Consumers and FSBO Companies, UNITE!

This blog has been quite astir the past week or so, with some very interesting posts and comments. One comment stands out over the others, as demanding some action. Bruce Hahn, President of the American Homeowners Grassroots Alliance, commented here that many of the innovations being called for won t happen until buyers, sellers, and innovative companies "come together to overcome the political might" of the entrenched full-commission broker industry.

In many ways, Bruce is right. So, I want to be the one to officially sound the call:

1) Buyers and sellers: if you want to have any choice in the type of company or method you use to buy or sell real estate, you have got to stop standing by idly while state governments take away those options through regulating a monopoly into existence!

2) FSBO Companies: you are all fighting over a grand total of 3% of the annual real estate market who use a company like you! Come together, as an industry - cooperate and join forces.

3) Discount brokerage companies: you ve got to ally with FSBO companies for a while. You need the momentum and weight just as badly. The National Association of Realtors does not represent your interests, or the interests of consumers.

Everyone, UNITE

Work together. Most new, innovative real estate companies are trying to be the lone cowboy, riding in to change the world by themselves. I m sorry, but that s just not going to happen. Others are content to just sit still, not rock the boat too much, and collect money for their established niche business. That won t work either, for much longer. Realtors have long since figured out the necessity of grouping together to accomplish something, and that s where the National Association of Realtors came from - with its 1.2 million members.

BUSINESSES: If you proceed like you don t need anyone, you just may be legislated right out of business. You ve all got your own independent lists of properties again, I m sorry, but that has got to stop too. Agents have the MLS going for them. Embrace some of these new consolidated ("MLS-like") services that let you share a database. Make it easy for consumers to find and use you. Don t make them hunt you down.

I suggest Bruce Hopom s American Homeowners Grassroots Alliance (AHGA), as a uniting organization. They have existed for longer than most companies this message is addressed to, and have no competitive interest in this cause, so they can objectively fight for the consumers without being partial to certain businesses. The AHGA already has the resources, expertise and connections to represent the interests of consumers in government, so those things won t have to be rebuilt from scratch. All the AHGA lacks is input from consumers and companies, and they would love to have it.

Give Bruce a call in D.C. and talk to him about what AHGA is doing, the kinds of things they could do with more input and support from consumers and the industry, and about how you can help

If you want to propose a different method of uniting, let s all hear it. Otherwise, tell me how your conversations go with Bruce!

What Percent Are Realtors Paid?

We ll start off answering the questions posed by searchers of The FSBO Blog with this one. Good question!

There is not supposed to be a set commission rate, legally - that would be collaborative coercion, and violates anti-trust laws in our wonderful United States. In fact, a couple decades ago the Federal Government forced real estate agents to break up their shared database (the Multiple Listing Service, or MLS) into independent, local directories - specifically to prevent agents from collectively setting a standard commission. (It worked.)

These days, according to sources such as the Wall Street Journal, Real Trends, Inman Real Estate News, and Newsweek, the national average for real estate agent commissions is somewhere around 5.1% to 5.4%.

Hovering at this level from around 2002 until today (2005), it s down from 6% in the 90 s - and many agents indeed would still like to portray 6-7% as the going rate benchmark.

Even though there s a national average, each locality has it s own average "going rate" - that can vary from 5% to 7% (Rumor has it that in some areas, such as North Carolina, real estate agents have even been starting creeping as high as 8%). Also, even though that s the high/average, it s worth noting that some discount-commission agents will do the exact some work as full-commission agents, JUST AS EFFECTIVELY, and only charge anywhere from 0.1% to 3%.

But the real point to remember is this: commissions are negotiable.

An agent s listing agreement is just like any other contract you would negotiate for, and nothing is set in stone. There are no laws about how much a realtor s commission must be, and it matters little to you what the going national average is; what matters is how much your house would sell for and how much cold, hard cash that would translate to for the agent. If you house will sell for over $1 million, it is expected that your negotiated commission percentage would be a fraction of the percentage on a $100,000 house.