You can talk directly to the buyer or his agent
- It is still perfectly legal to utilize the services of a "discount broker".
- Flat Fee MLS Listings are still legal in the state of TX. (and quite effective according to the actual #’s)
- A property may be shown by a buyer’s agent without the presence of a listing broker.
- An owner may speak directly to a buyer’s agent without the presence of a listing broker.
There is still a lot of confusion among some home sellers about what a seller can do to sell his home. You don’t have to be represented by a broker. And you can list your house on the MLS by paying a flat fee broker a small amount, then talking directly to buyers or their agents. Wouldn’t you like to know more?
See Also
- Flat Fee MLS
Select a state and list your house on the MLS today.
Author Danielle Babb has announced she will be releasing her book, "Commissions at Risk: A Real Estate Professionals Guide to Beating Online Competition," in October 2006. This book will help position agents on how to re-invent thier business based on the use of technology. The book comes as a response to the growing popularity of "low cost and flat fee brokers, as well as automated systems that cause distress for real estate agents." Flat fee MLS and discount brokers serve as a valuable tool in marketing a home for sale as it maximizes a homeowners potential exposure and allows sellers to retain all the rights of a for sale by owner.
Real estate websites report marked increase in website traffic
Statistics have indicated that 80 percent of home shoppers begin their search online. comScore Media Metrix released its monthly analysis of consumer activity at top online properties and categories today. Among the top trends in April was the increased traffic to real estate sites, up 12 percent from the March, and up 23 percent from a year ago. Peter Daboll, CEO of comScore, says interest "ballooned" due to overal angst in the market and new industry web site innovations. As inventories and rates have risen innovations like flat fee MLS companies, discount realtors and home valuation sites have been the benefactor. This marked increase in real estate website traffic only proves the trend in the real estate industry is toward consumer control. This consumer control is attainable on both sides of the transaction. Flat fee brokers and discount brokers are providing expansive marketing advantages to home sellers in a cost effective while home buyers are afforded the opportunity to enjoy open houses from the comfort of their own PC via virtual tours and multiple photo showcases. The industry is changing and here are some numbers to back it up.
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Industry Vets Move to Discount Brokerages
The former CEO of Realtor.com and executive for Remax International, Steve Ozonian, is just one of many real estate veterans leaving the old for new. Because the internet has empowered its consumers, flat fee MLS and discount brokers are assuming a larger market share in the industry. Consumers are aware of the added control they can assume during the home sale/purchase transaction bringing question to the current commission structure. Though some consumers see no problem with the commission structure of 5.5% to 6%, consumers should not have to use the current model. The offerings of flat fee MLS companies and discount brokers are providing services as they are wanted – you pay for what you get, not pay for what you don’t want or need.
Given the state of the MLS systems it is likely they will become more consumer friendly and less guarded. The Department of Justice is working to ensure the National Association of Realtors doesn’t discriminate against any form of competition. Advisory boards are currently in meetings to discuss the future of the MLS display of information. If the MLS information becomes even more consumer available, then it is likely we will see a continued growth in market share for flat fee MLS brokers and discount brokerages.
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Home Selling Alternatives
With the days of purchasers waiting in line to put an offer on a home long behind, what is the best option for home sellers? Traditional agents argue this is the time where their services are most valuable, thus their commissions most secure. Contrary to that point discount services believe a soft, or slow market is when their services are most beneficial, jeopardizing the commission structure of the industry. When you consider your home sales price is going to level off in a slower market it would stand to reason a discount broker, or flat fee MLS company would provide the advantage. By saving 3% upfront on the listing side of the transaction, you have significantly more freedom in pricing, and the commission being offered to agents while keeping more equity in your home. Furthermore, with the savings you experience through flat fee MLS you have the opportunity to spend more in terms of marketing, whether through local print or additional public websites. With a traditional agent you are going to be giving away 6% in commissions, minimizing your equity and losing the control you would otherwise have over your home sale.
Are Real Estate Commissions on the Decline?
Could the six-percent commission standard become a thing of the past? Economist Steven Levitt along with industry expert Brad Inman have reason to believe the commission structure of the real estate industry is going to change, and change drastically. With the alternative fee for service or flat fee MLS models in conjunction with the evolution of the internet and the way information is being displayed, home sellers and home buyers are ascertaining more control over the real estate transaction. With the recent development and launch of websites performing functions of a traditional agent the internet has literally become the new sales agent according to Brad Inman. It is estimated that 90 percent of the buy side work is done by the purchaser. That being said, how much longer can buyer agents expect to earn 3 percent on a sale?
Home buyers are not alone in their abilities to find useful resources and alternatives to the traditional model, home sellers now not only have the opportunity to list their homes in their local Multiple Listing Service for a low flat fee – broadening the market potential exponentially – they have the opportunity to take advantage of websites offering home appraisals, valuations, neighborhood information and advice on how to properly market their homes.
Not only is the competition becoming fiercer for traditional brokers, but they are continuing to turn more attention to the commission structure through ongoing legal battles with the Department of Justice. The DoJ has claimed real estate agents “collude to prop up commission rates through such anti-competitive actions as ‘boycotting’ the listings of discount brokers.” The DoJ has also charged that attempts by the National Association of Realtors (NAR) to raise the minimum requirements laws of the listing agent is also anti-competitive as it attempts to divest the industry of discount and flat-fee brokers.
Scott Levitt doesn’t stop with declining commission he offers his parallel to the fading profession of travel agents. With the Multiple Listing Service the main service agents offer their clients Levitt believes alternative models will win out, driving down the commissions and possibly driving out the traditional agents.
See Also
Beat the Buyers Market with Flat-Fee MLS
Following the banner years of 2004 and 2005 it seems the inventory has finally exceeded the demand. The record setting prices, appreciation values and overall sales seem to be on the decline. But in this period of industry adjustment flat-fee MLS and other discount brokerages still offer the competitive advantage for selling your home more quickly and maximizing the equity you can get out of your home. With only a one-time flat-fee your home can be listed in your local Multiple Listing Service. While home prices in your neighborhood are being adjusted and set in order to compensate the traditional commission compensation of six percent to the listing agent, you have the luxury of lowering your asking price making your home more attractive to prospective buyers while still maintaining more equity at the end of the transaction than if you were to enlist the services of a traditional agent.
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Consumers Reacting to Realtor Commission Rates
Residential real estate is an industry in which consolidation and time-saving technology have not only not saved consumers any money, but also coincided with steep price increases. It is an industry that has used its political muscle in a number of states to ward off competition from discounters. And at a time when the Internet has wiped out legions of other middlemen in other industries while squeezing the incomes of those who are left, the number of real estate agents has continued to climb along with their income.
Looming large in all this is the Internet, which threatens to break the exclusive hold that local Realtor groups have had on information and information channels vital to buyers and sellers. The Internet has made it easier for buyers and sellers to go through the process without agents. And it has provided an opening for lower-cost brokers offering limited services.
Companies such as Insight Realty, serving the entire Mid-Atlantic region has averaged over 200% growth in the last 2 years with their flat fee MLS Listing services. While their marketing efforts initially focused on FSBOs (For Sale By Owners), their rapid growth indicates that all homesellers are gaining interest in these services.
Recent forums also indicate growing consumer resentment toward the current rate of real estate commissions. Of course the term current is relative in this industry as the commission rate has largely remained unchanged over the past 80 years.
An online exchange on the Washington Post website include the following exchanges:
"Thanks for finally saying what’s needed to be said for a long time. Many in the real estate industry refuse to change, continue to overcharge for services rendered and real alternatives are needed. I don’t blame them though. If I could bag a $20k+ commission on a listing that sold in less than a week with minimal effort in this active market, I’d try to stave off competition too."
"You’d think, in markets with tight inventory, full service agents would be willing to bargain on commissions. Again, a few are, particularly involving expensive properties, and in those cases you should be able to find a good one willing to go down to 5 percent. But remember, selling agents for one customers are also buying agents for another, so they may not be as desperate as you think. They have a lot at stake in maintaining the traditional price levels and disabusing consumers about the wisdom of bargaining on price. These are conversations they DON’T WANT TO HAVE."
"The real estate industry, at least here in MD, is a self regulated industry that gets huge sums of money for little work. All you need to do is understand that the settlement lawyer, who can be sued if there is a problem in the contract the agent prepared, gets about $400 for his work while the agent on a sale of a $400K home can receive 6% or $24,000. Something is wrong. If I can sell a car myself I should be able to sell a home without paying such huge fees to people who do not even require a college degree to be the experts they claim to be."
As you can see, it appears the traditional real estate industry is in for change. Let’s hope that the interests of the consumer drive the process and not the protection of an outdated industry.
