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Internet-Based Realtors Win Monster Settlement
coondoggie writes "Until today, most Internet-based real-estate brokers were considered second-class citizens, and their clients were left in the cold. But perhaps that will change with today's news that the Department of Justice has reached a proposed settlement with the National Association of Realtors that requires NAR to let Internet-based residential real estate brokers compete with traditional brokers. NAR has agreed to be bound by a 10-year settlement, under whose terms NAR will repeal its anticompetitive policies and require affiliated multiple listing services to repeal their rules that were based on these policies." Here's the whole settlement document on the DoJ's site.
Protectionist policies usually only protect a handful of businesses. In the case of the Real Estate industry, a high cost to entry bars a lot of business from entering into the market without going into co-hoots with the "big brand" businesses. What this does is allow independent realtors to compete with the big boys, which will in essence force the big boys to be more competitive.
The internet helps small businesses expand as fast as they can handle, and forces big business to stay competitive or lose business. This is really good for everyone. Not a perfect solution, but a good start. Now, if this would only happen for all industries...
20th century Marxism is not progress...
"Real" realtors will still blacklist listings by online or DIY listings. Non local "real realtor" basically translates into negligible viewings.
Obviously this is pathetic. I happen to have three realtors on my doorstep, and they sing the same song, claiming colleagues will do the same. You cannot break this kind of cartel when grassroots will practice it regardless.
I'm glad to see anti-competative practice and brokers in the same sentence. I don't know if internet brokers are going to have any positive effect on the rental market in major cities though. Right now the only realistic way to get a new apartment in NYC is to pay a fee equivalent to 15% of the annual rent to a broker for the privilege of renting from the landlord who has given them the exclusive right to make the public aware of the apartment's availability. So that's easily $3600, just to be allowed to deal with the apartment management company. I once paid a broker's fee to someone who had an exclusive on all the apartments owned by the broker who shared an office with her. I was in the same room with the landlord, but I couldn't rent from him without paying her first. i would love to use capitalism properly and not give my money to brokers, but they control far to high a percentage of the real estate for that to be a viable option.
We are all just people.
It's just one more example of Internet disintermediation changing economics.
Hard as it may be to believe, there are still a lot of businesses that think this "internet fad" is going away, so seeing yet another major industry be dragged into the 21st century economy is interesting to a lot of folks.
Recursive: Adj. See Recursive.
Yes, it's ridiculous.
It has as much to do with this site as "internet-based" retailers did a decade ago. It is forging ahead, changing an industry. I don't have time to go sit with a realestate agent, I want to look at the houses online, and narrow it down to one or two, take a look at them, and make an offer. I don't want to have to give 3-6% of the sale price to somebody, when I do most of the work. (And no, posting some pictures and some text into a MLS database is not "work"). If I, as a nerd, can make the standard 6% commission go down to about 3% by using "internet-based" real estate companies, who have less infrastructure costs to support, and can make a profit on volume, instead of "services", then I can save many thousands of dollars. In California, many houses in "average" neighborhoods sell for around 400k. The commission you are paying to an agent is around $24k for the privilege of buying that house.
What are we going to do tonight Brain?
That's exactly what they're doing. You can almost hear the "(tm)" trademark and the ALL-CAPSness in the word "REALTOR". That's because it is a trademark, and it's NAR's trademark. The generic term is "real estate broker".
Similar cases of trademark dilution have taken place in the past -- do you use a Xerox(tm) or a photocopier? Kleenex(tm) or facial tissue? Likewise, are you doing business with a REALTOR(tm) or just some random real estate broker?
All of which is, as you've surmised, bullshit. Much like used car salesmen, real estate brokers are basically weasels. Because houses aren't identical, they can't be bought and sold like stocks, bonds, or even consumer electronics, so buying a house is more like buying a used car; people have to interact, in meatspace, if for no other reason than to inspect the property, and that invites a whole food chain of people whose only interest in the process is in getting a cut of your transaction.
And as the president of the National Association of Weasels, we'd like to make sure that you do business with one of our WEASELS(tm). Only WEASELS(tm) are members of the National Association of Weasels. Would you risk your family's financial future with mere polecats, skunks, or other poor imitation? Demand professionalism! Settle for nothing less than genuine WEASEL(tm)!
The trademark has worked well for NAW^HR, but this court case is the thin edge of a very big wedge. NAW's de facto monopoly over the WLS data broken, there'll no longer be any advantage to being a Genuine Weasel. Any old weasel can work within the same set of databases, which means that NAW will be denied the fat fees that only WEASELS pay...
Wake me when someone acts against real estate agents who are supposed to be representing the buyers stop getting commissions paid by the sellers. This is an obvious and massive conflict of interest.
I saw an item on TV where agents were saying that sellers wanted to place their houses with agents on the basis that the buyer's agent got a larger commission. Now, why would they do that if they did not think it would influence the AGENT of the buyers? If the seller can influence the buyer's agent, there is something deeply wrong.
Can someone explain to me how this obvious conflict of interest has persisted for so long?
And before anyone tells me that a realtor is necessary -- I bought a house in the US (for several hundred thousand dollars) with no agents involved on either side of the deal.
The real "Libtards" are the Libertarians!
Actually, the seller pays the commission, but the point is the same: why pay 6% to sell your house if a internet-based real-estate agency can get you in the same listings and attract almost as much interest at half the cost?
"They've canceled the show but we're still here. What does that make us?" "Big Damn Junkies, Sir!" "Ain't we just"
The way they phrase it (I'm a real estate licensee, in addition to my primary gig in IT) is awkward/duh, but what they mean is that Realtor is a registered trademark of the NAR, and that only members may call themselves a Realtor.
What, you may ask, is the benefit of that? Basically, it comes down to your rights if an agent screws you over. If that agent is not a member of her/his $STATE Association of Realtors (and by extension, the NAR), you can file a complaint with your state's Real Estate Commissioner and/or go to court. If the agent with whom you have a dispute is a Realtor, you can also file a grievance with your $STATE Association of Realtors and go to their arbitration panel. Those arbitration panels are fair, and the Realtor Code of Ethics is far stricter than what is required by state laws (and at least here in California, those state laws are fairly strict themselves). If a Realtor has violated the Code of Ethics and/or state real estate laws and you have some proof, the Realtor could be suspended and/or expelled as a Realtor, and may also face license suspension and/or revocation.
While more than a few of those reading this may doubt it, the majority of real estate agents, and particularly Realtors, are honest people who seek to do the best job possible for their clients. However, if you do have a legitimate problem with an agent, whether it's through dishonesty or just incompetence (and they are out there; it was through dealing with an incompetent agent when my wife and I bought our first house that I decided to get my own license; after joining a brokerage, I was amazed to find that a large number of my colleagues, including my broker had themselves gone into real estate for that very reason), you have a better chance of redress if your agent is also a Realtor.
Disclosers/disclaimers [1]:
1) I am not a lawyer, and none of the forgoing is intended as, nor should be construed as, legal advice. If you need legal advice, see a lawyer.
2) I hold a real estate agent's license but am currently not affiliated with a broker and so may not practice real estate. None of the forgoing is intended as, nor should be construed as, real estate advice. It is solely my personal opinion, and as such, may be completely wrong. Don't rely on it in any way.
3) I am not a real estate broker, and none of the forgoing is intended as, nor should be construed as, real estate advice. It is solely my personal opinion, and as such, may be completely wrong. Don't rely on it in any way.
[1] Why all the legal stuff? Real estate is very litigious business. If you're a doctor and the likelihood of a malpractice suit bothers you, just be glad you're not a real estate agent.
Ya, I am a Realtor, if you have a question about homes ask me, my advice is always free.
What exactly do realtors do? Why would I want to use a realtor to sell a home rather than listing the home myself, and what is the benefit of using a realtor to find a home rather than just looking through the listings myself?
I'm not actually planning on buying a home any time soon, but I'd like to know. Usually I prefer researching major purchasing decisions myself, rather than trusting a salesperson.
I don't think that part is ridiculous. There's a distinction between a real estate agent and a Realtor®. One is a person who has a license to sell real estate, and another is a person who pays dues to and is a member of the National Association of Realtors®. It's been that way for many decades, as far as I know.
Unless you've gone through the hassle of buying (or attempted to buy) a house this wouldn't be very clear.
Right now it is almost impossible to purchase a house using internet based tools. Every housing market is controlled by the local realtors and they are VERY territorial. This means extra calls to look at houses if you aren't using a local realtor, extra time spent researching because tools are intentionally crippled for non-local agents, houses that aren't "keyed" properly for non-local agents (meaning even if you've done your research, then had someone call on the house, you still might not be able to get in and see it).
This makes it harder to find (and buy) a house if you aren't working with a local agent. Knowledge is power, and with current tools & rules the local agents wield a lot of power over non-local (internet) based ones.
Time will tell if this ruling bears fruit, but it is definitely good news for any nerd looking to buy a house in the future.
Welcome to the 21st Century, Century 21.
Learning HOW to think is more important than learning WHAT to think.
My wife is a Real Estate agent (not a broker; there's a difference) and there is a ton of work she does for her listing clients, often including spending hundreds of dollars of her own money, sometimes over a thousand, to pay for preparing the house for sale and marketing the home. I've also donated many hours of my own time ripping out old carpeting, taking down wallpaper, painting, and doing various light carpentry jobs for her clients.
Her clients also get her experience. I've seen a number of For Sale By Owner homes, and they never look as nice as my wifes listings. People just don't realize that you have to clean your home and make repairs before you try to sell it. Otherwise, it looks like run-down junk, and buyers will treat it accordingly. First impressions are everything, and you need an agent who knows what to spend money on and how much to spend, so that you get the best return on your last-minute fix-up dollar.
All of that is before the house even goes on the market. Once it's on, there are endless phone calls, viewing arrangements, and follow-ups that have to be performed; it's definitely a full-time job. Once an offer is negotiated and accepted, there's even more phone calls and work to do meeting with inspectors, dealing with lawyers, and making sure the deal doesn't fall through. It's just a steady stream of work, and if you've already got a job, you don't want to do the agent's job too.
Finally, all of the buyers know that you're not working with an agent, and since they're probably selling their home as well, they know just how much you're saving. 99% of the time they'll deduct that amount from what they would otherwise offer you, figuring that you wouldn't have gotten the money anyway, and why should you get a free ride? It can't be for your time; agents don't do anything, right?
That was very smooth!
A positive attitude may not solve all your problems, but it will annoy enough people to make it worth the effort.
I appreciate the views that others have of the real estate industry that are similar to what I saw while working as the IT grunt for a small real estate company. And yes, I heard the exact phrase 'the internet is just a fad' and IT was just a waste of money. The babysitting eventually got old for me, and I came to realize that I had to leave, because the people in charge just dont 'get it'. Not in a bad way, just in a 'my grandparents still listen to music on AM radio' kinda way.
There is no other industry I have seen that is so absurdly protectionist in its business practices. And the result of that type of worldview has led some real estate companies to be literal fossilized relics of their time.
This settlement gives me great pleasure to finally see, as the roadblocks setup by MLS are some of the most frustrating I have ever encountered, from the buyers point of view.
Having seen the industry from the inside, I would never have any part of buying or selling a home through a real estate agent. If I see a house thats for sale that I want, I am patient enough to let the rediculous 'listing agreement' expire, and then buy it right from the seller directly. It is amazing how eager people will become to sell to you when they realize that waiting a few months can net them a 7% larger profit.
And what ever happened to that small real estate company, you may ask? Well Caton Commercial spends some of its time showing up to court cases brought against them by various old employees and business partners, and sending out threatening Cease and Desist letters to other old employees.
Here in TN, the NAR just bought a piece of legislation making it illegal (you read that right: illegal) to give a purchaser a rebate. They have a lot of power, and they'll use it.
Do you have ESP?
Do it yourself, because no one else will do it yourself. [beta blockade 10-17 Feb]
That's obfuscation from the real estate industry. The seller remits the commission, the buyer funds the commission. The agents say "the seller pays" to hide how the buyer is putting up all the actual funds of the commission, unless the transaction is a short sale where the seller actually puts up funds from their own pocket. Thus affecting buyer psychology. As long as the seller negotiates a price that is over the lien amount, any claim that the seller is "paying" the buyer (including claims of closing costs paid by the seller or agent) is marketing sleight-of-hand. Even worse, unless the buyer is doing an all-cash deal, they are on the hook for interest for all these "seller/agent-paid" amounts.
Internet + sleazeballs. What could possibly go right?
No sig today...
That's an insightful and shocking analysis.
Until last week I would've agreed with you, and helped light the torches at the next realtor lynching.
Last week I had a change of heart because I set about to buy a house. That's when I realized how valuable a good realtor really is.
It's important not to score their work along Marxist "physical labor is the only real labor" ideas. Mostly what you're paying for, as a buyer, is their expertise in assessing the value, condition, and livability of a house. Once your realtor understands what you want (and they'll spend the first six house visits figuring this out about you), they can give insights that you would otherwise have to learn the hard way.
The good ones also know what maintenance issues to look for. And of course they guide you through the buying process and give advice on negotiations. My realtor had all sorts of insights into reading between the lines of the seller's listing verbiage.
As a seller you benefit from a similar expertise, except in reverse: a good realtor can show you how to market your house's strong points.
In both cases, their expertise can add or subtract thousands from the closing price. My realtor just led me to a fantastic house for which I signed an offer letter just this past weekend. He's going to get $4500 out of the deal, and I consider that a reasonable fee for an expert consultant.
FATMOUSE + YOU = FATMOUSE
People are usually cheap SOBs looking for the lowest price on food, clothes, toys, computers, cars, etc., yet they all of a sudden got Truly Stupid paying huge prices for homes. Why???
1) Houses were seen as a lifetime investment that would not depreciate.
2) Home ownership in the US is highly subsidized by the Federal Government through the mortgage interest and property tax deductions.
3) A lot of shady operators took advantage of poorer and less well-informed people by writing them mortgages with ridiculous terms (like a late payment increases your interest rate to double digits), waiting for the borrowers to run afoul of those terms, then foreclosing on a house the family had owned for years. It's called "predatory lending" for a reason.
There's been lots of corruption in the "secondary" and "subprime" lending sectors, too. Borrowers were encouraged to hedge, and sometimes lie, about their qualifications because the lenders felt no risk. Lenders found they could sell almost any mortgage into the securities markets where the liabilities were sliced and diced into pieces and repackaged as equity holdings. The Federal Reserve Board also helped fuel the housing bubble by holding down key interest rates and failing to perform any real oversight of its member institutions' lending practices. Many, many people, including many supposedly well-informed financial types, simply believed real estate would continue to rise in value over the years ahead.
Whenever large numbers of people become convinced that the price of a particular item, be it tulip bulbs or homes, can never fall, you have the potential for a pricing "bubble." In this particular instance, public policies and private greed together created the over-valuation of residential property that occurred over the past decade.