Realty Freak

Fairness, Integrity and Quality

Robert E. Litan contributed an excellent article to the New York Times in which he calls for legislation that “should make clear that multiple listing services must provide all properly licensed brokers access to the marketplace on equal terms.”  This is something the Realty Freak is all for. I would even go a step farther and say that multiple listing services should provide the public access to the marketplace on equal terms.

Mr. Litan did however miss an important fact in comparing the securities markets to multiple listing services and it is the same fact that most Realtors fail to comprehend; efficient and transparent markets along with the rise of discount brokers like E*Trade did not bring about the end of full service, full price stock brokers and money managers.  I personally pay my broker for his expertise, not his ability to make trades.

A national real estate listing service that was transparent and fair to all would certainly lessen the overall number of Realtors, bad for the National Association of Realtors coffers.  The Realtors that could survive that type of market place would do so only because of their skill and expertise in helping people realize the best possible terms for their real estate transaction.

Litan’s quote of Arthur Levitt, the former chairperson of the Securities and Exchange Commission, is so poignant it deserves repeating: "Markets of fairness, markets of integrity and markets of quality should not be the most investors hope for — but the very least they should expect."

Just Department & Realty Freak In Agreement

The Realty Freak's alter ego was interviewed as part of a story by Chicago's Daily Herald on  how most Realtors obstruct pro consumer brokerages from developing innovative business models.

The article by Burt Constable is below or here: http://www.dailyherald.com/search/searchstory.asp?id=205015

Among money’s great mysteries — real estate commissions

Burt Constable
Posted Tuesday, July 04, 2006

Among the many things I don’t understand — the appeal of Paris Hilton, the existence of gay Republicans or Cubs manager Dusty Baker’s fondness for Neifi Perez — finances still rank at the top.

Money mystifies me. I know it makes the world go around, that the love of it is the root of all evil, and that it doesn’t grow on trees — and that’s about it.

I can’t, for instance, explain why a waitress who calls you “Hon,” balances a $5.35 collection of piping hot plates containing eggs, toast, bacon and hash browns, and refills your coffee cup as fast as you can drink it would be thrilled with a $3 tip. But a disinterested waiter who brings you one $9 martini and barely makes the effort to plop a $42 steak-and-potato in front of you is ticked if you leave him anything less than a $10 bill.

Likewise, a real estate agent who might sell an $850,000 house after one day of little effort earns a commission thousands of dollars more than a hard-working agent who might labor for weeks to sell a $140,000 house.

In a nation where more than 2 million people hold real estate licenses and God-only-knows how many are doing cheesy TV commercials for the sell-it-yourself movement, I don’t understand how it all works.

Maybe that is because it doesn’t.

“I think this industry is really broken,” says Realtor Evan Kane, 37, a member of the National Association of Realtors (NAR) and founder of suburban-based Endeavor Realty, one of a newfangled breed that has broken away from the brick-and-mortar real estate offices and traditional 6 percent commissions. “I think it’s anti-consumer.”

The Justice Department agrees.

For the last nine months, the Justice Department has continued to push toward a courtroom its antitrust action against the National Association of Realtors, which is headquartered in Chicago.

Since the start of this year, the NAR (www.realtor.org) has tweaked its policies, but not enough to stop the case from moving toward court. The organization also has been waging a nationwide public awareness campaign that emphasizes trust, ethics and its study showing homes sold by Realtors sell for up to 16 percent more than those sold without them.         

Realtors provide much of the advertising that pays my salary, and even some critics wouldn’t dream of buying or selling a home without them.

But the times, or at least the feds, say the industry needs to change.

The NAR “obstructs real estate brokers who are using the Internet to serve their customers, and who are developing innovative business models that take advantage of Internet technology,” argued J. Bruce McDonald, a deputy assistant attorney general. The suit alleges that the NAR prevents nontraditional brokers from gaining equal access to the massive Multiple Listing Service registry.

Last week, the Consumer Federation of America labeled the real estate trade industry a “cartel” that sets artificially high sales commissions and blocks competition from the coveted property listings.

The NAR fired back with a letter to The New York Times.

“Brokers created, operate and own MLS’s. They are not markets … or public utilities, as some would like,” NAR President Thomas M. Stevens wrote. “They are private exchanges and platforms for industry collaboration to facilitate cooperation among real estate practitioners representing buyers and sellers.”

The industry might change in spite of the NAR’s insistence that there is no “problem.”

When Mark Nielsen recently moved from Hyde Park to Mundelein, he went the nontraditional route and negotiated all the services and commissions before the purchase.

“We paid a flat rate,” Nielsen says.

In a blog by Steven D. Levitt, one of the authors of the best-selling “Freakonomics” book, the University of Chicago economist says “real-estate agents provide a valuable service.” But Levitt predicts a new market where flat fees and hourly rates become the rule, and we end up with fewer agents who make less per sale, but sell more properties.

“That would be Nirvana,” says Kane, who says he wants his profession to change.

The Justice Department and public pressure just might make real estate sales more consumer-friendly, more competitive, and something I can understand. Now, if only someone could do all that for the Cubs.