Information age brings pressure to bear on real estate commissions

With the advent of the Internet, stockbrokers have seen their commissions fall. Travel agents fees have plummeted. Yet Realtors still command fees equal to 5% or more of a property’s sales price. According to Alan Murray in a recent Wall Street Journal article, that’s enough money to build a new home in most parts of the world!

U.S. real estate commissions remain among the highest in the world. What use to be the Realtors advantage, access to information about which homes were for sale, is now readily available on the Internet. So why, do home sellers continue to pay such high fees?

Steve Cook, vice president of public affairs for the National Association of Realtors, says it’s because homes are, unlike stocks or airplane seats, unique comodities requiring speciliazed skills in order to sell.

But, according to Eric Danziger, cheif executive of Internet home seller, Zip Realty, the industry hasn’t  changed that much since Dwight Eisenhower’s day simply because people in the industry don’t want it to. Yes says business journalist, J.R. Lehman: State real estate commissions (usually comprised of real estate brokers) across the nation are notorious for enforcing anti-competitive rules that protect the existing class of brokers. It is illegal to advertise commission rates in many states. Other’s make it illegal to rebate portions of a real estate commission even to make the deal work for buyers and sellers.

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