the first is institutionalized.
==========================================
The current system fails to adequately disclose agency relationships which have a significant affect on ultimate purchase price and terms of transactions to home buyers. This is intimately tied to the virtually universal practice of listing agents 'offers' of compensation to buy side agents. Until home buyers can view themselves as paying their agents commission there will be little 'competition' in that area. It is the system that caused and perpetuates this and it won't change till it is confronted at the regulatory/legislative level. Offering buyer rebates and other such 'workarounds' only serves to continue a system that should be changed at a basic level.
I'm not arguing for more regulation - or for less. I'm arguing that whatever it is - what we have does not address the problems. Does 'different' regulation mean more - or less? Does it matter or does what it accomplishes matter?
I'm pretty clear about the small part of the problem I've discussed. Divorce the listing agreement/offer of compensation from the buy side agent's commission. Allow folding the buy side agent's commission (negotiated between the buyer and their agent) into the mortgage (much as "up- front MIP" is commonly done in an FHA deal).
Paul Howard, Broker
NJHomeBuyer.com Realty
Cherry Hill NJ 08002
www.twitter.com/paulhoward
Submitted by Paul Howard on March 1, 2009 - 8:49am.
Sandy X Woodard said: "Can I justify a 30K commission? Of course I can!, I do not want to offend anyone but the marketing of a Luxury Homes are far more extensive and expensive that just a average home. You need to market your property not just locally also outside your state and even Internationally..Paul do you think that is cheap?"
and claims: "The high quality of my service is the same, it does not matter the price!."
Can we assume then that the $27,000 difference in commission between a 100,000 home and a 1Mil home is just the expenses being passed along? That is quite a marketing budget.
And then,if you have the buyer and collect both sides the total commission may be $60,000. I wonder what some seller agents would do not to lose that buyer and the double bubble along with it.
Paul Howard, Broker
NJHomeBuyer.com Realty
Cherry Hill NJ 08002
www.twitter.com/paulhoward
Submitted by Greg Tracy on March 2, 2009 - 7:14pm.
Hi Glenn,
Good article. Here are my personal responses to each of your points.
1. I agree. I think real estate licensing is among the greatest flaws in the entire housing industry. I think licensing should be a two year degree with one year learning and one year apprenticeship.
2. Transparency is happening within the free market. I don't agree with adding regulations on the origination process.
3. Every industry can become more efficient and cut cost. The "body shop" offices would mostly disappear by raising the barrier to entry (see my response to #1)
4. Consumers have many options with compensation today. Exclaiming how it's all broken is old news. There are plenty of compensation models out there today.
5. A national set of standards for sharing MLS data would be wonderful and helpful. A national MLS would just be a bigger nightmare than we have now and could never happen- they all want more control (and more money).
6. Not everyone wants piles of data to pour over. In fact, most buyers I speak with could care less about statistics beyond the basics. Other than it being a good investment (which is why you use a great Realtor) they simply want to love their new home and feel good there. Data cannot give you that.
7. It's not securing the loans that is the problem. If the approval process was better, the secondary markets would function, as they have for many years, very efficiently.
8. I disagree. Regulation is not appropriate with settlement services- allow the market to dictate the fees and costs.
9. I agree we need more affordable housing and finding appropriate clemency for many people with regard to housing opportunities.
10. There are very few barriers to new business models in real estate. Innovation is thriving and technology is growing monthly.
See you at the next Connect!
Greg Tracy
BlueRoof.com
BlueRoof360.com
Submitted by Michael Daly on March 2, 2009 - 9:56pm.
The lack of regulation and "regard" for doing the right thing is what has gotten us into this mess, both on Wall Street and Main Street.
I think your list is spot on!
Michael Daly
True North Realty Associates - A Hamptons Buyers Agency
The Hamptons Real Estate Blog
www.beachamptons.com
631 725 0554
Submitted by Don Anthony Gomez on March 2, 2009 - 10:33pm.
As the Owner / Broker of a "new" business model where we offer a "hybrid" approach in our compensation structure, I always wonder how long it will take for the word to truly get out to the public that there are alternatives available on both the selling and buying sides of the transaction. Our concept has been around for many years, yet many people don't know that there are options. Since many homeowners only buy and sell a few homes in their lifetime, oftentimes the process doesn't even come on the radar screen until they have a reason to think about it.
For many years to come, there will be homeowners who will continue to stick with the "big name" real estate firm or will choose an agent based solely on the relationship they have with them rather than evaluating cost vs services. Some will be reluctant to even try a new approach out of unfounded fear. However, as alternative business models continue to spread across the country with more and more people successfully selling their homes and saving thousands of dollars compared with a "traditional" agent, the efficiencies and effectiveness of our business model will be well known through the clients who have become raging advocates. The industry is changing, albeit slowly, and we're proud to provide a consumer-friendly alternative.
Don Anthony Gomez
Owner/Broker
Don Anthony Realty
Charlotte, NC
http://www.DonAnthonyRealty.com
Submitted by Jerry Hoffman on March 3, 2009 - 6:42am.
Paul - I understand the theory and attempt at manipulating preceptions. However, you are still assuming a seller should sell for less, just because you reduce/remove part of the commission. The value of the house is $100,000 regardless of expenses. Why would a seller sell for less than market value?
If I have an agreement with my seller for x% or x/2, the value of the house is still $100,000.
To make your example work, you are asking the seller to take less - I understand the net figure, but I don't understand why a seller should sell for less just to make the example work.
Submitted by Jerry Hoffman on March 3, 2009 - 8:41am.
One obvious issue in many comments is that disclosure is an issue in some states. Paul's state of New Jersey is apparently one of them. In Illinois we have designated agency, as does Utah, noted by a previous comment. We work as the agent of the consumer we are working with by law. Back in the days of sub-agency, we had to give notice to buyers who we worked for. So the disclosure was still there - at least for those that do their job correctly, ethically, etc.
In both cases, my clients knew I was being paid and how much. If the "we need transparency" pundits aren't disclosing already - why?
A few comments suggest an office that handles both listings and buyers is a conflict. This assumes that listing agents and buyer agents in the same office are collaborating to manipulate price. In reality, that may have happened in some cases - therefore we have mandatory ethics training. But it is unlikely this is standard practice industry wide. No amount of licensing, training or regulations will stop individuals with a proclivity toward unprofessional and unethical behavior. Change the system and you will have the same issue in multiple flavors. Change will not magically entice unprofessional agents to become more professional.
For those of you who haven't figured it out yet, the buyers need to be educated by their agent as to the market place and value of comparable properties. They get to decide how much they are willing to pay - period. If the agent misrepresents the value, no change suggested so far will help. If the buyer's number and the seller's number at least meet, if not overlap - you got a deal. If they don't meet, move on to the next one. No buyer should pay more than they can or think the property is worth to them; no seller should sell for less than the market dictates. This assumes the agents are presenting their clients with valid, complete and accurate market data. No change suggested improves that practice.
The real purpose of suggesting the compensation change is to obtain credibility by manipulating the buyers perception of the transaction. Be honest - ask every buyer if they want to pay your commission or have it paid buy the seller through the listing broker. Putting commission onto a buyers mortgage doesn't qualify as a pipe dream. Again, it is just noise to make it sound like something. Not one of the buyers I have represented has ever objected to me being paid through the listing agent.
What you really don't like are the agents who "discount" and don't pay what you believe is a full commission on the buy side. Some agents work for their clients, some work for themselves. No change will alter that.
Submitted by Alex Grex on April 29, 2009 - 5:43pm.
I'm not a big fan of giving all the power to just one MLS service. Thats asking for trouble. I'm not happy with the one i have, I least now I can move and try another one.
Alex Greben
http://www.nwmove.com/
Portland Real Estate.
Submitted by Tim Dries on May 22, 2009 - 11:29am.
This is a bit off topic, although related to the state of the housing industry at the moment. A couple of days ago I read a post (I forget on which site) about the average prices of houses falling to just over $10k in Detroit. Although of course there is going to be a fall in house prices in these difficult times, the fall from the report I read seems an unbelievably high amount (from $100k average in 2003). I'm from the UK and wondered whether this was typical in many areas of the US at the moment?
Tim
Webmaster - closet organizers, gas fireplaces.
Submitted by james lee on August 29, 2009 - 10:16am.
Reforming the mortgage origination process is big for consumers. They really need to understand their mortgage before they sign it. People do not need to get a mortgage that they cannot afford. consolidate MlS information is so nice now. It just makes things alot easier and able to share. I like alot of these reforms.
Brampton Real Estate