New Business Models Face Tough Challenges
Victor Hugo’s quote, “An invasion of armies can be resisted, but not an idea whose time has come.” aptly describes the current environment in which InSight Realty’s business model finds itself. InSight’s rapid success has met with the full and continuous opposition of traditional industry competitors. In spite of the fact that commission rates in the United States are, by far, the highest of all industrialized countries, traditional real estate companies have shown a marked recalcitrance to change.
Traditional real estate agents and brokers have resisted InSight in several ways. Some of these methods have been overt, such as individual agents choosing not to show their buyer clients properties listed by InSight. Some are subtle. In several markets the leadership of Realtor Associations have gone so far as to modify MLS rules and regulations to discriminate against new business models like InSight’s by preventing MLS entry only listings from appearing on public websites like Realtor.com.
Today, the entrenched leadership of the real estate industry’s trade group, the National Association of Realtors (NAR) is attempting to stifle innovative business models even further. State & local Realtor Associations and State Real Estate Commissions whose memberships are largely comprised of traditional real estate brokers, have, with the advice and support of NAR, proposed legislation to require “enumerated minimum services” for real estate brokers. Depending on the extent and severity of the new laws, these actions could spell the end for innovative business models in real estate and with them "consumer choice".
Several states legislatures have already succumbed to the pressure of Realtor lobbyists by passing laws that force consumers to purchase a bundle of services similar to the traditional real estate companys’ offering. In these states, consumers who want any assistance from a real estate professional, such as a flat-fee listing in the MLS, must also purchase “contract negotiation”, “closing assistance” and/or other services associated with the traditional bundled service offering. The effect of these laws has been to eliminate consumers’ ability to choose the types of real estate services they can purchase. The successes of these efforts significantly impacts InSight’s pricing for “a la carte” real estate services. In these states, InSight has been forced to alter or modify its service offering to adjust to a changing regulatory landscape.
In response to these efforts by the traditional power brokers, both the United States Department of Justice (DOJ) and the Federal Trade Commission (FTC) have characterized NAR’s Internet listing display policy as well State Realtor Associations’ proposals to enforce “enumerated minimum services” through legislation, as harmful to consumers and anti-competitive to new business models. Both the DOJ and FTC have sent a number of warning letters to state legislators and governors opposing legislated “minimum service requirements”. The DOJ is currently preparing for a lawsuit against NAR for its Internet listing display policy. See http://blog.insight-realty.com
Regardless of the opposition from traditional Realtors, Mr. Hugo would agree that the concept that “the consumer can choose the real estate services that he or she wants” and “pay just for those services” is an idea whose time has come. The efforts of traditional forces to maintain the status quo in an attempt to protect their longstanding commission structure are failing. Home buyers and sellers are no longer content to be held captive to Realtors’ control of the vaunted Multiple Listing Service (MLS) and through it, access to property information and marketing exposure. With InSight’s business model, consumers have regained control of their real estate transaction.
The efficiencies and economies now available to consumers through the Internet, have allowed InSight’s model to thrive. InSight’s concept embodies what consumers now want and expect from a real estate company in today’s market – CHOICES.
InSight’s success has been the result of providing real estate brokerage services on an “as needed” basis for a price commensurate with the value received. InSight’s mission is to continue looking for ways to improve the real estate brokerage industry using innovative and creative approaches to increase consumer choice.
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