How I’d change the real estate business
There is resentment towards realtors. Many think we make too much money, for too little work. But there are additional problems too. I think these ideas could change the problems, all at once:
1. The entry-level to be an agent is too low. Require that all agents must get a broker’s license. That means six additional college-level courses. It wouldn’t guarantee better agents, but it would help. It would eliminate those that weren’t really committed to being a good agent.
2. Require a standard disclosure on commissions. The mortgage industry is required to issue a good-faith estimate and truth-in-lending statement to all prospective customers. We should be required to disclose the facts about the commissions. Let’s break it into three paragraphs:
A. For ‘X’ amount, we do a “limited-service” program, here’s an explanation of what that means.
B. For ‘Y’ amount, we do a “full-service” program, here’s an explanation of what that means.
C. The ‘Z’ amount is how much the buyer’s agent will get paid. Here’s the explanation of compensating the buyer’s agent .
(I’ll detail the explanations, if you’d like, in a future posting)
The amounts paid could be percentages, or they could be flat-fees.
3. Require a standard disclosure on what the agent does for the fee. If every agent had to complete the same form, then sellers could compare, apples-and-apples, much easier. Like we saw in my last article (1% commission), when an agent says he does the exact same thing for 1% that a 6% agent does, it’s misleading.
At least the seller would be clear about the differences between agents, and the difference in fees.
4. The standard listing agreement should also offer an option for the seller to pay for some services up-front, in exchange for more reasonable fees at the end. Include a paragraph on the benefits & burdens.
In the end, we’d have better agents, offering a choice of clearly-defined services for negotiable fees.
My biggest concern for the consumers is the lack of full disclosure of what you get for the money. I blame the real estate industry for that. If it was crystal-clear to the clients what the choices are, and what they mean, I think consumers would feel like they made an informed descision in choosing the right service for their need. They might like us more too.
What do you think?