Just about two weeks ago I published post "Call for Supplanting NAR", where I commented on the post of Greg Swann , the Bloodhound Blog editor under this title. I mentioned that I am not convinced to the proposed idea. I share my doubts with Mark Nadel, the author of "A Critical Assessment of the Traditional Residential Real Estate Broker Commission Rate Structure". Mark replied and provided very interesting comments to Greg's idea. Here is Marks response (he authorized me to share it):
Thanks for your email and for publicizing my article again.
I had not seen Greg Swann's post about supplanting the NAR with an entity setting much higher standards for brokers. Although I am in agreement with much of what Greg said and your response, I have a different thought.
I think that it would be very possible to create an entity to rate brokers and agents relatively objectively. If Greg wanted to follow the Underwriters Laboratory (UL) model of a minimum "safety standard," then I think that this could be achieved, albeit imperfectly, by using an "auditor" model. Brokers would pay an independent auditor - created along the models of accounting firms - to carefully review the skills, performance, etc., of the broker and his/her agents and the broker would receive a "certified" rating if s/he passed.
I think the model would be much better if the binary pass-fail ratings were replaced by one with 3 or 4 rating levels, say fail, satisfactory, above average, superior (top 10% or 5%). I think of the ratings that Standard & Poors or Moodys give to municipal and corporate bonds. (Yes they make errors (see recent rating reduction due to mortgage-backed bonds) and their can be conflicts of interest, but nothing is perfect).
The key to this working would be for brokers and the media to convince consumers of the value of using a broker with an "above average" or "superior" rating by the auditor. I think that if brokers believed that top ratings would strongly influence the brokers that home buyers and sellers chose, then those brokers would be willing to pay for the auditor to provide a rating. Meanwhile, since the auditor would only be valued if it was able to maintain its credibility in the market, it would have a strong incentive to give accurate assessments (If it gave everyone inflated ratings or favored one type of broker, e.g., traditional, then it would, hopefully, be trashed by the independent consumer media, lose its credibility and go out of business).
I would also like to see such rating firms offer to rate brokers and agents separately on their set of a la carte services to enable those who offer superior service in one area, e.g., pricing, negotiations, cost-effective closing, staging, etc., to advertise that specialty to consumers.
While I - along with a long list of brokers, commentators, etc.- strongly support decoupling buyer and listing broker commissions, I see that as a completely separate issue.
Artur, thanks again for bringing this issue to my attention and feel free to share this email with others if you think it is worth sharing.