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Architectlisting.com provides links to architect information, building designers, religious structures, building product, house plans, lanscape designs and more across U.S.A. |
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Realtor
Community Under Investigation by the Feds
Until recently, the only option a seller had to engage
a real estate broker was to pay a fixed-rate commission.
Well, not really... commission are not fixed by law,
they are fixed by custom. Or, are they really fixed
at all? That's the question the Justice Department is
looking into.
Price fixing has been illegal in the United States for
a long time. But, as a customary fashion, an industry
often ends up looking like a "fix" because
all the players want to look competitive. Hence, the
"standard" 6% listing fee. Until recently,
virtually every real estate broker quoted 6%, and if
a broker advertised less than 6%, the community was
in shock and often shunned him.
Buyer's agency is also something relatively new, that
is, an agent who represents the buyer. |
If the buyer's agent brings a buyer
to the table and the property is listed by a different
agent, then the 6% commission is split, generally 50/50
or something like 2.8% to the buyer's agent and 3.2%
to the listing agent. Since most buyers are procured
by the buyer's agent, the listing agent's role has been
greatly diminished in recent years.
So, one day sellers started asked the question, "what
do I need a listing agent for?" The answer to that
question is simple... you need to get your property
on the Multiple Listing Service (MLS), otherwise you
aren't likely to get it sold. After all, most buyer's
agents look to the MLS for properties for their clients.
Many listing agents smartened up by offering a limited-service
product for less. The flat-fee broker simply places
your property on the MLS for a flat fee, rather than
a percentage of the sales price. In some markets, some
agents are doing it for as little as $250. The buyer's
agent still gets 2.8% for bringing the buyer to the
table, but the seller must coordinate the showings with
the buyer's agent, review the purchase offer and complete
the sale without the assistance of the listing agent.
The fact is, most real estate investors are (or should
be) savvy enough to use do all of these tasks without
the assistance of an agent.
SIDE NOTE: AGENT VS. BROKER VS. REALTOR. In most states,
one must be licensed as a broker to list property. An
agent works under a licensed broker. A realtor is a
broker or agent who is a member of the National Association
of Realtors. Most agents and brokers are Realtors, as
well as members of a local board. Throughout this article,
I use the term "broker", "realtor"
and "agent" synonymously.
So, what's the problem? If you want full service, you
pay 3.2%, and if you want no service, you pay just a
few hundred bucks and do the work yourself. Sounds much
like the stock brokerage industry, doesn't it?
Well, it seems that the "gold old boy" network
doesn't much like the discounters. I don't blame them,
because it hurts their business. But price fixing is
illegal, isn't it? That's what the Justice Department
is looking into. According to CNN Money, a federal investigation
alleges that full service agents in Tulsa Oklahoma engaged
in "boycotting", that is, refusing to show
their buyers properties that were listed by discount
listing agents. The Attorney General has also sent letters
to lawmakers in Oklahoma and Texas, urging them to reject
proposals that would effectively prohibit brokers from
engaging in discount fee services. These propsed laws
require brokers to provide certain services that discount
brokers would normally forego.
The Realtor community claims that the public is being
protected by requiring agents to provide these services
because the consumer might make costly mistakes doing
it on this own. Sounds reasonable, but why do the Feds
allow discount stock brokers? The answer, to me, is
simple: don't treat consumers like babies, let them
make their own decisions. Sure, many consumers will
screw it up, but that's their choice. The state bars,
backed by lawyers, tried to outlaw software programs,
do-it-yourself kits and legal form publishers, but the
consumers won the battle. In reality, the consumer is
more likely to make mistakes doing their own legal documents,
but that's their choice. A smart consumer who does not
feel comfortable preparing his own living trust will
pay a lawyer to do it.
Personally, I'm all for the discount listing services,
especially for investors who know what they are doing.
If a homeowner does not feel comfortable using a flat-fee,
no service broker, they are free to pay the full commission
to get the full service. |
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