A few days ago I published a post "Is your income below $12,000 per year?"
As Caleb decided not to feature it because it might weaken AR's chances to be acquired by Realtor.com in the near future (just joking Caleb - I know that you don't select featured posts - it is all done by "NAR controlled AR establishment" - OK, just joking again), I decided to post reply from Mark Nadel separately.
The real reason is a reply from Mark Nadel the author of "A Critical Assessment of the Traditional Residential Real Estate Broker Commission Rate Structure" to my post. You can find it as a comment to my original post, but for your convenience I am pasting it below as well. Mark was just about to alert readers that he updated his October 2006 version with the new one, published in May this year. You can read the shorter version of this report by clicking here.
I would like to thank Bryant Tutas for encouraging me to contact Mark directly.
I didn't have time to post my comment yet, but will do it later today. Here is the text of Mark's reply:
"Thanks so much for recommending my article to your readers. By the way, I was planning on alerting readers that I updated the Oct. 2006 version (which had 6 recommendations) with a May 2007 version, which has reduced my recommendations to 4. The new version is at
http://aei-brookings.org/admin/authorpdfs/page.php?id=1332
I also wanted to thank those who commented on the earlier version and helped me improve it.
For people who are interested in the article, but do not have the time to plow through the entire 60+ pages, the Cornell Real Estate Review has published an abridged (still 20 pages) version at http://crer.realestate.cornell.edu/
Also, as Bryant told you, I welcome substantive criticisms of my article - including pointing out any factual errors, analysis that you believe is misleading, even if not inaccurate, and important omissions. If people could be more specific, I would be happy to respond.
Artur, your email to me observed that you "believe in limited regulations, fostering competition and positive selection. Markets have tendencies to straighten themselves, as long as we don't over-regulate them. If we need to regulate - we should stimulate market forces. Preventing accumulation of power in "single hands" is another basic principle that helps markets." I completely agree with that.
Some people have complained about me that I favor too much regulation, but none of my suggestions involve government regulation; all involve educating home buyers and sellers about what services are being offered and what the options are so that they can demand the services they want and try to secure the best price-quality combination.
I think that you are absolutely right to caution brokers to look at what happened to dominant firms of the past when they did not correctly anticipate what their customers wanted. Thus, I believe that if the NAR and local MLSs do not modify MLS rules to enable MLSs to best serve home buyers and sellers, then Google, Zillow, local newspaper databases, and/or Craigs List will displace them as the dominant "go to" site. I also believe that varieties of the fee-for-service business model will be the dominant model in the not too distant future, because, I believe that that model best serves the interests of home buyers and sellers. Therefore, if the NAR and realtors do not offer those options, than the banking industry, Zillow, or someone else with the financial muscle to tangle with the NAR, will base their entry strategy on educating consumers about how that pricing structure serves them better.
Artur, I also completely agree with you that there are too many minimally qualified brokers and agents. I would like to see new agents specialize in a particular task or geographic area so that they can offer a valuable niche service that is not already available buyers, at least not at the quality that they offer it. If they can not justify their entry in this way than I would prefer to see them enter a different industry.
Anyway, I will be off on vacation on Friday, 8/13/07, but I will try to check back here and try to respond to any specific comments or responses to my revised article.
Thanks again for writing about it.
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