Even though I asked people to humor me, I have been getting a lot of comments on the issue of monopoly.
Brian Brady mentions: “I think you’re losing me a bit Michael. How are 3 million licensees in a nation of 300 million a monopoly?”
The issue is how 3 million people are managing to keep the price stable. It’s hard enough for 3 people to collude, let alone three million, which makes this pricing phenomenon even more surprising. The issue here is with the National Association of Realtors and their practices. The Justice Department has stepped in because of this reason. Much like Microsoft and Windows, the NAR has employed many practices (some fair, others not so fair) to keep outside competition from competing for their services. The articles I linked to addressed this specifically.
Norm Fisher writes: “Suggesting that Realtors have a monopoly on real estate is like saying that accountants have a monopoly on accounting, or car dealers have a monopoly on cars.”
This is not quite the case. The market for selling personal vehicles is very active. There is no barrier to entry for me or anyone working against me when I try to sell my car to another person or even the dealer, who creates a very active market by buying these goods for no fee. Additionally, accounting fees are by no means fixed. I can go to H&R Block and get my taxes done for $19.95 or I can go to a private account and pay $200. The difference between all of these things is choice.
Brian Brady mentions: “You can list your home and have it entered into the MLS for $299 nowadays. Redfin, Zip Realty, Help U sell, iPayOne, et al have been offering a consumer discount real estate brokerage for over 30 years.”
Greg also mentions the variety of pricing. The issue is that the NAR is working to pass legislation preventing Realtors from working with these services. I agree there are more options, but the disagreement comes in the access that people who pursue these options have. Is it fair that Realtors only bring their clients to other Realtors, particularly without even telling their clients this is the case? Your answer may be yes, but I think the Justice Department is looking at this very closely.
Stephen writes, “So let me get this straight…. As a property investor, you are advocating special price concessions when the sale is “easy”. Using this logic, it follows that you should offer your tenants price concessions in a hot rental market…”
I dont quite follow this logic. In a hot rental market, there is a supply and demand issue. I can charge more because there are so few units out there. There is no difference in work in a hot or cool real estate market.
The agent scenario is different because there is no short supply of agents. Quoting Jeff Brown, “Since you can’t swing a dead cat without hitting an agent in the ass, even in East Toilet Seat Oklahoma, the concept of monopoly just doesn’t play,” there seems to be no shortage of agents. Additionally, the work of selling a house in six days with a quick close is very different than six months with a long arduous closing.
Stephen Nestel says:
Michael..let me extend my remark.
In the case of a realtor who brings you an “easy deal” he is responding to “market demand” (you) for a qualified buyer. Thus, out of hundreds or even thousands of brokers, he was the only one who met your criteria. Therefore from a supply and demand perspective he is “worth” his commission. If you want to “save” commission, just offer less and see the results…
I understand your frustration with the high cost of commissions, but let me assure you that it is the same frustrations that tenants and buyer’s feel with the high cost of real estate.
Let’s face it. Real estate is all about entreprenaurial behavior. An efficient marketplace is created by all players operating in rational profit motivated behavior.
February 1, 2007 — 11:42 am
NYCJoe says:
Michael – you are such an amazing breath of fresh air for this blog. You’ve become a must-read for me every morning.
Seriously, keep up the good work. How posts like this one don’t win the Carnival automatically is amazing to me.
February 1, 2007 — 11:54 am
Jeff Brown says:
Michael – If your case says brokers have conspired to keep fee prices stable, you still have to prove not only how they managed this, but how the public is stupid enough to go along with it for the last three generations. Also, how is RE exempt from a better business model which includes much lower fees? This assumes nobody in the last 60-75 years has wanted to improve the old ‘bad’ model and make more money doing it.
As far as information goes, whether it’s NAR or Michael Cook, or The BawldGuy, my info I’ve compiled is for my use, and you’ll not force it from me for free until you’ve literally brought force to my door.
The day someone builds a better mouse trap for real estate, will be the day the current model collapses, and not until then. The Microsoft analogy doesn’t hold water by any measure.
Of course, none of this discussion takes into account the huge expenses increas taken on by the broker/owners of real estate firms in the last 30 years. The splits alone have changed the way most of them have to operate. 30 years ago the average broker took away 40-60% of the commission dollars coming into his company. Now, that’s a joke. Yet they’re still charging only 6%.
When and if someone figures out how to do a lot of business as a real estate broker for way less than 6%, they’ll do it, and be hailed as a genius. Until then, all this talk is about how to defy gravity.
February 1, 2007 — 1:15 pm
Jonathan Dalton says:
> There is no difference in work in a hot or cool real estate market.
That’s not entirely … no … that’s not at all true. In 2004/2005, if you entered a listing in the MLS and didn’t have a phone call within the first 90 minutes, something had gone terribly, terribly wrong. Signs were posted after multiple counter offers had been presented. Marketing? Throw it out there and see what happens.
Holding the deal together, that was sometimes a far different story.
In a less-active market, there is one hell of a lot more work that goes into properly marketing a listing. It’s a lesson many learn when they put their ad in the paper and a sign in the yard to do-it-themselves only to find that investors willing to pay 70 cents on the dollar are the only buyers.
One other side note … commissions differ across the country where the accepted (but not mandated) norm is higher in some areas than in others.
February 1, 2007 — 1:15 pm
Michael Cook says:
“As far as information goes, whether it’s NAR or Michael Cook, or The BawldGuy, my info I’ve compiled is for my use, and you’ll not force it from me for free until you’ve literally brought force to my door.”
I love the passion for the business. Dont worry, I have no intention of bringing force to your door, but I hope you dont mind if I steal a few quotes. I wish there were more agents out there as passionate about the business as you all.
February 1, 2007 — 1:31 pm
Mike Thoman says:
> This assumes nobody in the last 60-75 years has wanted to improve the old ‘bad’ model and make more money doing it.
I may be guessing, but I think the counterpoint here is that old ‘bad’ way wasn’t bad for the broker. The way to make more money was to do it the old, bad way, not a new, open, cheaper-fee way. It was a closed system, behind the wizard’s curtain.
> Of course, none of this discussion takes into account the huge expenses increas taken on by the broker/owners of real estate firms in the last 30 years.
Perhaps this answers Michael’s question as to why the commissions haven’t changed. Perhaps they should have, if it wasn’t for the ‘cost’ of doing business.
I hear several gripes as to the cost of advertising and referral fees. They *do* seem irrational and exuberant (to be unoriginal). So, why are so many of “you” still doing it? Shouldn’t you be marketing, instead of advertising (I wonder how Greg’s advertising budget stacks up to the ‘typical’ broker’s ad budget)? Do you really need the referral leads? Shouldn’t the NAR boards be refunding to you your dues???
The whole system DOES seem out of whack to me, whether any of you think you’re paid appropriately or not.
Mike
Mike
February 1, 2007 — 2:11 pm
Greg Swann says:
> I wonder how Greg’s advertising budget stacks up to the ‘typical’ broker’s ad budget
Except for failed experiments that we always regret, we spend almost nothing on passive marketing. Everything we spend is based on getting right in front of buyers or sellers. Our cost per conversion is substantially less than $50. We don’t covert enough, yet, but we will.
February 1, 2007 — 2:32 pm
Brian Brady says:
Michael:
What commission structure are you asking about? (your title).
What nefarious practices does the NAR employ to exclude the discount fee models?
Most discount business models I have encountered (over 30 years) have been unprofitable. Perhaps the DOJ is unwilling to accept the fact that discount models, while a cute concept produce mediocre results.
I have many options available to me as a home seller from $299 up to 10% of the sales price.
February 1, 2007 — 8:44 pm
Mariana Wagner says:
First, I prefer to call services like HelpUSell “Limited Service” brokers, instead of “Discount” brokers. Using the term “discount” implies that there is a standard. And ther isnt.
Second, MANY limited service brokers are also members of NAR, and therefore are REALTORS. How can NAR monopolize against their own members? Did I miss something?
However, Perception = Reality, so if non-agents believe that there is a monopoly, then it is our duty, as REALTORS, to educate the public to the reality.
February 1, 2007 — 9:36 pm
Roberta Murphy says:
I have NEVER been directed by ANYONE or any organization to charge a pre-set commission. I have charged 0 percent–to 7 percent. Some are pro bono, and other transactions command more. What I charge depends upon the market, the commitment and occasionally, my heart.
There are times, though, that I wish I had accepted only a $199 fee to input a listing into our MLS, Realtor.com and other online publishers. With that business model, I wouldn’t have to worry about my client’s bottom line, marketing strategies, logistics, risk management or a lack of sleep.
To compete on price alone would be all too simple.
The “cost of conversion” may be cheap–whether it is $25 or $1500. It is the human toll that concerns me.
IMO, the DOJ has become a hunting dog subsisting on a diet of baloney.
February 1, 2007 — 9:37 pm
Stuart says:
As an agent, I love discount brokers (you’re right about them not being ‘discount’ as there isn’t a standard, but it’s these brokers themselves who say they are discount!… that should tell you something about them right off the bat).
Discount brokers give the public a continuing lesson on why you need a competent FULL SERVICE broker representing you on purchases or sales.
Here’s a good article on discount brokers: http://www.homefindinginfo.com/DiscountRealEstateBrokers.htm
February 1, 2007 — 10:05 pm
Jay Reifert says:
Chris says, up the line, “Look at it from our side, it costs a lot of money to advertise a house, set up an office and run the business in general. I could have $5k, or $15k into your house and the listing could expire and thats that. Poof there goes my money, that listing took 6 months of my time as well.”
Poof? Poof!?! Even if you never sell, THAT home, you will have had the ability to generate calls off of all the advertising you are doing, harvesting buyers and perhaps other listings from the phone calls that are generated by the ads you are running on the property that never sells.
Granted, in a glutted marketplace the return from these practices won’t be what they are for you in a vibrant market…but the benefits are still there. (And there’s also something to be said for not taking listings that aren’t priced right, too.)
Michael, the DOJ and FTC have it right. NAR has been, through their state associations, engaging in trade restraining legislative practices for years. They practiced this art on the concept of buyer agency, using their clout to get “Designated Agency” laws passed in more than half the states in the union. (In place of the gold standard of representation…the common law of agency.)
Now, they are going after the minimum service providers in legislative arenas, too and pursuing listing display policies that would make it so much easier to keep buyers from knowing about discounter properties.
Here’s some information you might find to be of interest: http://www.barryfirm.com/dnld/Nine-Pillars-Citadel.pdf .
Now, seeing how you have something of a consumer’s eye for these things, how about telling me what you think of Realtor Procuring Cause? You can see what I’m talking about by visiting: http://www.real-reform.org/pc.pdf .
I would be very interested in your take on this.
Jay Reifert, Broker/Owner
Excel-Exclusive Buyer Agency
Madison, Wisconsin
February 2, 2007 — 12:04 am
Jay Reifert says:
My comments directly above were actually meant to be posted under Michael’s other posting related to this topic.
When I attempted to post it–to the right place–it asked me for the numeric code, but refused to accept it.
So, I copied what I had written, went back anew and then thought I posted it to the right thread of conversation. Obviously, I didn’t, as Chris’s comments were from the other thread.
Just an explanation for those who might wonder why they can’t find Chris’s comments.
Jay Reifert, Broker/Owner
Excel-Exclusive Buyer Agency
Madison, Wisconsin
February 2, 2007 — 12:10 am
Marty Van Diest says:
Let’s see, in my area there are about 700 residential homes listed. There are more than 400 licensed Realtors. The fee structures run from 1 1/2% to 7%. I have a hard time seeing the monopoly there.
If Realtors changed to a by-the-hour consulting service then people who did not buy, or did not sell, would still pay. Then we would see a more reasonable price structure.
I have offered to list property on an hourly basis and always had people choose the commission instead. I do have one seller who has used the consultant method on two transactions. He is the smart one. I knew I was being paid for my time, he would only come in to sit down when he needed info.
Like I have said time and again. We work for nothing, we only are paid when we are successful in helping a client solve his problem.
February 2, 2007 — 9:15 am
Mike Thoman says:
Are you allowed access to the MLS if you’re not a REALTOR?
Mike
February 2, 2007 — 9:58 am
Marlow Harris says:
It depends on the location. Some states require membership in the National Association of Realtor to join the MLS. In my state of Washington, the MLS is owned by the brokers and only about 70% are Realtors.
February 2, 2007 — 11:08 am
Joel Carignan says:
Wow! It seems almost everyone forgets that the MLS is monopolized by the local Realtor board. Without going through a Realtor, I don’t have access to the MLS in my area. That is a true monopoly.
We all know that a listing held by a “discount” firm is not treated the same as a “full service” brokerage. From the comments above, its clear there is obvious tension between the two models. In a hot market, it doesn’t matter who you list with as the market is so ravenous, the MLS is the main conduit of buyers. In a slow market, the tables turn and a brokerage’s marketing/advertising pays off (hopefully).
I don’t think the disruptive technology will come from the Realtor side of the equation. Realtors are thoroughly entrenched in the business model and the longstanding monopoly on the MLS really does limit price competition. Its too easy to pass by the house offering 3% for the house offering a full 6%. I’d like to see the disruption come from the mortgage side.
As far as the longevity of the discount model, I thing firms such as Help-U-Sell, Redfin, etc are certainly making a run for the long haul. I would think discount brokerage’s shut their doors at the same rate as full service firms. I don’t imagine there is a ton of data on that though.
In today’s market of educated buyers, many buyers start the process of home buying by talking to a mortgage broker. It always struck me as odd that discount sellers don’t attack the mortgage brokers for their buyers, bypassing the monopolistic Realtors and their resentment of the discount model.
February 2, 2007 — 11:44 am
Stephen Nestel says:
Hold on a second.. all of this discussion about Realtor monopolies and “charging too much” assumes that there is only one side listing agreement-the broker.
Doesn’t the property owner have a say? It is the PROPERTY OWNERS that are setting the commission structure, the brokers are ASKING for for a commission. In your last salaried position, didn’t you ASK for a salary while the Employer set your compensation? It is the same with brokers and property owners.
I personally wouldn’t dream of offering a substandard commission percentage if I wanted to sell my property fast. I know that the best salespeople value their time and want to work for a decent return. The qualified buyer who might be inclined to buy my property will tend to be guided to competing properties that offer the broker a better commission.
Yes, commissions are high and sometimes hack, unprofessional realtors get lucky and show up with the right buyer and we feel cheated. But ultimately, sales is about producing results.
Markets work to everybody’s best interest even if we are not always pleased with the prices we are compelled to pay.
February 2, 2007 — 3:35 pm
Marty Van Diest says:
I belong to two different MLS systems. One is Realtor owned and one is broker owned. The broker owned MLS does not require you to be a realtor, but you are required to be licensed.
I don’t believe that is an unreasonable requirement.
All listings from both MLS systems are on the net and up to date. Anyone can search the mls system
February 2, 2007 — 4:10 pm
Mariana Wagner says:
Our MLS has a mirrored, free to the public site that shows ALL listings to ANYONE. SO, even if SOME local MLS’s do not offer the info to the public, how can the National Association of Realtors be a monopoly, if access to info is not consistent nation wide? Just wondering…
February 2, 2007 — 8:06 pm
Anonymous says:
How many national associations of real estate agents (not REALTORS) are there? How many agents have to become realtors to have EQUAL access to MLS data and services (ie, not just listings data)? That’s where the monopoly stems from. And when individual agents steer consumers away from properties with discounted commissions, they become part of the problem, too.
Mike
February 3, 2007 — 4:41 pm
NYCJoe says:
Exactly.
The monopoly extends from the business practices of the MLS, not from the agents themselves.
February 4, 2007 — 2:06 pm
Marty Van Diest says:
Let’s see, we have the internet. Anyone can advertise their home on a variety of networks on the internet.
A buyer can find those if they want. Our MLS’s both of them have ALL the listings in the net.
Is your goal to outlaw an MLS system? Do you feel that members of an MLS system who have payed thousands over the years to develop that system should allow complete access for free? Even to unlicensed people?
I am really trying to understand the issue here, and I just don’t see it at all.
February 4, 2007 — 5:05 pm
NYCJoe says:
The Supreme Court, in a landmark case over 100 years ago, ruled that when one railroad owned a bridge over a river, it had to let other railroads use it (albeit at a fair price) rather than forcing each one to build its own bridge.
The concept is not new.
February 4, 2007 — 11:29 pm
Marty Van Diest says:
Anyone who is a licensee in our state can belong to one MLS, anyone who is a licensee and is also a Realtor can belong to the other. Since it is already open to anyone for a fair price, I see no problem with it.
The only reason a person might not be a licensee is because they have a tough time passing the test.
The only reason someone might not be able to be a Realtor is because they don’t want to be subject to a code of ethics, or they don’t want to pay a fair price.
February 4, 2007 — 11:42 pm
Michael Cook says:
I just want to say that you guys are great. I personally have learned a lot from this discussion and I really appreciate the value that everyone has added here. Keep the comments coming.
February 5, 2007 — 7:53 am
Joel Carignan says:
>Anyone who is a licensee in our state can belong to one MLS, anyone who is a licensee and is also a Realtor can belong to the other. Since it is already open to anyone for a fair price, I see no problem with it.
The question is how does Average Joe Homeowner sell his house on the MLS without going through a licensed agent (where I am, you have to be a Realtor to access MLS and your license has to be held by a broker)?
What you are saying is that the average homeowner should go take the licensee exam and then sell their home via the MLS. That’s exactly what a monopoly is! Monopolies prevent free entry to the marketplace and by requiring a seller to become a licensee or Realtor is not free entry.
Yes, thousands of dollars have been spent building the MLS, and any listing placed in the MLS system should come at a cost to the seller/agent; no one is saying otherwise.
In our area (i assume in most) a note is made on the MLS when the listing is “limited service” or from a discount brokerage. That needs to stop as agents (not all, but some) will stay away from the homes with limited service.
February 5, 2007 — 11:43 am
Mike Thoman says:
Marty, not all states and MLS’s are the same. Many require you to be a Realtor to have access (as an agent, I’m not referring to FSBOs here) when no other alternative exists. And some that DO allow access to non-realtors, don’t give EQUAL access. These practices are anti-competetive. Why should I be required to be a Realtor to do business as a real estate agent?
Can I ask what Realtors get from their state and local Realtor association memberships, besides MLS access?
Mike
February 6, 2007 — 8:25 am
Marty Van Diest says:
Mike Thoman asks:
“Can I ask what Realtors get from their state and local Realtor association memberships, besides MLS access?”
What a lead in, anyone else want to answer this? Here are a couple small things we get from our Realtor organiztion.
1. We have real ethics monitoring. We have a committe that actually takes ethics complaints and acts upon them.
2. We have a mediation board that mediates problems between buyers and sellers saving consumers thousands upon thousands of dollars.
Just the question itself shows a lack of understanding about what it is to be a Realtor
February 6, 2007 — 8:36 am
Jay Reifert says:
Yes, Marty. What a lead in, indeed. I’m a realtor. A hostage realtor.
It is the lack of ethical treatment of buyers and true buyer agents that has led me to file an antitrust suit to break the tie between my local MLS and realtor board.
That suit is currently one step away from being heard by the Supreme Court of the United States. If our petition for cert is granted, a number of issues should be solved.
http://www.real-reform.org/scotus_06-815.pdf
Article 17 is full of trade restraining language. Procuring Cause, when used to deny unsuspecting buyers of the right to representation at no additional cost is the height of ethical–if not legal–repugnance.
http://www.real-reform.org/pc.pdf
When NAR recognizes that buyers and buyer agents deserve to be on equal footing with sellers and seller agents, then the Code you laud may begin to have some standing with those of us who are champions of buyer rights.
Until then, what you see as a grand benefit, I–and others–see as being a means of repression and subjugation.
There is so much more to say, with regards to other things which have been said in this thread of conversation, but time is at a premium right now.
Interestingly, Michael Cook–whom I had thought might actually have the courage to formulate a viewpoint on how Procuring Cause impacts on home buyers–has apparently opted to dodge the question. (Russell is the only one who has really taken a stab at it, so far, and he was an unabashed cheerleader for continuing the restraints unabated.)
Realtor trade restraints are created via POLICY. The Code is the document that states the policy. Loss of the MLS, the tool essential to making a living in real estate, is the threat which is used to enforce the listing centric policies that continue to keep buyers and true buyer agents in–yes, the word does apply–bondage.
Jay Reifert, Broker/Owner
Excel-Exclusive Buyer Agency
Madison, Wisconsin
http://www.real-reform.org
February 6, 2007 — 9:09 am
Marty Van Diest says:
We are stretching this post a little, but I want to respond to the procuring cause issue.
I’ve run into this issue from both sides of the fence. From the buyers representative side I have had my buyers enter an open house and then come to me to write the deal. The buyers have every right to choose their representation and so I showed them the house, (my first time, their second time), called the listing agent and told them I was representing them and would write the offer. They screamed about “procuring cause”. I said I was going to represent my clients whether I received a commission or not. Procuring cause is about commmission, not about representation. I did write the deal and have received many multiples of that commission from referrals.
From the sellers representatives point of view, I have had buyers who said they were not representated by anyone else ask me to show them my listing. I took the two hours out of my day to show them the listing. Then they went back to their non-realtor buyer’s broker 50 miles away to write the offer. If their broker had just called me ahead of time, I would gladly have done a “courtesy showing”. That behavior is so prevalent here that it has become common practice to write into the listing contract that if the listing office shows the property first to a buyer, the commission to the buyer’s representative is 1%. There are unethical practicioners on both the listing and selling side. The big issue is ethics.
February 6, 2007 — 9:36 am
Michael Cook says:
Jay,
You wrote, “Interestingly, Michael Cook-whom I had thought might actually have the courage to formulate a viewpoint on how Procuring Cause impacts on home buyers-has apparently opted to dodge the question.”
I have not chosen to dodge the question, but I have chosen to sit out of this discussion. Not because I do not feel that it is valid, but rather because I have no knowledge on this subject. I have read a variety of opinions on it, from your site and others, but I dont know why it was put into place or how it affects realtors or investors. As an investor I have never run into it. I apologize for not being able to come down on one side or the other, but I try to only give opinions on issues that I know something about or have experience with. I think it is my duty to the readers and to this site not to get out of my range of expertise.
February 6, 2007 — 10:02 am
Jay Reifert says:
Marty,
How on earth are we stretching the post? This started out as a discussion on NAR being monopolistic. NAR is a cartel. They create policies that are meant to protect the status quo, which is listing side (and seller) dominance.
In addition to the abuses they create via “The Code” they also foster legislative abuse. They did it, first, with true buyer agency, by bringing about morphed agency concepts–to protect the in house, double dip transaction–such as Designated Agency. Having cut their teeth on us, they are now trying to legislate away the effectiveness of minimum service providers to whatever degree they can.
All I have done is shine a very bright light on one particular, abusive, part of the Code and, of course, upon procuring cause.
If working for free is your desire, be my guest, but it’s pretty sad to rationalize that the referrals you should have gotten anyway are some kind of a reward for having your income stolen from you, thanks to the first licensee’s non-disclosure of procuring cause and its impact on the buyer.
And, regardless of how YOU do it, most licensees are not going to extend services to the buyer, if they know that a PC case is likely to develop. They aren’t going to invest all kinds of time and take on the transactional liability, if they don’t think they can get and/or remain, paid. That’s the restraint, and a very effective one, at that.
Your cartel–the one to which I am held hostage–absolutely does engage in monopolistic behavior. I am ever so thankful that entities like the DOJ, FTC and some within the legal community, like David Barry, have finally taken note of the NAR’s abusive behavior, and are doing what they can to change it.
Now if only leads to meaningful reform…
Jay Reifert, Broker/Owner
Excel-Exclusive Buyer Agency
Madison, Wisconsin
http://www.real-reform.org/pc.pdf
February 6, 2007 — 10:27 am
Jay Reifert says:
Michael,
Be the buyer for a moment. If you knew, from the very beginning, that you could have an agent to watch out for your best interests, at no additional cost to you in the transaction…one whose legal mandate was to get you the lowest price, at the best possible terms, on the home that you want, would you go look at homes with a licensee WHO REPRESENTS THE SELLER’S BEST INTERESTS if you knew that it would eliminate your ability to have that buyer’s agent at no additional charge?
It’s that simple.
Undisclosed procuring cause eliminates the certainty of that buyer agency option. And the saddest part is, the buyer had absolutely no knowledge that it was happening.
How does this happen in 21st century America? How can a buyer be divested of something of value, without ever knowing–until it is too late–about the divestiture?
Jay Reifert, Broker/Owner
Excel-Exclusive Buyer Agency
Madison, Wisconsin
http://www.real-reform.org/pc.pdf
February 6, 2007 — 10:42 am
Mike Thoman says:
> Just the question itself shows a lack of understanding about what it is to be a Realtor
Well, Marty, thanks for the info and thanks for the dig.
I know realtors “subscribe” to a code of ethics. Forgive me for not knowing the inner workings of the local and state associations. I have been educated.
Your comment indicates surprise over the general public’s lack of understanding about realtors. You shouldn’t be. The term realtor is often used generically. So much so, the NAR charged you extra dues (right?) on an awareness campaign for realtors (oops, that should have been a *big* r…). NAR says it’s working, but do people really KNOW what it means to be a realtor??? So much of the discussion on the BHB has been about commissions, how they’re earned (or not), representation, the value of a good realtor, etc. Would all this be necessary, or even interesting, if those things were already widely known?
I think your comment indicates a lack of understanding of the consumer.
Mike
February 6, 2007 — 10:46 am
Mike Thoman says:
“Then they went back to their non-realtor buyer’s broker 50 miles away to write the offer. …There are unethical practicioners on both the listing and selling side. The big issue is ethics.”
Marty, are you saying the majority of ethical issues in real estate stem from non-realtor agents? It seems implied.
Mike
February 6, 2007 — 10:55 am
Michael Cook says:
Mike,
I think you hit on a very important point. Neither side really understands the other. Consumers have no idea what the behind the curtain stuff looks like in the Realtors world. Realtors some times assume we do or that we even consider that when we use their services. I would relate it to purchasing a product at the store. If you get a bad apple at the store, all you care about is the fact that it is bad, not that it was picked in South America, shipped here, stored properly, but accidently got bruised in the transport. All you want is a new apple. Both sides here have valid points, the purpose here is to open more dialogue between the two parties and get more understanding on both sides. Thanks for your comment.
February 6, 2007 — 10:56 am
Michael Cook says:
Jay,
I am always a buyer, so its not a stretch for me to agree with you. I am also a businessman and I understand that there are two sides to the equation. It is not always feasible for the buyer to get exactly what they want because they have to have someone to provide that service. If the rules of the game inhibit people from wanting to provide a service, then this is a moot point. This is the reason why I have to consider more than my perspective. If this rule is great for buyers but detremential to agents or sellers, you will be hard pressed to get my support. This is why I need more perspective. If agents dont care about this or if they are not fundamentally harmed, I support you in full. If they are harmed then I think there needs to be some middle ground. The fact that you are at the Supreme Court on this shows that it is not a simple matter. Sorry to stand squarely on the fence here, but I think you cant make rules with only one party in mind. Again, because I have never been hurt by this rule or even heard of it until this discussion,so I am getting up to speed.
February 6, 2007 — 11:11 am
Jay Reifert says:
Detrimental to agents? Is a buyer’s agent not an agent? As for sellers, should a buyer not be on equal footing with sellers?
This is about equality. Buyers are second class citizens in the world of organized real estate. Buyer agents are having their trade restrained by the non-disclosure of procuring cause.
Of course disclosure is going to take something away from sellers and seller agents. It is going to take away their advantage. It is going to level the playing field.
Are you opposed to that?
Michael…I hear you. I respect that you are trying to get up to speed on this. However, please avoid any temptation to play to a crowd composed mainly of seller centric service providers.
You opened up a great dialogue on the appearance that NAR is monopolistic. It offered the perfect segue into exploration of one of those monopolistic behaviors: Procuring Cause.
Disclosure will level the playing field.
Jay Reifert, Broker/Owner
Excel-Exclusive Buyer Agency
Madison, Wisconsin
http://www.real-reform.org
February 6, 2007 — 11:31 am
Marty Van Diest says:
Mike Thoman,
No, I am not saying that unethical behavior is owned by non-realtors…there is plenty to go around. But the fact that this was not a realtor took away any right I may have had to procuring cause, should I have wanted to enforce anything. Bottom line is, I would have shown that house to the buyer anyway because it would have been a benefit to the seller. It just doesn’t feel right to be “used”.
However, I am kind of on Jay’s side about the non-disclosure of procuring cause. The more open and transparent the business is, the better it is for all parties.
The fact that I belong to a non-Realtor MLS and also a Realtor owned MLS allows me to see both sided of the equation I believe. I deal with one non-realtor quite a bit and he is always honest and transparent.
February 6, 2007 — 12:09 pm
Greg Swann says:
> Disclosure will level the playing field.
This is false. A coerced disclosure with no other change in practices will serve to eliminate the co-brokerage commission altogether. When lenders permit buyers to finance the buyer’s agent’s compensation on the buyer’s side of the HUD-1, things will change. Not before.
Even then, buyers will have to learn how to behave like adults making a life-changing financial decision, not like kids in a candy store.
Jay, I want you to dial it back. You’re right on the cusp of brow-beating.
February 6, 2007 — 12:10 pm
Jay Reifert says:
False, Greg? Did the emergence of buyer agency cause the elimination of an offered coop fee? Many predicted it would. It did not.
Neither will the requirement that seller agents tell buyers that seeing property with them creates a default obligation to use them on the properties seen.
And even if it does…why should it matter? I, for one, haven’t taken a cooperative fee in ten years. I always put a compensation clause in the offer to purchase, and then provide a separate letter to the listing agent, specifically refusing the coop fee. I’m not paid by listing agents, nor do they determine my fee income.
I’m paid by the buyer’s money, through the transaction. It seems to me that you also had championed that truth. The fact that, regardless of what side of the HUD-1 showed the fee, the fee was always paid by the buyer’s money.
Greg, this is about buyer, and buyer agent, rights. You want buyers to start acting responsibly? Let them know that an obligation is being created when they go to look at homes with seller agents. An obligation which is going to make it so they have to pay extra for buyer agency services.
Once disclosure is required, they will do their research BEFORE they go to look at homes. They will decide whether, or not, they want to have a buyer’s agent and will then act accordingly. They will get the hell out of the candy store, until they know if they want to buy candy from any particular vendor.
Without knowing of the obligation and its impact, how can buyers be expected to make intelligent decisions?
As one of the few licensees who does explain procuring cause to buyers, I can tell you that better than ninety five percent of them are shocked and amazed that such a thing exists.
It is just so alien to buyers to believe that they could effectively be shackled to a licensee without their knowledge and consent.
How can anyone blame them for their incredulity? I’ve said it before: At least with a buyer agency agreement, the buyer knows that an obligation has been created.
Not so with procuring cause. Not so.
Jay Reifert, Broker/Owner
Excel-Exclusive Buyer Agency
Madison, Wisconsin
http://www.real-reform.org/pc.pdf
February 6, 2007 — 1:05 pm
Marty Van Diest says:
Buyers tend to want to “use” listing agents to open houses for them and to do all the footwork and then write their offer with the their buyer’s broker. You can’t really blame them if no one has educated them.
I had a buyer call me to show my listing that was an hour drive one way. He wanted to see it NOW. I asked if he was working with any other agent and he said he wasn’t. I said “that’s great because if I show you the home and then you write an offer with another agent he will only get 1% commission”. After some stammering he said he will call me back. Actually his agent called me back, showed the home, and wrote an offer.
I do agree that the best scenario is for the buyers commission to be on their side of the settlement statement and that it can be financed into their loan. That I think is where this has to go.
February 6, 2007 — 2:05 pm
Greg Swann says:
> I do agree that the best scenario is for the buyers commission to be on their side of the settlement statement and that it can be financed into their loan.
I read a story today about farmers using little mini greenhouses in their fields to extend the growing season. So obvious it only took 20,000 years of agriculture to figure out. Lenders already fund both halves of the commission, but we didn’t take the natural next step when we got rid of seller sub-agency. The trouble with humans, generally, is not that we are too innovative but that we are not innovative enough.
February 6, 2007 — 2:32 pm
Boring Oregon Real Estate Guy says:
Well in this market I think sellers are willing to pay a little more to get a little more. Marketing is key. Internet marketing is the gate. I heard just by putting a listing a craigslist you increase traffic by 9% compared t just having it on mls. But there is some much an agent can do on top of that. So why would a discount broker go out of his way, when his focusing on volume.
December 24, 2007 — 11:31 pm