How do you solve the agent’s pay structure?
Every agent should offer every program, and let the client decide.
If every agent had a fee schedule that detailed what they charged (and what you got) for their commission-only, flat fee, rebate, and hourly programs, it would also encourage the consumer to shop around.
The paranoia about collusion and price-fixing would still permeate the space, but you’d probably see agents willing to work for $10 to $400 per hour (though I like clearfund’s idea of $975/hr!) . The agents who could justify their fee would lead the way, and those that couldn’t would need to charge a lot less, or get a different job.
The best agents would work with the commission-only clients, and have their assistants work with those who chose the alternative programs. If the consumer paid their agent on an hourly basis like other people, then that should include the normal 40-hour work week, right? Most agents don’t want to work nights and weekends, and, if paid hourly, would probably want it to be a typical 9-5 job, in a marketplace that goes around the clock.
A relatively minor adjustment, like having agents providing a fee schedule for all programs, would shake up the industry – but would it be enough? It wouldn’t eliminate the scumbags and sleezeballs, where the change is most needed. How do we clean house?
It was suggested that the real estate industry is ripe for a big player to change everything. Merrill Lynch tried it and lasted about a year, and the old Great Western Bank had a cup of coffee in the residential real estate business. Both couldn’t get out fast enough. Zip Realty and Redfin have both been around for years now, but we just covered their local production; they have barely made a dent.
If someone could blow up the current model, it would be Google. They have the name recognition, and could design the perfect public-MLS website that included all the extras, like videos, agent reviews, and quality valuation models. But that only covers the front end, the home searching. If they also had negotiators on staff and available by phone, email, skype, etc., it could change everything.
I sold a house to a doctor whose specialty is radiology. He works for a company that contracts with hospitals around the country, and when they need an expert opinion, they upload the x-rays, and he tells the local doctors what to do over the internet.
If virtual radiology is possible, then virtual real estate can’t be that far off.
But it would take a company who recognizes that the breakdowns occur at the meeting of the minds/follow-through to close stage. If Google combined the super-hot website with a limited real estate brokerage whose role was assisting with negotiating the deal and getting it to the finish line, it would change everything.
The website should still have an option for the seller to offer compensation/rebate to the buyer. If you had a specialty agent that provided valued help along the way, the buyer could use the seller-compensation to pay the agent if they didn’t opt for an alternative plan. Or if the buyer was on their own, and was comfortable with the Google-negotiated deal, then they could keep the seller-compensation as a rebate or apply it towards closing costs.
In some states, RE lawyers are the negotiators/closers.
Maybe Google could adopt that model.
That said, I still see a niche for really good local area specialist RE agents. Both to help the sellers that need hand-holding/prep advice/pricing advice based on special circumstances. And for lazy buyers, and out of area/recently relocated buyers.
Redfin is the future, the question is how long the real estate agents will fight it. It may not be redfin that wins, it may be some other service. Just like amazon did to bookstores. Or iTunes did to music stores. Or yahoo did to subscribing to newspapers.
A free market will eventually adopt the lowest costing model and that means elimination of those who stand in the way of a free market (i.e. real estate agents). Expect the associations to attempt to maintain status quo for as long as economically possible, just as unions still fight to maintain their grip on labor prices.
The 2 main jobs of a real estate agent are,
1 – create the market channel
2 – represent individual in the case of legal issues
What do real estate agents do right now for #1? They subscribe people to an automated MLS search service. Ridiculous! That takes no talent and I’m better at searching myself.
How often does #2 even come up right now in this market? Buyers are so desperate to land something (with banks and selling agents standing in the way) they can’t communicate let alone negotiate and the sellers are listing “AS IS, SELLER TO MAKE NO REPAIRS AND HAS NEVER OCCUPIED PROPERTY” so what’s the need for representation?
If agents aren’t creating a better channel and aren’t needed for representation, then guess what? Get rid of them. So Sorry, they’re obsolete.
In your case, you are creating a better channel (with video, transparency, etc). So hat’s off. You’re evolving with the market. Fire the rest.
Every agent should offer every program, and let the client decide.
If every agent had a fee schedule that detailed what they charged (and what you got) for their commission-only, flat fee, rebate, and hourly programs, it would also encourage the consumer to shop around.
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I’d love to see this happen, but think the NAR would fight every inch of the way (they’ve been fighting it for decades, at least).
IMHO, the times when agents are **really, really** needed are when buying or selling in another city or state (or country!). Unfortunately, from what I’ve seen around here, the agents who represent buyers from elsewhere have really harmed their buyers. Whenever you see one of those “head-scratcher” sales (bought way too high, oftentimes after the house has been on and off the market for years!), it’s often an out-of-area buyer with local representation.
That being said, I’ve had to sell property in other areas, and a GOOD agent can be worth much more than the standard commission.
I doubt Google would be interested, at least not directly (beyond what they already do). It’s not really their line of business. They aren’t going to start a real estate business.