Real estate, by far, is the most screwed up industry in America - Glenn Kelman
My colleague and good friend Allyson Hoffman, like many of us, was dismayed by the incredible slant and half-truths that filled this past Sunday's 60 minutes segment Chipping Away At Realtors' Six Percent. But, in her blog, she focused on something that I also believe needs some clarification - the issue of the minimum service requirements that some states, including Ally's home state of Illinois, require. There was so much misinformation and lack of full reporting in this story that I could easily blog on different aspects for weeks, but like Ally, I would like to focus on the concept of minimum service requirements.
As Ally says, "the piece mentioned that the State of Illinois is one of the states that has imposed a law making it harder for discount brokerages to offer their discounts. In fact, this is absolutely true. The implication was that full service brokerage firms are conspiring to undermine the discounters. It is unfortunate that this one-sided discussion failed to mention why the law was enacted in the first place.
This law, which obviously affects all homeowners and property owners in the Chicago metro area, the Northern Illinois real estate community , as well as buyers and sellers of homes in Chicago's North Shore and Northwest Suburban areas, might lead one to conclude that it was designed to limit consumer options. In fact, this law actually resulted from consumer complaints to the Illinois licensing authority, the Illinois Department of Financial and Professional Regulation (www.idfpr.com)." Read Ally's full story.
As I said in my book Ripping the Roof off Real Estate, "there are reasons that many states have established minimum service standards in Real Estate. This is not restraint of trade as the press would have you believe. On the contrary, this is consumer protection."
As Blanche Evans, Editor of Realty Times said in her article Are Minimum Service Rules a Disservice to Consumers? "It's the nature of consumers to try to "beat the system" until costs have dropped to the point where the consumer is endangered. But it's not the nature of consumerism to look down the road and envision the end result of their downward pressure on fees. For instance, they don't see the day when air travel becomes unsafe because ticket prices have dropped so low that maintenance is cut or deferred."
By the way, Blanche wrote a great article yesterday on the 60 minutes piece. Read Blanche's full story.
As many half-truths as were evident in the 60 minutes story, the one statement I agreed with was from Glenn Kelman, the president and CEO of the discount firm Redfin, when he said "Real estate, by far, is the most screwed up industry in America." But the answer is NOT discounters like Redfin that give the consumer the idea that buying or selling your home is no more difficult, or has no more downside if you get it wrong, then buying or selling some old belongings on eBay.
We know without a doubt that consumers statistically do better when they have the assistance of a real estate professional. I have always told consumers "It's not what you save, it's what you net" for a reason: in the quest to save on a commission, most consumers, going the discount route, lose far more than what they save when they walk away from the closing table. A home is, for most people, their largest asset and just because do-it-yourself sites proliferate, it doesn't mean that going it totally alone is smart. There are plenty of medical web sites out there - it doesn't mean that after reading them that I'm qualified to perform my own surgery. And if I have a complicated tax situation, it's false economy to save money by doing them myself when I lose far more because of what I don't know.
As readers to this blog know, I believe the answer is using the services of an Accredited Consultant in Real Estate ™ (ACRE). By doing so, the consumer can harnass the power of the Internet and use technology to do functionary tasks themselves (taking digital pictures, printing flyers) while leaving the vital fiduciary role (pricing,negotiating,and troubleshooting the transaction to close) to that of a professional who does it for a living. I make no bones about it: the traditional real estate industry has brought much of the proliferation of discounters on themselves by sticking to the sales model payable only by commission without offering quality choices that provide the consumer real value for their money.
I've said it before, I'll say it again: we need a middle ground. The business of real estate has changed incredibly over the last hundred years, but the sales model and practice has not. There are many of us who think it's time it did.
This law, which obviously affects all homeowners and property owners in the Chicago metro area, the Northern Illinois real estate community , as well as buyers and sellers of homes in Chicago's North Shore and Northwest Suburban areas, might lead one to conclude that it was designed to limit consumer options. In fact, this law actually resulted from consumer complaints to the Illinois licensing authority, the Illinois Department of Financial and Professional Regulation (www.idfpr.com)." Read Ally's full story.
As I said in my book Ripping the Roof off Real Estate, "there are reasons that many states have established minimum service standards in Real Estate. This is not restraint of trade as the press would have you believe. On the contrary, this is consumer protection."
As Blanche Evans, Editor of Realty Times said in her article Are Minimum Service Rules a Disservice to Consumers? "It's the nature of consumers to try to "beat the system" until costs have dropped to the point where the consumer is endangered. But it's not the nature of consumerism to look down the road and envision the end result of their downward pressure on fees. For instance, they don't see the day when air travel becomes unsafe because ticket prices have dropped so low that maintenance is cut or deferred."
By the way, Blanche wrote a great article yesterday on the 60 minutes piece. Read Blanche's full story.
As many half-truths as were evident in the 60 minutes story, the one statement I agreed with was from Glenn Kelman, the president and CEO of the discount firm Redfin, when he said "Real estate, by far, is the most screwed up industry in America." But the answer is NOT discounters like Redfin that give the consumer the idea that buying or selling your home is no more difficult, or has no more downside if you get it wrong, then buying or selling some old belongings on eBay.
We know without a doubt that consumers statistically do better when they have the assistance of a real estate professional. I have always told consumers "It's not what you save, it's what you net" for a reason: in the quest to save on a commission, most consumers, going the discount route, lose far more than what they save when they walk away from the closing table. A home is, for most people, their largest asset and just because do-it-yourself sites proliferate, it doesn't mean that going it totally alone is smart. There are plenty of medical web sites out there - it doesn't mean that after reading them that I'm qualified to perform my own surgery. And if I have a complicated tax situation, it's false economy to save money by doing them myself when I lose far more because of what I don't know.
As readers to this blog know, I believe the answer is using the services of an Accredited Consultant in Real Estate ™ (ACRE). By doing so, the consumer can harnass the power of the Internet and use technology to do functionary tasks themselves (taking digital pictures, printing flyers) while leaving the vital fiduciary role (pricing,negotiating,and troubleshooting the transaction to close) to that of a professional who does it for a living. I make no bones about it: the traditional real estate industry has brought much of the proliferation of discounters on themselves by sticking to the sales model payable only by commission without offering quality choices that provide the consumer real value for their money.
I've said it before, I'll say it again: we need a middle ground. The business of real estate has changed incredibly over the last hundred years, but the sales model and practice has not. There are many of us who think it's time it did.
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