Saturday, April 08, 2006

Realtors and Their Commission Structure Come Under Siege

Every few years, Realtors and their commission structure come under siege. It is happening right now. Why?
1. Zillow's coming out party prompted the popular press to peel back the onion on the industry with tough questions. Do you need a Realtor? Do you need to pay 6 percent?
2. The DOJ lawsuit against NAR has brought heat on the industry, bringing attention to commissions.
3. Some strange industry events such as real estate vet Steve Ozonian moving to a discount firm has prompted people to question the tried and tested model.
4. Flat home prices and squeezed equity due to non-stop borrowing raises the economic question as to what is an affordable commission in this environment.
5. Brokers have been complaining way too much and for too long about their biz model being broken, begging the question that the pricing structure itself is in need of reform.
6. Fast moving houses with fast-rising commissions, based on inflation not performance, has raised the "fairness" and the "greed" charge.
7. Sensitivity to price has never been higher with price busters like WalMart setting a new standard.
8. The Web has opened up the debate, introducing alternative models and giving consumers more control. When we do more ourselves, we expect to pay less.
9. The industry is getting way too defensive; there is usually some truth when people get overly sensitive.
10. Realtors have been whipping boys for at least two decades, since David Mamet's 1984 Pulitzer Prize winning play "Glengarry Glen Ross" that satired the profession without mercy. And every group needs one group it feels better than. Real estate agents have always suffered low rankings in the professional-respected lists.
In the past, such storms have not led to significant changes. Most people still want a full service broker and are willing to pay 5-6 percent. Is this a case of the elites being out of touch with what people ultimately want and will pay for? Are things any different now? What do you think?


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