The FTC more aggressive in its review of the industry
The Federal Trade Commission has created a new web site, "Competition in the Real Estate Marketplace," created to raise awareness of real estate issues and controversy. Addressed are the ongoing changes and development of fee-for-service (flat fee MLS) companies and the increasing use of the internet to enable home buyers during the home searching process. You can review case filings, workshops, report concerns about competition and read publications concerning the real estate marketplace. The recent press conference to announce a consent agreement with the Austin MLS combined with their efforts to increase consumer awareness of industy issues could be just a taste of what’s to come for associations restricting competition.
Limited-service brokers unaffected
As a number of states recently passed minimum requirements laws for real estate agency, Tennessee and
Virginia have passed legislation establishing requirements for full service licensees allowing exemptions for limited service providers. Thank goodness someone has gotten it right! The Department of Justice has commended the states for their preservation of consumer choice. Why has it been so hard for state senate to differentiate between the services being offered by a full service agent and a limited service broker and passing legislation that still promotes competition and choice? Minimum service requirements should be passed to ensure full service agents are providing a service that warrants the 3 percent usually received on the listing side of the transaction. Protecting the consumer means making sure that home sellers enlisting the services of a full service agent are getting all the services they deserve for the thousands of dollars they are paying. With a fee-for-service, or flat fee MLS broker, consumers know exactly what they are paying for, essentially there are no intangibles.
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March 13, 2006 – 10:51 pm
Are Real Estate Commissions on the Decline?
Could the six-percent commission standard become a thing of the past? Economist Steven Levitt along with industry expert Brad Inman have reason to believe the commission structure of the real estate industry is going to change, and change drastically. With the alternative fee for service or flat fee MLS models in conjunction with the evolution of the internet and the way information is being displayed, home sellers and home buyers are ascertaining more control over the real estate transaction. With the recent development and launch of websites performing functions of a traditional agent the internet has literally become the new sales agent according to Brad Inman. It is estimated that 90 percent of the buy side work is done by the purchaser. That being said, how much longer can buyer agents expect to earn 3 percent on a sale?
Home buyers are not alone in their abilities to find useful resources and alternatives to the traditional model, home sellers now not only have the opportunity to list their homes in their local Multiple Listing Service for a low flat fee – broadening the market potential exponentially – they have the opportunity to take advantage of websites offering home appraisals, valuations, neighborhood information and advice on how to properly market their homes.
Not only is the competition becoming fiercer for traditional brokers, but they are continuing to turn more attention to the commission structure through ongoing legal battles with the Department of Justice. The DoJ has claimed real estate agents “collude to prop up commission rates through such anti-competitive actions as ‘boycotting’ the listings of discount brokers.” The DoJ has also charged that attempts by the National Association of Realtors (NAR) to raise the minimum requirements laws of the listing agent is also anti-competitive as it attempts to divest the industry of discount and flat-fee brokers.
Scott Levitt doesn’t stop with declining commission he offers his parallel to the fading profession of travel agents. With the Multiple Listing Service the main service agents offer their clients Levitt believes alternative models will win out, driving down the commissions and possibly driving out the traditional agents.
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Is Your Home is Ready for Purchase
When preparing the home for sale it is important to determine what work should and what work should not be done prior to selling. Whether selling the home with a traditional agent or selling the home For Sale By Owner with a fee for service broker, often it is a wise decision to order a pre-sale inspection of the home to determine if there are any known defects requiring immediate attention. In the event there are no major defects, items that will negatively effect the first impression of the home need to be corrected, or repaired first. If the fence looks ragged or the entry porch is dilapidated, repair them. If paint is chipping or peeling on the siding, doors, or interior, touch them up. The correction of these minor items will help maximize your return from the sale. If the inspection reveals major defect like code violation, it may be more cost effective to disclose the problem to prospective buyers and ask a lower price, than to remove the defect and rebuild. If the decision is made to disclose the violation to the buyer rather than have the problem fixed, it is wise to have a licensed contractor provide an estimate of cost to fix so prospective buyers have the chance to visualize or see all the costs involved with purchasing the home.
The Internet’s Effect Marketing Your Home
Beginning in the late 90’s national real estate service providers – like Realtor.com, owned by the National Association of Realtors – began the display of MLS listing information along with home photos. Less than a decade later “we’re on the front end of a virtual explosion of useful tools for consumers…” according to Real Trends magazine. From the comfort of their own home, home buyers are now capable of viewing property data, multiple photo showcases, virtual tours, accessing neighborhood and county data, and with the evolution and development of satellite maps, sponsored by internet juggernauts like Google, capable of swooping down to street level with only a few clicks to see aerial images of not only the home of interest but the surroundings of the neighborhood. Due to the recent trend potential home buyers are experiencing a greater control over the purchasing process than ever before in the industry. Buyers are spending more time conducting their own research before enlisting the assistance of a real estate agent, but are moving more quickly to close once they do begin working with an agent. With such information readily available to the home buyer market it is becoming easier for homeowners to directly market their homes to buyers through the use of a flat-fee MLS broker willing to enter their home onto the MLS on a fee for service basis. These homes are appearing on public websites providing a platform for For Sale By Owners to market competitively with the listings of any traditional real estate agent.
