Is your income below $12,000? - Important update from Mark Nadel

By
Real Estate Broker/Owner with Cimpler Real Estate, Inc. CA BRE# 01330941

Update

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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Rainmaker
434,477
Adam Brett
The Adam and Eric Group - Fullerton, CA
The Adam and Eric Group, Fullerton's Finest
I completely agree with the statement that there are too many minimally qualified brokers and agents. All to often problems arise from the non-professional.  The DRE should mandate more schooling and take away the open book nature of the exams.  Realtors can make a lot of money - more so than computer engineers working for an aerospace firm.  But who is more educated?
Aug 13, 2007 01:41 PM #1
Rainer
42,460
Artur Urbanski
Cimpler Real Estate, Inc. - Burlingame, CA
Helping property owners to maximize property value
Adam, thank you for your comments. I don't think that education should be mandated. Obviously something is wrong if there is no enough pressure on service providers (us) to provide expertise and skills equal those of engineers.  But this will change, as I don't believe it will be sustainable.
Aug 13, 2007 03:49 PM #2
Ambassador
1,522,945
William Johnson
RE/MAX Associates - La Jolla, CA
San Diego Real Estate Voice, GRI CRS e-Pro CDPE

Artur, I agree in part. I do think the standards are different in other areas. You are used to California standards which are hideously low. Mandate, an interesting word. Not sure.

I do believe that there should be an apprentice period of 2 years. They licensee can work as an agent but half of the income goes to the trainer and the one that will carry the joint liability. A lot ofpeople will consider that not worth their time because it is not a career commitment, but an income desire. They are different but eventually experience and passion develops and they can meld together. ( optimal)

Aug 13, 2007 04:38 PM #3
Rainer
42,460
Artur Urbanski
Cimpler Real Estate, Inc. - Burlingame, CA
Helping property owners to maximize property value
Hi William - that's a good idea. I didn't mean that the education bar shouldn't be raised higher. I was trying to say that it would be better if the need for education was market driven and not just mandated by the state. The entirely different question is how it could happen. Thank you very much for your comment, especially that our pass has not crossed for a while. I continue to be impressed with your steady climb in the AR ranks.
Aug 13, 2007 05:15 PM #4
Rainer
60,557
Dan Homan
Coldwell Banker Ellison Realty, Inc - Ocala, FL

Art -

Another great post!

I think we (our industry) have created a monster.  Real Estate practice as we know it is about to change forever and we are going to have very little to say about it.  In your last few posts you have addressed major problems that are not going to go away on their own and since our industry leadership has refused to step to the plate and clean house, it is being done for us by those outside the industry. 

The main problem is that as an industry we have transformed a licensed profession to the point that we have the reputation of hucksters and con men.  We have degraded to the point that by and large that the public regards us as inept, lazy and greedy.  Just look over some of the posts in AR on why we deserve the commissions we charge.  The justifications usually fall into several categories:

I get up early, am on the phone all day, work hard and even have to miss dinner with the family to show houses.

Here is a list of all the things we do in a transaction, everything that could go wrong in a transaction and just try doing this yourself and see how you like it.

Redfin and other discounters stink.

Say what?  With a "tried and true 100 year old business model" could we do a little better?  The public is tired of hearing this recycled garbage, and new business models have seized the day.  Instead of trying to compete we are reaching into our 1950's bag of tricks in hopes of finding the silver bullet that will make the competition go away.

When I first joined AR I wrote a post (no I am not looking to spam you, I am not including any link and you can delete this comment if you feel it inappropriate) regarding brokers taking ownership over their listings from the point they are taken - not just when an agent goes to work for another brokerage - this by the way is in accordance with state laws - and I was flamed by brokers who said agents wouldn't stand for it and agents who said they wouldn't work for a broker who took any ownership over the listings.  This is indicative of the problems with the industry as a whole.  Ethics are selectively followed, state laws are ignored, and for new agents it is like the Wild West.

Although entry into the industry is too easy, any changes would grandfather in the establishment and there would be no meaningful change.  The laws would change, but for the old guard it would just be business as usual.

Sorry I went so long.

Aug 14, 2007 03:55 AM #5
Rainmaker
1,136,235
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time
Well Artur look at that? A quick response from Mark. Very good. I'll pop over to the other post and check it out.
Aug 14, 2007 04:30 AM #6
Rainer
42,460
Artur Urbanski
Cimpler Real Estate, Inc. - Burlingame, CA
Helping property owners to maximize property value

Dan, thank you very much. I certainly believe that we we are going to see major changes very soon, but also that the time is right for"market" to take car of it by itself.  I am explaining way in my reply to Mark Nadel's reply to my original post. Please take a look and tell me what you think.  I believe that the business has a chance to cure itself. Internet, an influx of new talent to real estate after the dot com collapse, customer frustration, DOJ law suite scare (hopefully the scare is enough, as we don't need judges to run real estate!) and a few other factors created environment for change - or at least it feels they did.

Regarding the broker ownership over the listing I believe that broker's power comes from "happy agents".  Yes, legally broker owns all listings, but it is definitely catch 22. I will shoot you an email on this issue closer to the end of the week.  As usually, great comments Dan.

Aug 14, 2007 06:03 AM #7
Rainer
42,460
Artur Urbanski
Cimpler Real Estate, Inc. - Burlingame, CA
Helping property owners to maximize property value
Brtant, Mark sent yet another reply so check it up. Thanks.
Aug 14, 2007 06:06 AM #8
Rainer
130,493
Billnulls Blog Florida Realty Professional
Charles Rutenberg Realty - Clearwater, FL
AHWD
Having been a teacher in my former life, I personally think that there is no such thing as too much education! My partner and I take all the classes we can at the local board of realtors when we are not out with customers! The more knowledge the better and the more efficient we are at what we do and love..... selling houses!!!
Aug 14, 2007 06:08 AM #9
Rainer
42,460
Artur Urbanski
Cimpler Real Estate, Inc. - Burlingame, CA
Helping property owners to maximize property value
Bill and Barbara, we are living in the age of constant change.  Our parents had a single job all their lives. Most of us had to change it several times and our children might have to do it every 5 to 10 years - just to keep up with changes.  Real estate was providing a "sheltered" environment for many many years. It even survive the dot com era unscathed. However, it is not the case any more.  So, education and getting new/more skills are the only way to stay afloat. Thank you very much for your comments. Good luck and enjoy selling houses!
Aug 14, 2007 06:15 AM #10
Rainer
147,824
MAUREEN STACCATO
Springfield, MA

Open book nature of the exams? When I went to school, we had a hard core instructor that went by the book and had given us a 50 question quiz along with much to study for the practical and state exam. Maybe it is not the same from state to state but it was not an easy task in my location.

I agree that continuing education really is the key to being on top of your profession and game. I feel that it is imperative to continue to educate yourself so you can always be with the current trend as well as major changes in the real estate industry.

Aug 21, 2007 02:09 PM #11
Rainer
42,460
Artur Urbanski
Cimpler Real Estate, Inc. - Burlingame, CA
Helping property owners to maximize property value
Maureen, thank you for your reply.  There is no doubt that open books are a "half measure" at best. I am not sure if we should "mandate" more education or let "market place" to eliminate those who cannot keep up with changing clients requirements and expectations.  What do you think? 
Aug 21, 2007 04:50 PM #12
Anonymous
Rubel




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Rubel



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Jul 30, 2012 07:03 PM #14
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