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Month: February 2007 (page 7 of 7)

February 1, 2007

If there is no Realtor monopoly — then what explains the commission structure?

by

Real Estate Investor

Author website

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 Read more

February 1, 2007

A Different Perspective on the Value of Realtors

by

Real Estate Investor

Author website

Has anyone ever wondered why the price of real estate agents has been 5-7% for what seems like an eternity? I know I run a serious risk of stepping on a lot of people’s toes out there since this is a site run by realtors, but I really have been thinking about this a lot lately (particularly this morning after I read Greg’s articles). Additionally, several other articles got my attention (CNN Money, Business News, and The Wall Street Journal). If you stop to really think about this, you will realize that real estate agents have created one of the longest standing monopolies out there. Let me dust off my economics text book and delve a bit deeper into this subject. [Please note this is intended to spark discussion and not personally attack anyone’s profession. As I said before, I love a GOOD real estate agent].

What is a monopoly? Let’s simply define a monopoly as providing a good or service with very little competition. While this may be debated, humor me when I say that real estate agents have been providing their service with very little competition. This is evident in the fact that the price has stayed fixed for so long. One could argue that by using a percentage method, agents are simply hedging themselves against inflation. While that would partially explain this pricing phenomenon, the fact that the percentage has stayed the same despite significant changes in information control speaks of something else. In other arenas, when a significant technological advancement hits the market, prices typically drop accordingly or the level of service increase dramatically. Look at cars for example. As technology has improved cars have become much cheaper (in real dollars) than 70 or even 30 years ago. Additionally, an owner now gets many more standard services.

So do Realtors do more now than say 30 years ago? Of course they do. With the advent of new technologies, they provide marketing over the Internet, in newspapers, and perhaps even their own website. The more important question, however, is does the consumer get a higher value for the services they Read more

February 1, 2007

Whatever it takes: A determined Realtor is a bargain . . .

by

Suburban Phoenix Real Estate Broker

Author website

Jeff Turner wrote this in a comment, but I think my answer to him justifies a post of its own:

Greg, what percentage of transactions fall into the category of “requires great skill,” as a result of the kind of title issues you speak of in this post, and what percentage fall into the “no problems” category?

Four out of five, at least, seem very routine to me, but that’s misleading. There is no transaction we are involved in to which we don’t bring a great deal of non-obvious value. Frankly, if I just talk with you, or visit you at home, I’m going to shed a lot of information gleaned from experience. I’ve seen thousands of houses. I’ve worked with hundreds of buyers and sellers. I’ve been directly involved in dozens of escrows from start to finish. You might be a lot smarter man than me, but I have seen everything, big and small, that can go wrong in the sale of a home. I’m not just there for the paperwork, which any title company can do in Arizona, and I’m not just taking your order, sink or swim. My job is to make sure you get everything you want — as, when and in the amount you want. So even on transactions that seem routine to me, I will be doing many, many things for you that you would not know to do for yourself. It’s not razzle-dazzle salesmanship, and it’s not some vast brilliance. More than anything else, it’s the knowledge that comes from having done it so many times before.

For what it’s worth, the house that closed yesterday didn’t require great skill, just bulldozer persistence. A dozen phone calls a day for weeks, not letting up. Yesterday, I spent half the day in my car moving documents myself to avoid courier delays. This is dumb work, perhaps demeaning to some. My attitude: Whatever it takes. Last Friday I looked at a hopeless situation and bet everything I had that we could get the job done by the end of the month. At two-thirty yesterday afternoon, the movers were waiting Read more

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