Below is an article I saw on CNN/Money. The debate is whether Realtors fix commissions and lobby for laws that make it harder for Discount Brokers to offer services. I’m not happy to see politicians involved in this debate. It is humorous that politicians, who perform shameful funny-business with money more than any other class of people, feel qualified to scrutinize the appropriateness of the compensation structure of the highly competitive real estate industry. The real estate industry is already very highly regulated by laws designed to protect the public, and the real estate business is extremely competitive. Ask any of the thousands of agents who wash out of the business each year.
The current system works well. Buyers and Sellers can, with little difficulty, find Realtors who are willing to negotiate lower commissions, or offer Limited Service arrangements, if that is what the Seller or Buyer deems most important with the agent they hire. There is no price fixing. We don’t blacklist Discount Broker listings as some suggest. (I’m going to write a separate blog article on the fallacy of this assertion)
We have several Discount Realtors in Austin (search Google for “Austin Discount Realtor” if you’d like to consider hiring one). These companies and agents have captured little market share in Austin though. For example, the most visible Discount Broker in Austin, One Percent Realty, ironically, has 1% Market Share in Austin. This despite massive media advertising by One Percent, including a barrage of radio ads that disparage traditional full service Realtors and portray us as sleazy, greedy money-grubbers who drive BMWs and own Power Boats. See the One Percent TV ads on the One Percent Website. Their marketing stategy seems to be a combination of stirring ill will toward traditional Realtors, and promising big savings to potential customers.
The owner of any business must decide what his unique selling proposition will be. Realtors are no different. Some attract customers with lower fees; some with exceptional service; some with unique and specialized market knowledge; others have very effective brand identity and marketing campaigns. Some industries do limit competition and create barriers to entry (the medical profession for example), but there is perhaps no business easier to enter than real estate. In Texas, two to six weeks of classes will qualify most people to take the real estate exam. More than half of those who take the test flunk the first try, but most pass by the third attempt.
Real Estate customers are free to select from a vast sea of agents who want to earn your business. I’m going to write more about this subject later on, but for now, the article below does a pretty good job of outlining what people are saying about this topic.
July 26 2006:
NEW YORK (CNNMoney.com) — The fight over competition in the real estate industry went to a new battlefield this week as representatives of consumer groups, brokers and government agencies clashed before a House subcommittee.
Few participants pulled any punches.
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