Don't overregulate real estate
Perspective: The 10 Points List
By Inman News, Monday, March 2, 2009.
Flickr photo by jepoirrier.Editor's note: Inman News has compiled a list of 10 reforms for the real estate industry (see "Reforming Real Estate"). We invite your discussion in refining this list. Send any suggestions and commentary to future@inman.com. The following essay is a guest contribution written in response to the list.
By DOUG PATTERSON
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 grandstanding 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 ("Reforming Real Estate") editorial would do that to the real estate industry.
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 (multiple listing service) data." I know the debate is huge on this. In my humble opinion, an MLS exists for the exclusive use of its 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 it 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 percent" -- I WISH!
Doug Patterson is no longer a Realtor but maintains a real estate license with WeSellGreenville LLC in Greenville, S.C.
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Submitted by Paul Howard on March 2, 2009 - 4:35am.
It's fair for Doug to call out those who make statements based on 'unsubstantiated facts'. He doesn't provide much in the way of facts himself though.
I do have to say that the one thing he agrees with I also agree with. He says, "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."
As I have said in the past, the only way that can happen is for the institutional framework within which we operate to change in such a way that whatever commissions buyers and their agent negotiate can be included in the buyer's mortgage in much the same way FHA's upfront mortgage insurance premium often is now. If this ever happens real competition can take place. More regulation within the current framework is just trying to fit a square peg into a round hole.
Disclosure: this is a hot issue. Lots of agents pay lip service to it. Telling a partial truth is not good enough. For example:
Doug is identified at the end of his piece like this: "Doug Patterson has worked as a buyer's agent for Keller Williams Upstate Realty in Grenville, S.C." Many may miss the past tense. The implication is that he is an active agent.
Yet, an attempt to go to his website leads to a redirect saying: "Doug and Carol Patterson's Web site has moved. Please go here for our web site design business. We're no longer in real estate."
Also, advertising ones self as a 'buyer's agent', without qualification, while working for a company that also represents seller's is presenting less than a true picture.
Home buyers deserve FULL DISCLOSURE - all the time - and the current hodge podge of state disclosure laws don't give it to them.
Paul Howard, Broker
NJHomeBuyer.com Realty
Cherry Hill NJ 08002
www.twitter.com/paulhoward
Submitted by Larry Whited Sr. on March 2, 2009 - 4:43am.
Well Said by both.
Larry A. Whited, Sr., CRB, CRS, GRI
President & Founder
www.maxUnet.com & www.WebMLS.net
P.O. Box 757
West Chester Ohio 45071
Direct - (513) 543-2727 Fax - (513) 297-7497
Submitted by Robert A. Hulme on March 2, 2009 - 4:48am.
Disclosure has always been a hot button in the Real Estate industry. We should be required to do whatever would be in the best interest of our client whether it be buyer or seller.
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 Doug Patterson on March 2, 2009 - 5:34am.
Now my 15 minutes of infamy begins!
Paul, I'm not the ones who made these assertions in the first place. I think it is up to the one who did to back them up. Several people who replied to the original post challenged the assertions and proposals.
Paul, what's with the personal attack?? Can't you manage to stick to the issues? You really don't deserve the justification of a reply, but what the heck. I am still an active licensee, but not a REALTOR as of December; our company set up a subsidiary so that people who decide to make a living some other way can maintain a license and receive commissions for giving referrals. However, I _was_ a buyer's agent whether you like it or not because I only worked with buyers and I had to relay that fact somehow. I did _not_ say "exclusive buyer's agent" which we all know one can't say if the company represents sellers.
Is that enough disclosure for you? Great. Now please mind your own business and stick to the questions at hand.
Hace a nice day.
Submitted by Walter Boomsma on March 2, 2009 - 6:45am.
There are too many issues here to discuss, but one that the entire thread demonstrates: the real estate "industry" tends to be one of the most internally focused (and often self-serving) in existence. Sometimes it appears that any benefits the consumer receives are incidental.
Submitted by jerry silverman on March 2, 2009 - 9:33am.
Come on Doug - How can you say there are no barriers to alternative business models and that federal and state governments should not vigorously police industry antitrust behavior that restricts innovation. Right now in 20 states there are either anti rebate or minimum service laws in place that restrict the purchase of unbundled real estate services and help keep commissions artificially inflated. Try to tell the consumer why it is not in there best interest to be able to receive a rebate at settlement and why they should have to pay thousands of dollars for the performance of menial tasks even if they are willing to take on a portion of the work themselves.
Submitted by Joseph Bridges on March 2, 2009 - 10:11am.
Doug makes a point that consumers have a view of what agents get paid is incorrect and all of us are partially to blame when we don't take the time to accurately tell clients how their money is spent.
I do agree with Doug in that more regulation is not a good idea. I am always in favor of raising the standard in the industry but having the government get involved to do that is not a great idea.
We should continue to educate ourselves and raise our own standards and this will help change the view of the customer.
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