October 23, 2006 – 11:22 pm
The traditional real estate structure is not the way to go
Real estate commissions in the United States are higher than any other industrialized nation.
According to the independent study by Mark Nadel at the AE Brookings Joint Center, A Critical Assessment of the Standard, Traditional, Residential Real Estate Broker Commission Rate Structure, the real estate commission structure is a poor way to compensate a real estate agent for their time.
Discount Realtors and flat rate real estate companies offer alternatives to the traditional commission rate based system. With a discount real estate broker you can get the same bundle of services for less than the prevalent rate in your market.
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Maximize your marketing efforts without sacrificing thousands in commissions
A recent article published by CNNMoney.com provided tips for home seller and home flippers, but to my disappointment was very outdated and stale. As a proponent of choice and alternative to the traditional real estate model, I had to completely disagree with the advice to hire a full service agent. One thing I do think she was right about is homeowners "hate the idea of parting with 6 percent of [their] home’s value." Especially when there is growing awareness of discount realtors and flat fee MLS companies that serve as a much better avenue for home sellers to capitalize on marketing exposure in a "tougher environment" while maximizing their equity. When a home owner has to fork over 6 percent of the sales price of their home at closing you better believe that is being reflected in the asking price, which as the article stated is the most important aspect to getting the home sold. Because flat fee MLS charges a low, one-time fee to list the home in the MLS, homeowners are saving 3 percent at a minimum during the sales transaction freeing them to price their home far more competitively than anyone listed with a full service broker.
While a full service agent may run classified ads or send postcards to neighbors, flat fee brokers provide an MLS listing whereby the home will get the same marketing exposure through public websites like realtor.com for the low fee freeing up additional pocket change for the seller to run ads themselves where they have the opportunity to attract unrepresented buyers and save on the full 6 percent of broker commissions. As the industry continues to see lower sales prices, sellers should be encouraged to seek alternative models that provide similar exposure without sacrificing thousands in commissions.
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February 13, 2006 – 6:49 pm
Why are you paying 6%?
You save on airline fares. You can buy stocks for just $10. You book hotel rooms, buy books and trade junk from your attic on the Internet. So why are you still paying 6% to sell your home?
According to studies, U.S. home sellers pay about 1.5% more than home sellers in other parts of the industrialized world for the priviledge of having their homes listed by real estate brokers. A listing in the Realtor Multiple Listing Service (MLS) along with a bundle of services from pricing assistance and marketing to contract negotiation and transaction management can take a huge slice out of the home equity pie.
The Internet has brought about a plethora of new business models aimed at reducing the cost to consumers of selling a home. Choosing a discount real estate model is a simple matter of searching the web. Try this experiment: Google "flat fee mls + (your city’s name) " or "discount realtor + (your city’s name)" and you’ll now find hundreds of entries for real estate companies competing for your business by offering lower fees and an "unbundling" of the traditional real estate brokerage offering.
Once a fringe element of the real estate industry, discount real estate has become a part of the mainstream. Discount realtors, flat fee brokers and limited service companies have sprung up all over the country in response to consumers’ clamoring for alternatives to high real estate commissions. The effects have been noticeable. The average commission rate in the U.S. has fallen to about 5%.
So, what are you waiting for? Find a reputable company offering "a la carte" services and you’re on your way to saving thousands of dollars in real estate commissions. That could come in handy in your new home.
October 24, 2005 – 12:52 pm
Pros & Cons
Jean Chatzky, Financial Editor for NBC’s The Today Show, discusses the advantages of using Discount or Flat Fee brokers when selling a home. The significant cost savings, particularly in hot markets, are driving more and more sellers to explore these options.
Consumers have more and more information at their disposal and are increasingly the drivers of the real estate transaction. Even as traditional brokers fight against these emerging models, consumers will continue to seek out service providers who better meet their individual needs.
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October 12, 2005 – 6:45 pm
“Consumer Protection” or “Industry Protectionism”
Brokers in Texas are facing new restrictions on the way they provide real estate services. No longer are limited service and MLS entry-only brokers able to offer an a la carte menu of services to consumers without restriction.
Because of the efforts of traditional Realtors who control the Texas Real Estate Commission and Texas Association of Realtors, legislators were convinced that the public needed "protection" in the form of stricter real estate requirements for real estate brokers.
Senate Bill 810 went into effect September 1, 2005 requiring real estate brokers to, among other things, present real estate offers directly to their customers. No longer do consumers have the choice of paying a real estate broker less for fewer services. Whether or not Texan home sellers want a broker to handle their real estate offer for them or not, they must now agree to allow the broker to present the offer (and, of course, pay for that extra service accordingly).
While the introduction of the new law was couched with the term "consumer protection" by it’s proponents, the obvious intent of these types of measures is protection of the interests of big brokers and their right to a traditional real estate commission of 5-7%. Limited service companies have made terrifc gains in the market over the past several years at the expense of traditional brokers.
So much so, in fact, that Realtor Associations in several states have called for and pushed through legislation on the unwitting public that requires them to pay for additional services they may not want or need. Aaron Farmer of Texas Discount Realty and Jack McLemore of BrokerDirectMLSTexas have both already raised their fees in response to the requirements of the new law.
It doesn’t seem like the consumer wins (or gets protected) when rates for real estate services go up in response to a new law and no benefit is derived.
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