Jim Walker (look up also his Trulia Voice profile) published the following question/request on Trulia Voice earlier today: Agents! Do you know what Nadel's 4 questions are? Read his 66 page polemic to learn to defend yourselves.
For those who don’t know, Mr. Nadel is an attorney/policy adviser with the federal government who published a paper on real estate commissions. Jim sees it as a must read for those who “want to understand the attempts to undermine real estate brokerage, in order to understand the rate cutters arguments, or to defend your profession”. I agree with Jim on the “must read part”, however totally disagree with him on why we should read it. It simply is a good reading for everyone involved and/or interested in real estate, so thank you for bringing it up. Mr. Nadel’s paper reads very well, independent on if you agree or disagree with his views on commissions. As a matter of fact Mr. Nadel is making a lot of great comments.
What Mr. Nadel doesn’t understand is what he cannot feel – the pain of doing real estate business. He cannot – as he is not a real estate practitioner. The current real estate price structure is a “historical accident”. The commission pricing sounds great (and is great), but only for 10% of agents who own 90% of the market. 90% of agents sells less and earns less (they own the remaining 10% of the market). They also seem to follow the NAR lead not realizing that it might be doing more harm than good. According to the California Association of Realtor statistics, the average income of a California agent is $12,000 (twelve thousand dollars per year). This means that an average agent sells a fraction of a house per year. Can you expect a quality of service from someone who does it once in a while (sells one house every two or three years)? The problem is that everyone tried to become an agent or a broker – as there are too many brokers as well. The lack of serious license requirements led to the “overproduction” of agents and brokers licenses. More agents and brokers - more competition, so it should be good for the business, right? Unfortunately not -a lot of competition between agents and brokers is just for the the 10% of the market. It is very difficult to dislodge those who are in business for long time and own the 90% of the business. Are these 10% of agents and brokers best for the clients? Not necessarily – sometimes yes and sometimes no. They are simply in the driving seats and they don’t have much competition.
So why should we defend NAR, its policies and the status quo it created? For overpopulating the field by weak agents as result of not sufficient license requirement? For not being able to create clients respect to our profession and us, agent and brokers? For leading us blindly to the potentially disastrous low suit by Department of Justice? Yes, they are good things about NAR activities (Good and Bad about NAR: Can We fix it? and Can We Fix NAR - Sequel Part 2), but we not always remember good things once disaster struck. Do you remember Enron and all the great things it did (what were they?) or you remember the largest “corporate disaster” in history, that wiped out savings of thousands of its employees? Do you remember another great monopoly, AT&T (if you have more time – read this)? Today it is a part of a former Baby Bell, Southwestern Bell, as a result of many disastrous management decisions following the law suit by DOJ. Organizations, such as AT&T and Enron, created management power and arrogance that lead to their destruction. Will the same happen to NAR? Can actions of a trade association be compared to those of corporations? Management power and arrogance are certainly the common denominator. Will the consequences of NAR loosing the DOJ law suit for an average broker or agent will be similar to those of the AT&T break up or the Enron collapse? Possibly not, but would you continue to defend NAR leadership if livelihoods of small brokers, including yours go away? Are you waiting for an average agent income to drop even further?
The competition between agents and brokers is not enough to “cure” the real estate business and improve our image with clients. Fortunately, we have Trulia and Zillow and even Redfin (I guess – we love to hate them, but they are good for our business, so let embrace them). All these companies are helping “to steer up” our th stale for years real estate business. And this means change and change is always good and competition is even better. Even MLS is starting to change. NAR has a long way to go, but it will feel the DOJ heat pretty soon – and this might help to create the upward pressure from agents and brokers to revise the way NAR does its (and our) business.
We are lucky to witness the period of changes in real estate and hopefully we will see more. It will be good for clients and it will be good for agents and brokers who are willing to change and adapt to changing clients requirements. Average commissions might drop, we will have also fees for different services, flat fees, but some brokers and agents will continue charging more than 6% (or 5.1%). We are part of a great business, so let’s do our share to improve our service and our image.
Please check also the UPDATE.