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?
I like your ideas. How about a disclaimer stating, "Realtors are salespeople, not economists. Their only job is to make a sale. Realtors cannot give financial advice, as they do not necessarily have the education or ability to assist you in your decisions. They are not real estate experts and do not have any knowledge about what prices will do. You CAN LOSE A LOT OF MONEY IN REAL ESTATE. Please do your own due dilligence."
Not slamming agents/brokers. My mother is a retired broker/investor.
You are the Martin Luther of the Realtor profession. You desreve great credit for addressing the problems of the industry. I think there also needs to be some disclaimers. "Nothing said or done constitutes financial or economic advice." "Realtor may have financial aranegments with third parties." Etc.
Disintermediation, The Future of Real Estate
Good to hear from you again. You gotta give me a few days to tackle disintermediation.
Martin Luther? Who does he play for? I only follow the Lakers…..
Jim, when you said good to hear from you I realized there was an email sitting in "drafts" waiting. I apologize for taking so long to reply privately.
I know you know who Martin Luther was. For the rest it was Martin Luther who had the courage to confront the Catholic Church on several points of theology by nailing his comments to the door of the cathedral. Thus the comparisonfor those who challenge orthodoxy.
Please go back to documenting the slow down and statistics on the housing market. Your site has recently become Realtorrant.com not Bullbleinfo.com.
Matt, That got a laugh out of me, thanks. The MLS has been broke, so I’ve been filling the time with other selfish endevours, sorry.
It doesn’t look like they’re going to fix it, so I’ll spend the additional time to search for stats one-by-one, instead of by group – just because you asked. Check back tomorrow.
How ironic. MLS broken. Thanks again for your blog.
I think your observation that sellers expectations are disconnected from reality is correct, particularly in a city where prices have gone up 2 – 3 times in 6 years in many areas. From my perspective as a software engineer with a CONSIDERABLY innadequate income (110K) to purchase anything decent in San Diego, I am content to Rent until either my income doubles (not happening any time soon) or prices fall 50% which is not going to happen until sellers are sufficiently motivated which will not occur until mid to late 2007 by my estimates. What is wrong with simply being truthful and just admitting what we cannot afford a leer jet, a Rolls for every day of the week or a $700K (OK) house in San Diego? Many who have bought recently with creative financing may not know it, but their finances are a train wreck in slow motion. No one knows what is going to happen in the future, but one can look at the information available and make an intelligent guess. My guess for 2006 – record low sales volume as buyers and sellers stand off. 2007???
Amen to #1. It takes years and a ton of study to become a CFA or CFP. Series 7 is a bear of a test etc. This is become a trustee money manager yet a home is usually the biggest asset and biggest nest egg most will ever have and you have let’s face it total idiots handling the transaction. In all seriousness 70% of realtors should NOT BE IN THE BUSINESS!
Oh geez I was updating my old blog posts and notifications went out to subscribers – sorry. These were my thoughts in 2006!