No Competition in Real Estate? Really?

avatarthumbnail.jpgSometimes, you just have to shake your head.

Admittedly, I’d never read Jeff Jarvis’ blog before and probably won’t read it again – it’s little different than the “all real estate agents” suck routine you can get in a dozen other places.

But there’s one line from his post yesterday celebrating the settlement of the Department of Justice’s case against the National Association of REALTORS that has left me shaking my head:

Kiss your 6 percent commission good-bye, Ms. Agent! Competition is on the way.

Let’s get the standard disclaimer out of the way – there is no standard commission rate across the real estate industry. All commissions are negotiable though each agent and each brokerage is able to set their own rules – we all have the right to work for what we feel we earn, plain and simple.

Actually … let’s not run away from the standard disclaimer so quickly because the truth is the key to understanding competition in the real estate industry.

There is no standard commission. Every agent is allowed to charge whatever they choose. And because of this, there are a wide variety of business models at work. There are web sites who will provide an MLS listing for a flat rate. And there are agents who are willing to work at a number of different percentages all the way down the line.

Does this sound like a lack of competition?

One of my good friends here recently left his brokerage and hung his own shingle. Another is working his way in that direction.

Does this sound like a lack of competition.

Though NAR wasn’t required to admit any wrongdoing as part of the settlement, that doesn’t change the fact that the powers-that-be made a stupid decision once upon a time (and others along the way) in trying to limit the flow of MLS information.

(I’ve called out similarly moronic decisions made by local boards as well.)

And there still are some who believe the MLS is a public entity and anyone should be able to list their homes for sale … just like anyone with a car for sale has the ability to post their automobile on Ford’s website. (Oh wait … we can’t do that, can we?)

Anyone can sell stock they hold but they can’t list that individual stock for sale on the New York Stock Exchange or NASDAQ unless they go through an NYSE member institution or a NASDAQ market maker. In eight years at Schwab I never saw a NASDAQ stock come up on the Bloomberg terminal with “Bob Smith, Pierre South Dakota” as the seller.

Why? Because the NYSE and NASDAQ are not public exchanges, in as much as they are not open for everyone to utilize their listing services. The same can be said for the MLS.

What are the obstacles that must be overcome in order to have MLS access?

  • Attend real estate school
  • Pass the state real estate exam
  • Pay your board membership (since locally the boards operate the MLS)

And here’s a basic reality … many of the 40,000 agents in the Phoenix real estate market hold their licenses solely for their own investments. They don’t work with buyers. They don’t work with sellers. They work strictly for themselves.

People seem to spend a lot of time fretting about real estate commissions, which is odd only because there seem to be more pressing economic issues these days. You know, like $4 a gallon gasoline, rising food prices and the like.

When there’s news and movement on those fronts, then you’ll have my attention.

[tags]Phoenix real estate, DOJ v. NAR[/tags]

Jonathan Dalton

Jonathan Dalton is a 40-plus-year resident of the Valley and has been helping folks buy and sell homes since 2004. He can be reached at 602-502-9693 or info at allphoenixrealestate.com.

0 Comments

  • John Corey 9 years ago

    I am not an agent. I am an investor and have been for over 20 years.

    The debate about commissions comes up all the time. People think agents are over paid. At the same the average agent earns very little until they have an established business with happy clients. With almost no barrier to entry (barrier to get a license) if there was easy money to be made more people would become agents. Whenever the public things this is the case there is a spike of people getting a license.

    Jeff can have his view even if the data does not support his speculation.

    Oh, I agree that NAR was a bit short sighted when they came out with their policy against data flowing onto the net. In some ways technology made the position moot so the suit was settled.

  • Jonathan Dalton 9 years ago

    Thanks for the insight, John, it’s much appreciated.

    NAR and some of the locals have habits of making some rather silly decisions in an effort to stifle competition. There was the effort in Tennessee to ban commission rebates, for example.

    I’m adopting markets work as my mantra because it’s true. Let the market decide what’s viable, what isn’t and it will.

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