Using the above FSBO’s pictures a scammer will create a new ad indicating that the property is for rent to own. These very creative and well executed cons generate thousands of dollars for the scammer before he/she shuts it down. Here’s how it works. The scammer sends the would be renter to the address and says “look through the windows, if you like it, send me $100 via Western Union (untraceable) and I’ll have the key’s and lease to buy agreement, for you to sign, delivered.

Now that the NAR has been exposed as this evil entity stealing and hoarding billions of homeowners effortlessly earned equity dollars we can rejoice in the creation of more scamming outlets like the VOW.

And for those of you who still believe the NAR has been protecting 6% universally, visit http://www.halfpriceagent.com , there are thousands of agents and sites like this. For those of you who can’t see that the VOW is the dawn of new outlets for scammers, good luck! For more on the settlement visit http://www.realtytimes.com and view their video on VOW’s.

True, when she is able to go to contract, she gets paid but remember also that they don’t pocket the whole 6%. In most cases, each deal requires a broker on the sell-side and one on the buy-side, so the commission is split 50-50. Then the brokerage takes its cut. So in the end the broker, unless they have been with the firm so long and performed so successfully over the years that they have been able to command a more favorable percentage, usually winds up with only 1.5%.

The new regulations will help many buyers and sellers save money, of course. In many cases, people don’t need Realtors. Much in the same way that many day-traders don’t need a broker. But there will also still be those clients who still feel they need the professionalism and insight that working with a Realtor provides–and for which Realtors like my wife work extremely hard to bring to their clients.

Like many jobs, it is a lot tougher than it looks.

And, just to be clear, I certainly agree that the NAR settlement is a good thing, and there should be competition on commission rates and in other areas of real estate sales.

While you’re right… pray how is that any different from the Bar Associations and the state legal regulators? (Overseen, incidentally, by the courts whose members are judges, meaning… they’re all lawyers.)

Or medical regulators that regulate doctors?

Why single out realtors?

-rsh

It’s not very unusual anymore for a “reasonable” mortgage payment to equal half of a household’s monthly take-home. For such borrowers, 11 - 22(ish) months of mortage payments adds up to 5 -11 solid months (!) of hard-earned post-deductions income going to the broker, for what? - how many hours of effort? How, exactly, can this not take a huge bite out of the “value” of homeownership, short of a market that is forever appreciating wildly out of sync with incomes and inflation?

Every few generations, we have to be taught anew about the dangers of “leverage”, Ponzi Schemes, and just general unregulated greed. These lessons don’t come cheap, and if the NAR’s constituency pays a particularly disproportionate price, I’m afraid there won’t be many tears shed…

> That 6% gets cut up like a small pie at Thanksgiving.

Either those folks are adding value or they aren’t.

I like messages that tell about wonderful, time-consuming, and expertise requiring jobs that realtors do and then rant about realtors who are basically suits giving the industry a bad name. The former may be worth 6% but the point that such messages always miss is that the latter is worth less than the former. Yet, those messages are always arguing that the 6% fee should be universal.

The US real estate industry, dominated by the National Association of REALTORS and its affiliates nationwide is still a closed business that is highly resistant to change. Implementing any change that would have a direct impact on consumers (like lower fees) is like trying to turn the Titanic around in a bathtub.

Most consumers have no idea that the NAR has a strangle hold on virtually every state real estate regulatory body (the very entity that was established to protect consumers). They exercise this control through their state affiliates and it goes virtually unnoticed.

Real estate regulatory bodies like the Kentucky Real Estate Commission (KREC), operate with little or no oversight and rarely make a move without the direct involvement of the Kentucky Association Of REALTORS (KAR). It’s easy enough to see that that the objectives of the KAR would be “industry” oriented and that the KREC should be “consumer” oriented.

We are not likely to see any meaningful change in the way the real estate industry functions until we restore independence to real estate regulators. Currently in many states, a position on the state real estate regulatory body is a “pay-back” for past political involvement and has to be approved by the state REALTOR trade group.

What we actually need are “subject matter experts” serving the interest of consumers and establishing reasonable rules and policies that reflect the fact that we are living in 2008 not 1960.

Jeff, your article is not researched well and is more of a tirade than informational. The truth as to why it costs 6% to list your home with a competent broker is because there are too many large brokerages housing too many agents. Furthermore, they always need more agents in the house to subsidize the high overhead. As a 15-year veteran and broker I know the game of the big brokerages. They seek out and hire any eager newbie. That newbie predictably will do 1-6 deals with family and friends in the first 6 months. The brokerage keeps 50% or more of each commission. The big brokerages know that the newbie will be out of the business in 4-12 months, in debt up to their eyeballs, if not bankrupt. NEXT! I don’t think my phone service is noticeably different because of Big Brother?

The solution which the NAR will vehemently fight against is to make it harder to get a license; The NAR likes their 1.2 million dues ($104). The states need to require: 1) at least an associate’s degree in business to enter the field or 2) require that all new agents operate under an apprentice for a period of time and when certain points/credits have been achieved. Under this model, similar to appraisers training (after the S&L scandal), the industry would then attract people with a sense of direction, commitment and understanding of patience and discipline. Right now we get 18-year olds to retirees and everything in between, who just want to earn a buck or two. These incompetent part-timers and squatters tarnish what could be a highly reputable profession.

I personally have a punch-list that includes 180 items from: tasks, calls, meetings etc. that I do for a single client and this is just a starting point, it’s customized for each client. PLUS I have to prospect for new business at some point in the week.

This is about the value an agent provides and whether you agree or not. You get to choose the agent! Would you like me to find you three discount brokers? There in every state, every county and every city! A good agent provides value, whether it’s worth a percentage is arguable and nothing is stopping competition. It’s like lambasting the athlete that gets 20 million a year. I bet once that pie is cut up he really takes home half the face value of the contract if that.

Jeff, your tirade is focused on the symptom vs. the cause. Perhaps your right, the commissions will come down. But consider this: If I average more than 1.5 clients a month, with my system, I would have to hire one competent assistant (36K per year) for every 8 additional clients. This is exactly why you see the trend of “teams” in big brokerages. That 6% gets cut up like a small pie at Thanksgiving. An assistant in real estate is the equivalent of daycare to a two income blue-collar family. It may pay to hire daycare it may not. The real disservice to consumers would be cutting the commission for the sake of cutting the commission.

Office Max, the internet all have fill in the blank forms. What’s stopping anyone from selling or buying a home without paid help? Why are you blaming brokers for high commissions? I see nothing in the way of competition! There’s fixed fee, discounted commission and Pay for performance brokerages all over, why aren’t they more successful? Oh I know it’s because Big Brother needs to step into this fight because the consumers are too apathetic and scared. They can’t organize and make a difference without government? Phewy! I can create a business plan on $3000, 2%, 3%, $995 or any other amount but why would I choose $995 when over 80% of the property sold averages over 2.74% each side? Would you tell your boss, no don’t give me a raise, that’s idiotic.

The Bad guy that can’t recognize a garage is too small for the buyers trucks and sells the house to them anyway should go home create a virtual office and hide behind the internet for $99 per sale, maybe then consumers will recognize the value in an experienced broker regardless of the size of their fee. It’s not about the money silly it’s about the consumer being educating and responsible for their choices. Meanwhile enjoy deciphering what’s fraud and what’s not on Craig’s’ List as Craig so often warns you.

The right thing to do is to make it harder to become an agent. Then watch the commissions go down naturally or watch the service and reputation of agents do a 180 and the commissions go up. Microsoft doesn’t seem too affected by Big Brother and nor will the pro’s. I’ve been financially broke many a months because I truly have the clients’ best interests at heart. I didn’t sell a property even though I easily could have. I know many who fall into the same category of ethics but like all things the bad guy ruins it for the good guys.

Disruptive innovation happens on the fringe, simplifying the process for the unsophisticated first. And then it matures and becomes mainstream, and legacy companies wonder what the hell just happened.

It’s the age of disintermediation. Realtors are certainly those in the middle of the transaction. Individuals are capable of far more than you imagine.

I’m not a realtor nor is anyone in my family. The one time I bought a house the agent certainly earned her money, I ended up making offers on idiosynchratic properties that required a lot of research, down to studying 100-year-old water rights records on microfilm. I was actually very impressed with her efforts and her knowledge of matters that would have been very difficult and time-consuming to understand on my own.

But, the point I want to make here is a different one. Real estate is a complicated market, regulated in different ways in different states, and the NAR settlement is only one piece of a complex puzzle. In some states sales prices aren’t even disclosed, for example. I would argue that Zillow sometimes does a disservice by promulgating radically inaccurate “information” about home values. When you’re selling things that are worth *a lot* of money, and are by definition subject to many layers of regulation and financial review, there are going to be intermediaries. How many intermediairies, what functions, and what cut they get are all on the table. But individuals are not going to be buying and selling houses one-to-one on Craigslist, or at least not in any great number. Ask someone who has tried a FSBO - it’s not much fun, and not only because Realtors make it harder.

Like almost anything in life, value can be recieved if it is searched for and/or demanded. You seem to have a hard-on for realtors, which makes one think that you had a bad experience with one. Did you search for one that did the work that make their commissions worth it?

Another point — few sales net a real estate agent 6%. This is because the majority of sales have one realtor listing a home and a different realtor selling the home — thus a 6% commission is split in half. That 3% commission is then split with the realtor’s broker — 70-80% to realtor being about the norm.

Let’s do some math. You quote the Times saying the median commission is about $11,600. At a 6% commission rate, that would put the median sales price at $193,333. With a 6% commission split between two realtors, then split 75% to realtor and 25% to the broker, a selling realtor would make $4,350 before taxes - about $3,200 after.

No, I am not a realtor — I just bothered to research them before I used one. And yes, I agree with the basic premise that information should be open and shared. I just dislike your pissy tone towards realtors - or any other profession — in general. What do you do for a living? How about if we fisk your paycheck line by line and see if everyone feels you are worth it?

This is a free market system. In any open free market, the actual seller of a widget is going to make a disproportionate percentage of the income than anyone else in the widget chain — more than the manufacturers, more than the designers, more than anyone other than the owner of the widget idea. Why? The salesman is the point man, and drives the entire engine. It is true in any business — do not just pick on realtors.

Now, go back to cheering for a more open marketplace - that is a commendable effort. But the sneering at a sales force in general makes your writing less appealing…

Good Day!

Craig