By Datta Khalsa, Broker
Having been in the local real estate market for three decades provides some measure of perspective, particularly when I see someone make an authoritative statement about the current economic climate, or for that matter, the nature of our industry at large.
Such statements remind me of the ancient parable of The Blind Men and the Elephant, where 6 blind scholars encounter different parts of the elephant and each comes away proclaiming to have a full understanding of the animal, while in fact being only partially informed. At the risk of also resembling one of those blind scholars, here’s my takeaway from two such proclamations made recently by others:
The first was an article that ran with the title “Real Estate Agents Are Ripping Off Homebuyers”. Intrigued at the alleged crime that was being reported, I took the bait and clicked.
In his piece, the author characterized the industry as a monopoly that works to keep fees high, stifle competition, and control access to the best listings while driving prices up. This raised an eyebrow for me as an industry insider, where in my experience other agents have consistently acted more as tough-but-friendly competitors rather than as co-conspirators of any sort.
Let’s face it, we agents are ultimately more driven to getting our client a better outcome than would make us want to hold ranks with another professional who could easily vie for that same client’s business the next time around. To his other point, commissions are driven by free market forces, and there are just as many forces trying to drive commissions down as there are trying to drive them up.
The author goes on to discredit himself from being able to handle his own transaction by identifying as a hot-headed and impulsive negotiator but then proceeds to lambast the National Association of Realtors for actively working to keep commissions far higher than they are in other countries, yet he fails to provide any context for differences in how the marketing, legal and transactional processes are handled in those parts of the world.
He then zeroes in on the MLS as a cartel which provides the monopoly that makes all this price gouging possible, but then goes on to note that internet-based disruptors such as Zillow and Redfin offering lower cost alternatives and broader public access to the MLS data have failed in their predicted outcome of driving down commissions. In conclusion, as his proposed solution he calls for government regulation to disallow the seller’s agent from setting the commission offered to buyer’s agent.
The second proclamation came as if on cue shortly after reading his article. It was a call from an agent citing the changing market and offering a double commission if I could bring a buyer for their listing, and guess what? I’m not any closer to bringing a buyer to the listing than I was when they were offering a normal commission.
And then it hit me: Yet another person was missing the point.