The purchase of Move, Inc. by News Corp could bring more change to how homes are sold in America.
Last summer, I described on camera how our market is moving towards a single-agency format, and have been mumbling about it ever since. By the time the movie comes out, it will probably be a fait accompli.
News Corp already owns the primary real estate website in Australia, where the listing agents pay to advertise their properties on Rupert’s website, and buyers go direct. The commission rates are 2.0% to 2.5%, and according to this article, buyer-agents are involved in only 1 out of 1,000 sales:
Currently we call this ‘dual agency’, where the agent has a fiduciary duty to represent the interests of both parties. Eventually it will erode down to a ‘transactional brokerage’ format, where the agent’s role is reduced.
While sellers will marvel at the perceived savings, they won’t benefit much unless expert salespeople are manning the phones/emails/texts. Listing agents – who now make 5% to 6% when buyers go direct – will reluctantly accept the lower commissions but won’t push for top dollar.
Why? Because eliminating the buyer’s agent has always been the ultimate goal of listing agents, and the reward was double commission. When the extra incentive is gone, it will feel like working for half price, and, as a result, agents will mail it in.
In this format, the most important ingredient when hiring a listing agent will be how they handle the inbound inquiries from the buyers directly. Test them by calling their number – do you get a receptionist? Voice mail? Assistant? Or the actual listing agent?
I answer my own phone, and I’m pushing the product – your home!
Who pays for the cheesecake we always see in those Aussie promo vids you post? 🙂
No charge:
http://youtu.be/3UdxkkshvX4
Bulk of the work is done by the listing agent anyway. I don’t really see much value-add on the buyer agent side. So I don’t think it’s really double the work for the same commission. More like 10% more work?
Plus, the listing agent now has all the buyer contact info and can mine that list for years to come….
The savings to the seller will not be perceived, they will be real. And just like every other industry upended by technology (think stock trading), the real estate industry will recalibrate to the new reality (i.e., lower commissions as a result of less work due to the benefits of technology) Will the number of agents shrink? Probably, but that’s okay too.
Geez, if you already know it all, why are you reading here?
Specifically – the seller savings will be perceived. They will pay less commission but will struggle to sell for top dollar. Net proceeds = less.
It already happens every day now – sellers who hire lousy agents sell for less.
Agreed. Lousy agents will still get bad results for sellers and great agents will get great results. There will always be demand for excellent service, in every industry, not just real estate. BUT, the cost of the transaction for the seller will go down over time and all the agents, even the great ones, will adjust to the new reality.
I know you are here to tell me the way things are and will be.
Are you a realtor?
I’m a 30-year veteran, and if you look around you’ll see that I’ve been talking about this stuff here since 2005 – over 5,000 posts in fact.
If you pay less, you get less. Everyone complains that commissions are too high – but when they go down to the levels mentioned then you will get clerks processing paperwork, not salespeople pushing for top dollar sales.
There are several benefits throughout the industry – softer ups and downs, less hysteria, hourly wages, etc.
But top-dollar sales will be sacrificed for just getting close enough.
Great agents pay for themselves.
I am not an agent, and I respect the hell out of your 30 years of experience. But, most of your 30 years was spent in an industry where buyers and sellers were kept in the dark. The information and communications afforded by the MLS was horded, which kept the agents like yourself as experts and buyers and sellers like myself, ignorant. I don’t have to tell you that the information gap between top-notch agents and run of the mill home buyers and sellers is down to almost nothing. We now know almost as much as you know, and we can reach almost as many buyers as you can, for free.
What I believe, and you may too, is that the information gap has narrowed, the cost of the transaction has shrunk. It would be naive to think at some point that would not have an effect on costs. If you believe that, then we agree. Otherwise, we’re just two people that have different opinions about an unknown future.
I see your type coming in here regularly and while I try to hit you with disruptive language it never works. You are stuck on being right at all costs.
My favorite comments are left by those who may have an opinion but are at least open to discovery. We banter back and forth and everyone can learn something new, including myself.
Guys like you just want to be anonymous big shots spewing your superior knowledge. I finally had to change the format here to moderated comments to minimize the arrogance.
So you are done – go start your own blog about what you do for a living and I’ll come over there and set you straight.
For those who are open.
Shrinking the information gap hasn’t helped that much in general, and the relation to saving money is a theory.
1. All the real estate data is out in the open, which you would think makes the buyers razor-sharp on pricing and prevent them from over-paying. But how many sales have you seen close in the last 18 months at insane prices? Too many to mention, and the +20% rise in prices in such a short time supports how detached pricing was from the comps.
2. You still pay the same escrow and title fees and the other related costs of a real estate transaction – no savings there.
Do I save some time and money with buyers who have been educating themselves online? I think the time saved is more due to the lack of inventory – buyers would spend more time looking at properties if there were more to consider. It’s where the ‘fear of loss’ comes into play. Buyers are educated on price but see so few for sale they just grab one.
You would think it would cause consumers to search out for more expert help in such a challenging environment. But the ones that do are left on the sidelines by those who jump willy-nilly and overpay.
But there is no penalty for overpaying in this market, so it continues.
“Title” is antiquated. Lots of room for improvement.
Nothing has changed in the whole process over the last 30 years, and it’s driven by Fannie/Freddie. Title, escrow, appraisal, mortgage underwriting, etc. are all required and costs about the same – usually a percentage of sales price.
Did you know that title searching is done off-shore now? And I don’t mean Catalina Island.
Your title defects are discovered by workers in India, Pakistan, and the Philippines. But the title companies don’t pass along the savings to you.
If they find a defect that they can’t resolve, they insure “around” it. The buyer gets stuck with it if they or their agent don’t catch it.
It causes the title business to be virtually claim-free, and if you do file a claim their staff attorneys will fight you to the death.
But Fannie/Freddie won’t buy a loan that doesn’t have title insurance.
What can you do? Hire JtR and let us fight with title before closing to resolve issues and not just waive them through.
It is the type of service that you don’t get with clerks whose job is to have a complete file. They compile, not interpret.