Department of Justice Insinuates Real Estate Buyers and Sellers Lack Intelligence
In its infinite wisdom, the US Dept. of Justice has created a website to warn the public that the real estate industry is "non-competitive!" Where have they been? They are claiming that new models of real estate companies are having difficulty competing. Of course they are! It is a competitive business!! The DOJ is making the same mistake others have made in thinking of real estate transactions as commodities, like buying plane tickets or books. Every house, and every transaction is different. Paying a professional to guide someone unfamiliar with real estate through a transaction is worth every cent.
For our government to take sides and promote one type of business model over another is completely inappropriate. The DOJ even goes so far as making judgments about pricing, without understanding the true costs of a real estate transaction. (See my comments below regarding this subject). I am outraged by this, and you should be, too. I encourage you to email your Senators and Representatives to demand them to reign in the DOJ. Did the DOJ do a website to warn consumers about car dealers, stock brokers, or plastic surgeons? I can argue that consumers need more protection from those industries.
Here's another way to look at this: There are many different types of retail stores including Wal-Mart, Target, Bloomingdale's, Nordstrom, and many others, including online stores. Customers choose the level of pricing, quality and service they want and shop accordingly. This DOJ website is essentially the same as telling the public they are better off if they shop at Target instead of Neiman-Marcus, and telling the department stores how to price their merchandise. What happened to the consumer making choices for themselves based on their own wants and needs? Our government is essentially saying that consumers in general are not intelligent enough to competitvely shop for services.
The one saving-grace about this website is that it is very difficult to find. I challenge you to find it at: http://www.usdoj.gov/
Scroll down to see some of my comments on this subject from previous posts.
· The MLS system is NOT exclusionary.
The MLS system is open to everyone who pays the fees and plays by the rules, just like the New York Stock Exchange. The MLS was created in the 1950s to bring order to a chaotic market where buyers had to call or visit every single real estate office in the area to find out what was for sale. The MLS motivates Realtors to publicize their sellers’ properties to the world because they know they will get paid if the transaction is successful. This benefits buyers by creating an orderly marketplace where they can view everything for sale.
· The abundance of real estate information on the Internet does NOT reduce the true costs of a real estate transaction.
The truth is that real estate commissions will never be lower unless the most of the customers want to do most of the processes of the transaction themselves (research tells us that they don’t), real estate offices and personnel are not needed (research and experience of new models say they are), and most importantly, buyers and sellers of real estate take full responsibility for their own non-disclosures, mistakes, forgetfulness and changes of mind. In my 30 years of experience, it is this last point that creates the largest costs of real estate transactions.
· Buying real estate on the Internet is NOT like buying books, airline tickets, stocks or computers online.
Those items are commodities: a plane ticket from Dallas to San Francisco on American Airlines is virtually the same as one on US Airways. One hundred shares of Oracle stock is the same whether it is purchased through Etrade or Morgan Stanley. However, a resale 3 bedroom, 2 bath house with a fireplace is not a commodity. One is usually significantly different from the other – even if they are in the same subdivision by the same builder. Also, if something breaks on the Dell computer you bought online, it is pretty easy to return it and get it fixed. Try that with the house you bought over the Internet. You might then discover why the good real estate professionals get paid what they do.
For our government to take sides and promote one type of business model over another is completely inappropriate. The DOJ even goes so far as making judgments about pricing, without understanding the true costs of a real estate transaction. (See my comments below regarding this subject). I am outraged by this, and you should be, too. I encourage you to email your Senators and Representatives to demand them to reign in the DOJ. Did the DOJ do a website to warn consumers about car dealers, stock brokers, or plastic surgeons? I can argue that consumers need more protection from those industries.
Here's another way to look at this: There are many different types of retail stores including Wal-Mart, Target, Bloomingdale's, Nordstrom, and many others, including online stores. Customers choose the level of pricing, quality and service they want and shop accordingly. This DOJ website is essentially the same as telling the public they are better off if they shop at Target instead of Neiman-Marcus, and telling the department stores how to price their merchandise. What happened to the consumer making choices for themselves based on their own wants and needs? Our government is essentially saying that consumers in general are not intelligent enough to competitvely shop for services.
The one saving-grace about this website is that it is very difficult to find. I challenge you to find it at: http://www.usdoj.gov/
Scroll down to see some of my comments on this subject from previous posts.
· The MLS system is NOT exclusionary.
The MLS system is open to everyone who pays the fees and plays by the rules, just like the New York Stock Exchange. The MLS was created in the 1950s to bring order to a chaotic market where buyers had to call or visit every single real estate office in the area to find out what was for sale. The MLS motivates Realtors to publicize their sellers’ properties to the world because they know they will get paid if the transaction is successful. This benefits buyers by creating an orderly marketplace where they can view everything for sale.
· The abundance of real estate information on the Internet does NOT reduce the true costs of a real estate transaction.
The truth is that real estate commissions will never be lower unless the most of the customers want to do most of the processes of the transaction themselves (research tells us that they don’t), real estate offices and personnel are not needed (research and experience of new models say they are), and most importantly, buyers and sellers of real estate take full responsibility for their own non-disclosures, mistakes, forgetfulness and changes of mind. In my 30 years of experience, it is this last point that creates the largest costs of real estate transactions.
· Buying real estate on the Internet is NOT like buying books, airline tickets, stocks or computers online.
Those items are commodities: a plane ticket from Dallas to San Francisco on American Airlines is virtually the same as one on US Airways. One hundred shares of Oracle stock is the same whether it is purchased through Etrade or Morgan Stanley. However, a resale 3 bedroom, 2 bath house with a fireplace is not a commodity. One is usually significantly different from the other – even if they are in the same subdivision by the same builder. Also, if something breaks on the Dell computer you bought online, it is pretty easy to return it and get it fixed. Try that with the house you bought over the Internet. You might then discover why the good real estate professionals get paid what they do.
posted by Realty Executives Int'l at 2:42 PM
2 Comments:
Rich,
You (I suspect deliberately)miss the DoJ's point;
They are not suggesting that all consumers are better off buying at Walmart but that the public as a whole is better off when they have the option of buying at Walmart, Bloomingdales, Nordstrom, etc.
The problem with the real estate industry today is that there is no (significant) middle ground available to consumers, largely because of the active resistance of NAR, real estate boards, Realtors, etc. Consumers can either choose the (hopefully) high quality, (definitely) high price services of a Realtor or they can go FSBO and risk making a mistake with the most significant financial transaction most people make in their lifetime. You suggest that the government is implying customers are too stupid to seek out lower prices, I'd be interested in you naming two or three lower priced options (other than FSBO like) that are available to consumers in the markets you serve.
Your suggestion that gas prices, E&O insurance, etc., are sufficient to account for the increase in the (inflation adjusted) price of Realtor services over the last decade or so is simply untrue. These items have certainly risen but at nowhere near the double digit annual growth rates of Realtor fees.
You also suggest that homes are not commodities like stocks, books, etc. This is partly true, a share in AT&T is a share in AT&T but the difference between one telecom stock and another (say Sprint) are significant let alone the differences between a telecom stock and say a REIT. Delivering good investment advice (lots of which is now delivered over the Internet) is at least as complicated as finding the right home. Consumers looking for investment advice however have a wide range of price/quality options available to them from pure self service to 24/7 on demand advice from a team of professionals.
Hopefully the DoJ will take action in busting the current cartel structure of the industry by forcing "exclusive right to sell", eliminating rebate and minimum service laws, etc. But I'm not holding my breath, consumers only get ripped off by Realtors once every five or ten years or so, Realtors milk the public daily, so I suspect you'll write more letters than I will.
Mark
Mark, I appreciate your opinion, and you asked to know 2 or 3 options available to you that mitigate costs. #1. By law, all commissions are negotiable. All of our Realty Executives agents have the right and ability to negotiate fees with sellers and buyers as they see fit. Menu pricing is not uncommon with them. I have even seen them negotiate to give rebates back to buyers and sellers.
#2. Menu pricing exists with other companies like Help-U-Sell and Assist-to-Sell, and there are many "Do-It-Yourself" companies in every community that are a step above FSBO.
#3. Some internet-based companies like Redfin and Zip could also be good alternatives.
My point is that all of these options exist in the market and many have been there for a long long time. The DOJ doesn't need to get involved in our free enterprise system.
Without the "exclusive right to sell", Sellers have no specific advocate for them and their property. Seller's would get very little service. The real estate marketplace is full of alternatives for the consumer to choose from at many different levels of pricing and service. The government does not need to insert itself.
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