Wednesday, December 21, 2005

NAR Running Scared

Check out this National Association of Realtors press release.
"Banks have once again demonstrated their incredible ability to find ways to charge customers record fees. Banks that once touted warm, fuzzy customer relations now are brazenly charging nearly $3 to use an ATM and more than $26 for a bounced check. Imagine what they will do to the real estate customer if they are allowed to broker real estate. Banks will control the real estate transaction end-to-end, creating virtually unlimited opportunities for extra charges and add-ons", said NAR President Thomas M. Stevens of Vienna, Va.
There is increasing competition for real estate transactions. Think For Sale By Owner (FSBO) and discount brokers. Oh and the bubble is bursting. The Realtors are running scared.

1 comment:

  1. Hello. I am a Realtor in Texas.

    My city has a population of 700,000 and a Realtor membership of 1,700. 40% or more of the 1,700
    current Realtors will be out of the business within 12 months, and another 20% within 24 months. The reason for the churning of agents is that they cannot make a living in real estate. It seems like the ideal job until they actually have to do it. Most of these agents will not have made more than a couple of small sales during their year or two in the business.

    The trends toward FSBO's, Help-You-Sells, deep discount brokerages, and the like have reduced average commissions to 5.5%, down from 6.2%
    about ten years ago (my cited figures are from memory, but are reasonably accurate). The largest
    part of the reduction has come from relocation firms, which generally strip about 35% from commissions. These relo firms serve corporate transfer clients.

    So far, only a small part of declining average commissions is attributed to discount brokerages,
    and non-brokerage assitance businesses.

    In my opinion, many sales by FSBO, Help-You-Sell, and discount brokerages are rife with problems such as underpricing or overpricing property, and contractural mistakes leading to lawsuits (that never get reported because there is no place to report such problems) and financial losses to both buyers and sellers. At this point I acknowledge that having an agent does not guaranty zero problems... you do need to find a good agent who has the skills to properly analyze the market, properly price the property, and properly manage the marketing and sales process while protecting the client's interests.

    A good agent is worth the 6%. A mediocre agent or a bad agent isn't worth a cent. In fact, they can be a liability.

    If a seller or buyer does not have a good agent, how can they really know the value window of a property? The direction of the market for that specific property?

    Here is a recent and true experience: I competed with two other agents for a listing. My value analysis came in within 3% of the other two agents, but I advised the client to price the property 9% higher than calculated values because the market balance, calculated as "MOI", was very strongly in the seller's favor. The seller followed my advice, priced up 9%, and we had the house under contract within 10 days, WITH a full price backup offer. Was I worth the 6%? I'd say yes, and this is not an isloated incident.

    In summary, if sellers and buyers discount the potential value of a good agent, then they do themselves an injustice.