Posted by admin on June 27th, 2006
Alternatives to the traditional real estate commissions
At a recent convention Steve Levitt, the author of "Freakonomics," shared some interesting facts and views about the real estate industry. He has been criticized by the National Association of Realtors and many agents for his prediction for the future of the real estate industry. His findings include:
- Due to low entry barriers for new real estate agents the median income has not increased over the last 10 years even though prices are up almost 70 percent in some places.
- Real estate agents tend to sell their own homes for about 3 percent more than the selling price of their clients’ homes.
- Real estate agents tend to leave their own homes on the market about 10 percent longer than their clients’.
He also shared a story criticizing the ethical motivations of real estate agents citing a personal experience. He contacted the listing agent of a home he was interested in order to determine a minimum offer that would be considered by the seller. The agent then explained the seller would be willing to accept offers significantly lower than the asking price so she could pocket an extra $20,000 to 30,000 in commissions costing her clients over $50,000. Sound fair? This problem certainly would not be encountered using a flat fee MLS service, where you - the seller - are in control of the transaction. Cost effective alternatives like flat fee MLS provide a viable option for home sellers and for sale by owners to market their homes. In fact Levitt explains he thinks flat fee MLS and limited service brokers will provide the knockout punch to the traditional model.
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Posted by admin on October 28th, 2005
Two out of three home sellers hire the first agent they contact.
Many homesellers don’t realize that real estate commissions are negotiable. The fact that real estate commissions seem to be fairly standard across the country leads many to believe that there’s only one commission rate.
Nationally, the average commission rate is about 5.2% according to Real Trends, a publishing and communications company providing news, research and information-based services to the residential real estate industry. But a recent poll of home sellers showed that most people anticipate paying a commission of 6% for a real estate agent to list and sell their home.
As new Internet business models enter the real estate arena, the downward pressure on real estate commissions gives home sellers more room to negotiate when it comes to hiring a real estate broker. Knowing what you can hope to gain by doing a little reseach before meeting with a real estate agent could save you a lot.
For a primer on "How to Negotiate Real Estate Commission Rates" see the new online report at Insight-Realty.com.
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Posted by admin on October 2nd, 2005
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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Posted by admin on September 28th, 2005
GAO report finds MLS may discourage discounted commission rates
According to a report published today by the Government Accounting Office (GOA), the Realtor Multiple Listing Service (MLS) system prevents competition in real estate commission rates charged to home sellers.
One of the notable findings of the report was that it seems that the same system designed to promote cooperation among real estate brokers may be used to discriminate against home sellers offering a lower than average commission rate.
Real estate agents are able to view the commission rates being made available to Realtors by home sellers through the MLS system. Agents may determine whether or not to show a property based on the commission they will be paid for bringing a buyer to the property. All things being equal, an agent may elect not to show a property with a lower than average commission rate being offered.
The report notes that although housing prices have steadily increased in many areas in recent years, along with the associated commissions paid, the amount of work performed by real estate agents has remained relatively stable.
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