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REAL ESTATE MISCONCEPTIONS CON'TWhy Realtor Commissions are DroppingIn the 1960's the 6% commission paid to Realtors by the home owner was split 90/10 – the "selling" agent received 90% of the commission and the "listing" agent only 10%. The split was designed to reward the "selling" agent for producing the buyer. The 1970's saw an explosion of franchising like MacDonalds. Real estate franchising produced Century 21, ERA, Coldwell Banker, Red Carpet, and Realty World. Do you remember Merrill Lynch and Sears? They too were real estate franchisers, but lost millions and closed shop! The franchisers recognized the enormous profit in just obtaining listings. It cost less to produce a sold listing than to produce a sale. Statistics show 67% of listings are sold through the local multiple listing service (MLS) by "outside" brokers. Little money is spent by the broker on actually "selling" that listing. Getting a signed 6 month listing contract with you the seller has a higher probability of return than generating and working with buyers where there is no contract and no guaranteed sale. Unlike listings, buyers can come and go to any broker they want. In real estate circles they say, "buyers are liars" and "if you don't list you don't last". 50/50 Splits The franchisers pushed to increase the commission paid to the listing agency. The split moved to 50/50 during the boom of the 1980's as there were countless buyers but a shortage of listings. Today the 50/50 split remains, giving the listing agent as much commission as the agent producing the buyer! Lawsuits, Realtor.com and The Internet Beyond low inflation and the sameness of real estate firms, there are other important reasons for the current decrease in commissions. The lawsuit began in Georgia and was appealed by the National Association of Realtors (NAR) to the Supreme Court. The Realtors lost. The suit paves the way for public access to Realtor MLS. Soon you will no longer need a Realtor to list your home in Realtor MLS, depriving Realtors of their monopoly on the information. The NAR, is attempting to protect it's own future with the creation of http://www.realtor.com website. This site is personally owned by a group of NAR executives. Secondly, the purchase of the Buyers Brokers Council by the NAR in 1996 lends credence to the prediction that soon all Realtors will be "buyer brokers" representing only buyers and receiving only 3% of the sales price. The listing agent will be replaced by realtor.com and sellers will pay a "fee" to place their property on this "national" site. Right now the Internet delivers many Realtor MLS listings to your home or office PC. Since the information is readily available and no longer exclusive only to Realtors, it's value has decreased. In addition the big franchise firms no longer have an "edge" in mass media perceptions, i.e., their "bigness" is obsolete as the Internet has made the world smaller. Perhaps the most overlooked beneficiaries of low cost home selling are the buyers. The primary reason buyers like to shop for FSBOs is the belief that they are not paying more for the home because of the Realtor's fee. The winners in the new world of real estate will be independent House Express Affiliates delivering the benefits of a Realtor MLS under the supervision of local, experienced licensed broker/owners at a very, very low price. I just need my property in the MLS book." Len Van Orden Homeowner, Bergen County, NJ Back to page 1 of Real Estate MisconceptionsLearn More About Vallure Realty | HUD Home Listings | Helpful Real Estate Tools | Austin Sellers | Austin Area Resources Austin TX Real Estate Agent | Austin Real Estate | Austin Mortgage & Loans | Link Exchange Site Map | Bookmark My Web Page
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