In yesterday's open thread, Plymster pointed out an interesting bit of drama that is being played out in the Seattle real estate blogging scene. I'm not really interested in fanning internet flame wars, but the comments of a local Realtor really sheds some light on one of the problems the real estate industry as a whole is dealing with in the face of emerging technologies and a national slowdown. This is only tangentially related to the "bubble," but it's interesting enough that I think it should be posted here.
Beau Betts (Seattle RE Professionals blog contributor and a local "Accredited Buyer Representative") kicked things off with a post on his blog questioning the viability of Progressive Homesellers' flat listing fee business model.
I'm really not sure how this business model is going to work out. I know that there would be no way John L. Scott would allow me to work as a discount agent while under their roof. If I came to my broker with a listing agreement for 3% + $3,995 (which I'm sure Progressive Homes takes a cut of) and said that the service I'd be providing would be absolutely minimal, I'd be show the door with a list of discount brokers to call (Redfin, Assist-2-Sell, Sutton, etc). Working for John L. Scott I'm expected to provide a full range of professional marketing services to my clients to get their homes sold. Just putting a sign up and adding the listing on the mls with a few lousy pictures taken by the Seller is not allowed.In the comments to the post, Marlow Harris—also a Seattle RE Professionals contributor, and more importantly, a licensed Realtor—laments the fact that licensed Realtors operating under established brands are out there undercutting the sacred 6%.
The unfortunate truth however, is that some well-known companies have bought a franchise and are operating as almost 'rogue' agencies out there, offering limited service for as low as 1%.At this point, Trevor Smith—the 4% Realtor himself—joins the discussion in defense of his business:
Have you seen 4% Real Estate? It's a John L. Scott agent!
Thank you for taking notice of my business model: 4% Real Estate. However, I ask you review my website for clarity. I am a full service real estate agent. I give all my clients the same treatment that my peers charging 6-7% are giving. Remember, real estate agents received a 30 - 50% raise over the last 3-4 years due to the increase of housing prices. Do you know any other profession that received that sort of pay raise?Rather than directly address Trevor's points, Marlow resorts to name-calling:
If the National Association of Realtors was a labor union, and we were union workers, you'd be a scab, my friend.Aside from Marlow's misuse of the term 'scab' (unless there's a Realtor strike that I'm not aware of), her comment is quite interesting because of its extremely anti-competitive undertone. As Trevor rightly points out on his blog, fixing real estate commissions is against the law. In fact, the National Association of Realtors is in the midst of defending itself against an antitrust lawsuit brought against it by the Department of Justice:
...challenging a policy that obstructs real estate brokers who use innovative Internet-based tools to offer better services and lower costs to consumers. The Department said that NAR's policy prevents consumers from receiving the full benefits of competition and threatens to lock in outmoded business models and discourage discounting.Marlow's comment would seem to indicate that she is in favor of exactly the kind of anti-competitive practices that have gotten the NAR into hot water. Seeing as how I'm not "in the industry" per se, I'm not really qualified to offer a very educated opinion on the situation. However, a Seattle Bubble reader that is an industry insider made the following comment to me via email:
Her comment is the most stupid, arrogant and glaring comment by a Realtor I have ever seen in print. I cannot imagine why on earth she would place herself in such a dire situation by saying that. This is just the type of anti-competitive behavior that the Dept. of Justice is suing over and is clear ammunition they are looking for.It will be interesting to see how this all plays out. With credit tightening, sales slowing, listings growing, lawsuits brewing, and new technologies emerging, it would seem that the squeeze is on for the traditional 6% real estate agent.
(Beau Betts, Seattle Real Estate News, 09.22.2006)
(Trevor Smith, Seattle - Tacoma Real Estate, 10.02.2006)
(Press Release, Department of Justice, 09.08.2005)