Blogging Hits Real Estate

Posted by admin on January 31st, 2006

Internet Keeps Expanding Consumer Power

Blogging has hit the real-estate industry…and it just may upend a marketplace known for inefficiency and restricted information. There are hundreds, perhaps thousands, of blogs covering real estate and they shine unfiltered lights on their subjects, reporting market gossip, innuendo, facts, opinion, virtually anything.  Blogs are telling it like it is at the street level," said Brad Inman of Inman News, a large real-estate news service. Inman said real-estate blogging began in the Bay area, took hold in New York and has now spread nationally.

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State Mandated Minimum Service Laws limit consumer choice and harm competition in the Real Estate Industry

Posted by admin on January 30th, 2006

Isn’t it about time the feds stepped in?

Rebuffed by state lawmakers in Alabama, Missouri, Oklahoma and Texas the Department of Justice (DOJ) may get some support and muscle for its efforts to oppose state mandated minimum service legislation in the real estate industry. The Antitrust Modernization Committee (AMC) created by Congress in 2004 to study whether or not U.S. federal antitrust laws need updating may provide relief against state agencies that are in support of monopolizing real estate services.

In light of the effective elimination of newer, innovative real estate business models in some states by the passage of minimum service laws, the AMC findings couldn’t come at a better time. What could happen as a result of these findings is a modification of the federal antitrust laws to make professional real estate licensure board members (generally traditional real estate brokers) liable for creating their state regulations policies  based on their own financial interests.

It is to be seen whether or not the commissions findings give the DOJ any real teeth, but it’s obvious to many that the National Association of Realtors (NAR) as well as state real estate regulatory boards, both of whose memberships are dominated by traditional real estate brokers, are attempting to limit competition in real estate by the lobbying for legislation, in the case of NAR’s state and local counterparts, and creation of regulatory policies, in the case of state licensing boards, that requires real estate practitioners to offer bundled services after the traditional real estate brokerage model. Where these efforts have been successful in legally requiring these bundled services consumers can no longer elect to purchase just an MLS listing for a flat fee without purchasing other enumerated services such as contract negotiation and transaction management.

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Flat Fee MLS, Real Estate, limited service, lower commissions, minimum service, real estate board No Comments »

Virginia Considers New Real Estate Agency Law

Posted by admin on January 29th, 2006

Limited Service debate spreads to the Old Dominion

House Bill 316, Agent Services Legislation is now being considered for passage in the Virginia Generaly Assembly. Ostensibly, the bill, backed by the Virginia Association of Realtors (VAR), seeks to ensure that consumers understand what services they will or won’t receive in a brokerage relationship by creating a new form of agency "Limited Service" (LS).

Currently, Virginia agency law allows for two kinds of relationships: 1) standard agency, in which clients are owed the full gamut of statutory agency services/duties by the real estate licensee; and 2) non-agency/independent contractor, in which licensees provide only the services contracted for, with no disclosure requirement as to services not provided. But new limited services real estate brokerage models anticipate a hybrid approach: a limited kind of agency relationship, in which consumers may choose brokerage services a la carte, and in return pay the broker a flat fee or reduced commission.

Overall, I am pleased with the decision of VAR to back a simple disclosure rather than enforced enumerated service requirements which have been promulgated in various states. The disagreement I have with the proposed legislation is that it provides for Multiple Listing Services (MLSs) to create a data field to designate "LS" listings without a prohibition of not making the designation field searchable. By making LS designation searchable traditional agents are able to selectively elimlinate LS listings from their searches as well as any searches they may create for automatic email to their clients. It invites discrimination against LS firms and provides no counterbalancing positive effect that is not already available in the existing MLS data fields.

To me the LS designation in the MLS data fields is a "red herring". It is disingenous for agents to say that they "need" a separate MLS field to know that they are dealing with an LS listing since this disclosure can be readily made in the existing "agent remarks" field of the listing. From my experience, LS brokers aren’t attempting to hide the fact that the listing is LS. In fact, one of our biggest time/money wasters as an LS firm is answering calls from agents who haven’t read the MLS instructions about who to contact for showings, contracts, etc.
From the other side, I really can’t see what all the fuss is about from these agents who are supposedly having to do SO much more work with LS listings. When I was a traditional agent, I would have welcomed (read: jumped all over) the opportunity to directly negotiate my buyer clients contracts with the sellers (not allowed by precendent in my market). Not only would I have been able to more clearly and fully present the interests of my clients, I would have been making contact with another future buyer/seller prospect which is the name of the game for real estate agents.
I presume that traditional brokers see this new legislation as a win for the status quo because they think that by telling the "poor, uninformed" sellers what they’re missing by listing LS or MLS entry-only they will change their minds about attempting to look for ways to save their equity. (HA HA).
What confounds me is how the traditional real estate leaders continually consider these issues affects them without giving any though to what the consumer wants. Such a myopic and selfish outlook only serves to make the new entrant innovators look even more consumer oriented. And it’s beginning to show. Look how may flat fee, limited service brokers there are now. A quick Google search shows our numbers are increasing exponentially. Wouldn’t they think it’s a result of consumer’s being fed up with the lack of choices? Being forced to purchase a bundle of services doesn’t protect anything except the traditional Realtor’s right a full commission.
My feeling is that even in states where minimum service laws have been passed, those laws will eventually be overturned once the consumer wakes up to what’s really happening. Calling the laws "consumer protections" can’t belie the fact that choices are being eliminated. Experience shows that the consumer, and specifically consumer choice, always wins in the long run. Even Microsoft now says they’re going "open source".

See Also

MLS, Virginia, flat fee, house bill 316, limited agency, limited service, real estate agency, va, var No Comments »

Flat fee MLS helps Sell Your Home

Posted by admin on January 27th, 2006

When the Housing Bubble Bursts…,or, just slowly leaks air.

Patrick Newport, U.S. economist at consulting firm Global Insight in Waltham, Mass., said in a recent statement,  "Interest rates have eased in recent weeks, but we are expecting them to drift back up over the first half of 2006," he said, adding that if the Federal Reserve raises interest rates two more times before pausing, the increases "will cool off the housing market and deflate many local housing bubbles."

It seems that everywhere you look today, a housing bubble burst imminent. So, what do you do if you want to sell your home in a slowing market? In a buyer’s market, pricing it the number one most important factor in selling a home. Obviously, anyone can sell their home by lowering the price enough to cause a sale, but for most home owners, this option leaves a bit to be desired.

So, to re-phrase the question, "How do you sell your home and still NET the most  during a market slowdown?" Enter "flat fee mls" listing. A relatively recent entry to the real estate brokerage industry, a flat fee MLS listing allows home sellers to place their property in the Realtor MLS and on Realtor.com for an upfront fee (usually in the $500 range) instead of paying a whopping 6% commission at closing.

A flat fee MLS listing allows a home seller to lower their price and still, maximize their net return. Studies show that a MLS listing increases the odds of selling a home by providing the highest marketing exposure possible. Higher exposure means a greater demand and consequently a higher price. 

Here’s how it works: Instead of listing with a traditional broker, find a flat fee broker offering MLS entry only listing of homes for sale. (for a nationwide listing of flat rate brokers visit www.MLSLion.com). A flat fee broker will enter your property into the Multiple Listing Service in your area where it can be viewed by all of the real estate agents as well as their buyers. If a buyer’s agent brings you a buyer, you pay them 1/2 of the normal commission amount, generally around 3%. For every $100,000 of your sales price, you save approximately $2,500. That means on an average $200,000 home, you can lower the sales price by about $5,000 and still net the same amount of money from the sale as if you had used a traditional real estate agent. Of course, all other factors being equal, a house selling for $195,000 sells before one selling for $200,000 in any market.

If you’re not ready to go the For Sale By Owner (FSBO) route, most flat fee brokers also can provide additional assistance for marketing, contract preparation and transaction management and closing. Flat fee MLS also provides significantly higher marketing exposure than FSBO. The reason is simple - most buyers go to real estate agents using the MLS to purchase a home. In fact, the most recent comprehensive study showed that over 75% of home buyer’s use a real estate agent when purchasing a home.

There’s usually little risk with flat fee MLS listing too, as many flat fee brokers will credit your upfront fee back if you allow them to refer you to a traditional real estate agent, should you change your mind down the road. It’s truly the best of both worlds. All of the exposure of a traditional real estate listing without the cost, or even the risk!

See Also

  • Real Estate Journal
    Homes Sales Fell in December, Condo Market May Falter
  • Extreme home selling
    As the market slows, home sellers are throwing in sweeteners to move properties…dual-mode toilets, anyone?
Flat Fee MLS, buyers' market, home sale, home selling, housing bubble, sell your home No Comments »

Realtors, Consumers and Commissions

Posted by admin on January 25th, 2006

Consumers Reacting to Realtor Commission Rates

Residential real estate is an industry in which consolidation and time-saving technology have not only not saved consumers any money, but also coincided with steep price increases. It is an industry that has used its political muscle in a number of states to ward off competition from discounters. And at a time when the Internet has wiped out legions of other middlemen in other industries while squeezing the incomes of those who are left, the number of real estate agents has continued to climb along with their income.

Looming large in all this is the Internet, which threatens to break the exclusive hold that local Realtor groups have had on information and information channels vital to buyers and sellers. The Internet has made it easier for buyers and sellers to go through the process without agents. And it has provided an opening for lower-cost brokers offering limited services.

Companies such as Insight Realty, serving the entire Mid-Atlantic region has averaged over 200% growth in the last 2 years with their flat fee MLS Listing services.  While their marketing efforts initially focused on FSBOs (For Sale By Owners), their rapid growth indicates that all homesellers are gaining interest in these services.

Recent forums also indicate growing consumer resentment toward the current rate of real estate commissions.  Of course the term current is relative in this industry as the commission rate has largely remained unchanged over the past 80 years. 

An online exchange on the Washington Post website include the following exchanges:

"Thanks for finally saying what’s needed to be said for a long time. Many in the real estate industry refuse to change, continue to overcharge for services rendered and real alternatives are needed.  I don’t blame them though. If I could bag a $20k+ commission on a listing that sold in less than a week with minimal effort in this active market, I’d try to stave off competition too."

"You’d think, in markets with tight inventory, full service agents would be willing to bargain on commissions. Again, a few are, particularly involving expensive properties, and in those cases you should be able to find a good one willing to go down to 5 percent. But remember, selling agents for one customers are also buying agents for another, so they may not be as desperate as you think. They have a lot at stake in maintaining the traditional price levels and disabusing consumers about the wisdom of bargaining on price. These are conversations they DON’T WANT TO HAVE."

"The real estate industry, at least here in MD, is a self regulated industry that gets huge sums of money for little work. All you need to do is understand that the settlement lawyer, who can be sued if there is a problem in the contract the agent prepared, gets about $400 for his work while the agent on a sale of a $400K home can receive 6% or $24,000. Something is wrong. If I can sell a car myself I should be able to sell a home without paying such huge fees to people who do not even require a college degree to be the experts they claim to be."

As you can see, it appears the traditional real estate industry is in for change.  Let’s hope that the interests of the consumer drive the process and not the protection of an outdated industry.

 

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Flat Fee MLS Industry Shakeout Begins

Posted by admin on January 24th, 2006

Number of flat fee brokers increases along with market share.

Flat fee MLS listing has become one of the fastest growing segments of the real estate industry. Offering consumers an unbundled real estate brokerage service, flat fee MLS listing firms now provide competition to traditional Realtors in over 85% of the major metropolitan markets in the country.

As this industry segment becomes more mature, key players are coming to dominate the market. InSight Realty, a flat fee listing company serving the Mid-Atlantic and Southeast United States area from Philadelphia, PA down through Atlanta, GA has recently been named one of the "up and comers" among all brokerage firms nationwide, flat fee, discount and traditional.

With a single corporate office in Richmond, VA, InSight was paid on more real estate transaction during 2005 than the majority of real estate firms in the country - competing with traditional companies boasting multiple office locations and hundreds of agents.

Companies like InSight have one thing in common. Providing a variety of unblundled real estate services to consumers at a price commensurate with the value received.