Home : Blogs : Chichi Ahia : Chichi's Blog

The Last Stand of the 6-Percenters?

This was the title of an article in the New York Times a few months ago predicting future trends in Real Estate Commissions.

"The Internet has radically changed the way consumers buy books and airline tickets, trade stock and learn news. But the real estate industry has resisted change - and protected its commission structure - by controlling the information on its Multiple Listing Service database of properties for sale.

Traditional agents still firmly control the M.L.S., which allows all participating brokers to view almost every home for sale in a particular area, even those being offered through competitors' agencies. But the typical 6 percent commission, paid out of the seller's proceeds and split between the seller's and buyer's agents, is under attack because, as economists note, it does not serve consumers well."

Read the Article Here

While I did find this article interesting, I have to disagree with very many of the assertions. Bottom line, representing a client is about more than taking them to a few houses or sticking a sign up in a yard; it's about REPRESENTATION. In my opinion, engaging in a real estate transaction without a Realtor is very much like going to trial without an attorney. Sure, you can probably get through it, but the success rate is substantially lower. I can't count the number of clients that I have protected from problematic issues that didn't even make their radar. A Home is one of the most valuable assets of most Americans. It just makes sense to protect your investment by consulting with a professional.

Posted by Chichi Ahia on 11/18/2006 12:41 PM

Comments (22)

22 Comments on The Last Stand of the 6-Percenters?

NOV

2006

The Federal Government enacted the Sherman Antitrust Act which covers collusion in commission structures.

As you were taught in your licensing class, commissions are discussed in your office and your office only.

Commissions are fully negotiable between Seller and Broker. The negotiated commission is what those parties have agreed to accept.Mangp

Chichi its great to see another new face and another new persepective. i agree with you its all about the representation of your client.

David, I do understand that commissions are negotiable. But the new trend, according to this article, other articles, and the innumerable emerging discount brokers, is to dispense of commission all together and bypass the "middleman" (Realtors) by allowing sellers to pay a one time fee to advertise their home on the internet ("the new MLS") thus (in their opinion) eliminating the need for Realtors all together. That is the point of this article and the point that I was refuting.

ChiChi, I am in agreement with you 100%. I justed posted a similar post right above you. BTW there is nothing in ths post that even comes close to violating Anti Trusts laws. Welcome to ActiveRain. I will look forward ot reading more of your thoughts.

"Hi ChiChi"

Welcome to AR...We are pleased to met you!

If you have any questions or concerns please post them.

You will find the members here will be more than happy to give you a hand.

Here is a SECRET on how to get your blog going in Active Rain...Shhhhh!

It's a SECRET...:0)

TLW "The Lovely Wife"...Shhhhhh...I Always Have Secrets...ROAR!

Chichi, what a neat name.

Several of my current clients started out as FSBOs or what I like to refer to as UNREPRESENTED Sellers. They listed with me after multiple frustrations. One was under contract for several months and the buyer just backed out. I have been very fortunate in this business, work by referral and have a waiting list of sellers. Commission is not an issue. There will always be discount traveling and there will always be first class travel.

The nice thing is we have the choice of how we want to work and with whom we chose to work with.

www.HomeRome.com

Baltimore,Md

I had a friend who just said there should be one big website that everyone should use and that realtors shouldn't exist. What they feel to realize - we as realtors typically bring qualified, serious buyers into people's homes. We serve as an excellent filtering system. Without such a system, all sorts of strangers, very unserious, potentially, would be stopping by. It would basically turn into a schmorgesborg (spelling?) of open houses.

Chichi,

Thank you for reminding us of those media predictions that did not materialize.

Sellers will be selling their homes through the help of the internet and buyers will also find their homes on the internet, completely eliminating real estate agents at least the full service ones and putting more money in the pockets of consumers. Well that did not happen, did it?

Professional real estate agents who work ethically and honestly will always be in demand, especially now that the industry is back to normal.

Strange to notice that in the late 1990s, those same people also predicted the end of the full service investment brokerage firms being replaced by the discount investment brokerages. Well, well, well!!! Today, many of the discounters have merged and the ones that survived are offering more and more traditional services and the full service investment firms are still there making themselves and their clients money.

Discount real estate brokerage, FSBOs, and even non-representation brokerage (I call them MLS FSBOs) are now a part of our industry. There are reasons sellers go to them and sometimes, their limited services do work for certain sellers. Our goal now is to set us apart from them with our professionalism, services, and network like these.

Thanks to all for your comments

Sagine

The article you link to here, Chichi, mentiones BuySide Realty, a 75% rebate provider for buyers they represent, an internet-based company. I mentioned a concern (for different reasons) the other day about banks becoming real estate brokers (my first featured blog post, thank you ActiveRain). The two intersect with Chase, one of the largest banks around. This article is an old press release about the teaming of Chase and BuySide.

The other day I heard that Chase's site had an offer for an 80% rebate (an extra 5%) from BuySide through the Chase website. Apparently, though, they weren't offering it on the main site, just for customers that were logged on already. I no longer use Chase for my checking or money market stuff, but I kept my mileage credit card through them. I logged on and can't find it, but that might be due to my not having my premier platinum checking status there anymore.

I'm not concerned about the internet taking away my value proposition - I think it just strengthens it to anyone that goes through the other route. If few or no FSBO sellers ever want to FSBO again, I wonder how soon the studies will start showing how few internet brokerage clients won't ever do that again either. That said, ignorance is bliss and I suspect the majority of folks that get a bad deal through these services won't realize that they got a raw deal (when they do - even a blind squirrel finds a nut sometimes, so these services are bound to get some deals right, aren't they?).

All I see this doing is driving out of the business those that don't really belong in it to begin with - and it's about time. Don't forget, too, that while I may be a big-city guy, guys like Broker Bryant aren't in the same kind of market. Is ZipRealty really going to replace a guy like him in a small market? No way I say.

In the corporate real estate world the investment market nearly panicked a decade and a half ago with the onset of virtual officing, when the "experts" predicted something rediculous like 50% of the people in the country were going to be working at home within a decade. Guess what, that didn't happen, and the internet was a major component of enabling that (then in its infancy).

I think you get what you ask for and what you deserve. If you cant sell you fee what else cant you sell.

Chichi.... I welcome you to Active Rain also. A good post here and I just read Bryant Tutas's blog which is similiar to yours. I have also written a few blogs recently, one that talks about these discount borker shops. Take a peak.

I also like Gabriel's comments. I agree... yes, the internet scared a lot of people...made shopping easy online....clothes, toys, cars, even houses. But there is still something different when buying a car online or visiting a house. Sure, you can go test drive that car....then find a great deal online. But you can't do the same with a house. Besides.... when buying clothes, I need to see them face to face. It's just doesn't feel the same.

Again...welcome and good topic of discussion.

Chi Chi cool post, well written and clearly stated! Welcome mto Acive Rain! It also gets down to what Lenn Harley said in her post today: let's market our experience and let people know what we do. As it relates to this post, let's TELL people we can negotiate through the closing which is a slippery slope way too often. Can't wait to read more of your posts!

welcome Chichi,

your post is great and compliments a few others today. Technology is growing in leaps and bounds-the internet is pretty much an open space with little or no regulation.

I am literally afraid of all the overnite websites luring the innocent in. Scams will become more relevant. It is coming.

A smart lady in my office- a Realtor decideds to buy a new car and put her conv. BMW out front w. of course a for sale by owner sign! ( we all laughed-she knows better).

Anyway- thru a fsbo type car trader magazine she advertised in she gets an email this week. He writes from a yahoo acct.

He supposedly has a client who lost out on a car and he already has a certiied check in hand for this client of his. Problem is her car is 7,000 less than the check. he wants the difference refunded to him as it is his finders fee. he will send someone for the car after he gets his refund.

Smell funny ??? Scary part is she got all excited and really thought she had a buyer- just didnt know how to technically get the sale executed.
Well, she went to the bank with the email -they saw many red flags in the note.Tthey said many cert checks are bogus. She could deposit the check,wait three days for the money to clear then begin title exchange and pay out the difference.

Go back and see if that is acceptable for the guy.

Guess what ? yep- he disappeared. It is a scam. She reported it to the magazine to warn other sellers and they already knew all too well about him (and others.)

Back to my point- it isnt too far off for a fsbo to be taken to the cleaners with a "buyer' pulling the wool over them. Especially in an internet scenario.

We earn our pay. We need to stand up and make some noise.

Comparing real estate brokerage to selling airline tickets show the ignorance of the writer, typical of the over rated New York Times.

What the NYT cannot tolerate about the real estate industry is the system of free enterprise exampled by negotiated commissions, supply and demand and other capitalist market driven businesses.

Ignore the NYT. They are an anachronism. The real estate industry will never fit into the NYT agenda.

Chichi,

WELCOME to Active Rain! Dig in and get your feet wet :)

I love the "In my opinion, engaging in a real estate transaction without a Realtor is very much like going to trial without an attorney"..... IT's SOOO TRUE !

Welcome to AR Chichi. The mortgage company that I work for does a lot of radio and some TV advertising. In ALL our ads we emphasis the need to work with professional Realtors. Loans on Borrowers who are not working with a Realtor can be an adventure, lucky for me I have only had a couple. If it wasn't for me telling them that they at least needed to be talking to an Attorney right away, they would have been a circus act. On one of them the seller was even using one of those sales contracts that you buy at Staples. I had my Borrower take it to an Attorney I recommended and he filled in all the holes.

The biggest problem is they don't have a clue as to what they are doing, and no one to hold their hand through the process. The hand holding alone is well worth the price of commission.

Excellent post, Chichi. I'm sure that for a predetermined niche, a flat fee for services business model makes complete sense. That seems to be the revolution in mortgages, can real estate be that far behind?

The flaw in most of these business models is not how they charge. It is the amount of liability they are willing to take on.

How many messy transactions have you run into because the agent on the otherside is not providing full service.

NOV

2006

Welcome Chichi! Good job on the gold star, there! I will say here, what I say often ...

I welcome competition. It will only make the good agents better and the so-so ones *disappear* . Also, there is a cup of tea for everyone, I guess. However, we have a lot of REALLY good agents in my city, and Discounters do not have much of a market share here. My guess is that they will thrive better where agent reputations are lower...?

Cheers!

Welcome to Active Rain Chichi. Great blog entry about an interesting article!!!

I am seeing the fees stay pretty strong. The sellers are always asking for a discount, but sticking to my guns seems to work. Most of my bank clients are willing to pay top dollar. At auction, we have been turning down quite a few deals since we will not take the job if the seller is not willing to pay for the marketing up front. It has always been difficult to get a consumer who is used to the traditional model of the Realtor paying for everything to write that check. Now it is becoming even more difficult. That is the only real change I see though.

NOV

2006

Nice to see you on ActiveRain ChiChi. And it is always interesting when others are letting you know and trying to regulate how much your time is worth, how much you should earn. The bottom line is volume though, the money will take care of itself.

Leave a response…

Name:

Email:
(optional)

Comment:

What does the graphic say?