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The great realtor rip – off
05-08-2012, 06:20 PM
Post: #1
The great realtor rip – off
Why is it so expensive to buy or sell a house in America?

IN BRITAIN, if you want to sell your home, an estate agent will list the property, find a buyer, help you negotiate a deal and guide you through the transaction, all for a commission of 2-3% of the sale price. In America, realtors provide the same services for roughly double the fee.

Are they worth it? The shouty realtors in David Mamet’s film Glengarry Glen Ross (pictured) certainly think so. (“[My] watch costs more than your car…that’s who I am.”) Others disagree. Chang-Tai Hsieh of the University of Chicago finds that American property brokers cause “social waste” of $8 billion a year via overcharging and inefficiency.

Economists are baffled. The internet has squelched inefficient middlemen in other industries, from insurance brokers to travel agents. Why not American realtors? Although scores of discount brokers and for-sale-by-owner websites have sprouted up, traditional full-service realtors have somehow maintained their market share of 80% without reducing fees.

The business used to operate like a series of local cartels. In a typical area, a handful of brokers controlled a shared database of available homes, and limited their cheaper rivals’ access to those listings. In 2008 in the United States and 2010 in Canada, regulators struck deals with realtors to open up these databases. Yet since then the average commission has actually risen, from 5.0% in 2005 to 5.4% in 2011, according to REAL Trends, a research firm.

Why are high fees so persistent? One counterintuitive theory is that America’s housing bust has buoyed them. Selling a home is easy when prices are rising. But when financing dries up and volumes dip, sellers may need an agent’s expertise and energetic marketing to find a buyer.

Never give a sucker an even break

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05-11-2012, 10:11 AM
Post: #2
RE: The great realtor rip – off
The article continues with possible reasons including buyer's agents steering their clients away from listings that offer less than the "usual" commission split to the buyer's agent. Agents who do this are breaching their legal fiduciary duty to their clients, and the NAR code of ethics as well.

This type of steering was easy when real estate agents controlled access to the MLS data, but now with the data available to the public on just about every agent's website it doesn't seem that this is such a powerful reason. Today's buyers do their own research on the internet for months before they contact an agent. The only thing the agent still controls is access to view the property. Today's buyers tell their agent, "I want to see that house." (and may even give their buyer's agent the MLS number :-) The public doesn't see the commission split data online, so that has no effect on which houses the buyer wants to see.
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