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You know, the "Danger Report" included 1 very interesting "Threat" to the real estate brokerage industry that is fascinating to consider.
That would be the reclassification of agents as employees rather than subcontractors.
I don't support that, although it would be an incredible boost to business for the sole operator.
But, cutting through all the 1099s and replacing them with W-2s would completely upend the traditional brokerage model. The hybrids who are paying salaries and benefits should lobby for it.
I think brokers should appreciate the view from consumers that if they inquire to local brokerages about their listing fees and are told they are the all the same and inflexible, that a consumer can reasonably conclude that there may be some hidden handshakes going on. It may be a market function or business model decision on the part of the brokers, but:
how can commissions be negotiable when consumers are told by local firms that they are not?
riddle me that batman.
I understand that consumers think there is collusion because they call a bunch of big name brokerages and none will negotiate their fee. Really I do get that. I do feel for consumers in very rural areas that might have just one or two options, but it is the way of life out there.
Consumers are confused about what "commissions are negotiable" means, though. It doesn't mean that the specific brokerage you want to hire will agree to work for a lower fee. It just means that within a market fees are negotiable. Clearly within my market fees are negotiable, but it does mean consumers have to do some legwork to find an agent that charges a rate they are willing to pay. Agents are reluctant to publish their rates online because they worry about the appearance of collusion so they don't generally talk about fees, rates, and commission offerings publicly which means consumers have to make a lot of phone calls.
I understand that consumers think there is collusion because they call a bunch of big name brokerages and none will negotiate their fee. Really I do get that. I do feel for consumers in very rural areas that might have just one or two options, but it is the way of life out there.
Consumers are confused about what "commissions are negotiable" means, though. It doesn't mean that the specific brokerage you want to hire will agree to work for a lower fee. It just means that within a market fees are negotiable. Clearly within my market fees are negotiable, but it does mean consumers have to do some legwork to find an agent that charges a rate they are willing to pay. Agents are reluctant to publish their rates online because they worry about the appearance of collusion so they don't generally talk about fees, rates, and commission offerings publicly which means consumers have to make a lot of phone calls.
I advertise my rates heavily, because I am willing to list nearly any property in my local market for my typical rates.
A Tin Man's basic sales tactic, and one I think some firms follow, is not to discuss rates until you have done your entire dog and pony show and built your value proposition (i.e., chained yourself to the kitchen table leg until you have worn the poor homeowner down.)
And, unfortunately, there still are idiots who present the idea of a "going rate," and homeowners who fall for it.
You know, the "Danger Report" included 1 very interesting "Threat" to the real estate brokerage industry that is fascinating to consider.
That would be the reclassification of agents as employees rather than subcontractors.
I don't support that, although it would be an incredible boost to business for the sole operator.
But, cutting through all the 1099s and replacing them with W-2s would completely upend the traditional brokerage model. The hybrids who are paying salaries and benefits should lobby for it.
At the end of the day, it's a sales position. A complex, very involved sale that is one of the most important sales an average person will ever make, but it is still a sales role. Keeping most on commission probably makes the most sense. Allowing people to work part time for a 1099 keeps entry to the field possible.
Yet, there's another reason to support the status quo.
When I was younger, there was another well paid group of people called stockbrokers. Their fees for placing a trade were quite large, especially when looking at today's trading costs. Even in those days, it was very possible for a successful broker to make six figures. As such, volume was lighter, and people needed to think through a buy or sell a bit more. They also had a professional to help them balance their portfolio.
If you took the same ease of a transaction and applied it to real estate, I think you'd have a recipe for disaster. This December I bought a home for my sister. The first home that I thought was a deal turned out to be one that would have required significant repair work. Our agent, recovering from surgery, worked with the other agent to provide a new key (the first had been stolen) and then went through the home, discovering that this Chicago home hadn't been heated in the prior winter, and almost all of the radiators had burst, to say nothing of the plumbing inside. Granted, an inspection would have caught this, but having a good agent kept us moving in the right direction.
The agent had spoken with my sister, an artist, and knew she dreamed of having a studio to work from. She was friends with a flipper, and they spoke and he agreed to sell one of his properties to my sister that will have the perfect space for her. It's going to be the only home she's going to buy. It's going to be perfect for her.
Companies hire project managers all the time. A transaction has a lot of moving pieces. Buyer interest, escrow, contracts, contacts, inspections, title etc. Yes these are farmed out, but you still need to have a central contact. I'd hate to have that contact cost $100 and be a farmed out call center in India.
"... The reason MikeJ is talking about larger cities is because he knows that really small towns have few choices just by the nature of being small. ..."
Well, not really. MikeJ was trying to make it easier for them.
The larger the market, economies of scale provide funding to make more data and information readily available on line. Small markets tend to not be able to afford technology that makes data and information readily available.
And, of course, a brokerage or two, or a 300 member MLS, does not provide a national trend that the posters are claiming to exist. For there to be any support for claims of overwhelming collusion, I would think it reasonable to cite multiple markets and regions with large agent membership and population base in MLSs.
I think only the super small MLS systems (like the 30 member ones) wouldn't have good data. Salem-Keizer is about 190,000 people and we have about 600 brokerage members (about 1800 agents) so we aren't huge. I don't know how there could be 300 brokerages in an area and not have competition.
The real issue is that consumers don't know how to seek out and find the different options.
I think only the super small MLS systems (like the 30 member ones) wouldn't have good data. Salem-Keizer is about 190,000 people and we have about 600 brokerage members (about 1800 agents) so we aren't huge. I don't know how there could be 300 brokerages in an area and not have competition.
The real issue is that consumers don't know how to seek out and find the different options.
We have 16 counties, cross the VA state line, and a few boards of Realtors and about 3 million population, and I think about 7500 members.
And, competition out the wazoo.
Bottom line:
People hire people they like and trust.
I advertise my rates heavily, because I am willing to list nearly any property in my local market for my typical rates.
A Tin Man's basic sales tactic, and one I think some firms follow, is not to discuss rates until you have done your entire dog and pony show and built your value proposition (i.e., chained yourself to the kitchen table leg until you have worn the poor homeowner down.)
And, unfortunately, there still are idiots who present the idea of a "going rate," and homeowners who fall for it.
I remember back in the boom an agent wrote on all his advertising "home of the 3% listing." He got so many complaints from agents to the state real estate agency because they genuinely thought it was illegal to advertise rates. In the newsletter, the agency addressed it so that agents would understand it was okay. It is just one of those myths that takes hold sometimes. He went out of business within a year of the bust because the math for that model only worked during boom times.
I remember back in the boom an agent wrote on all his advertising "home of the 3% listing." He got so many complaints from agents to the state real estate agency because they genuinely thought it was illegal to advertise rates. In the newsletter, the agency addressed it so that agents would understand it was okay. It is just one of those myths that takes hold sometimes. He went out of business within a year of the bust because the math for that model only worked during boom times.
It IS a worry to me how poorly informed many agents are. I blame very large firms with minimal supervision per agent and fear of scaring away old dog high producers.
So, errors that are inbred are hard to erase.
Commissions are negotiable but I know what I need to run my business so my commissions are set. I offer 3 options and the seller can pick what they want to do. So because a broker or an agent doesn't negotiate commissions it doesn't mean they are in collusion with the other companies.
I bought a widget last week. I looked on EBay, Amazon, Wallyworld.com, and a few other sites and that widget was about the same price everywhere. I bought the widget from a local store that was $5 more than ordering online or Wally World because I do try to support local businesses when all else it equal. Does that mean all those big bad companies were colluding on the price of the widget I bought?
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