It’s been close to two years since the 60 Minutes report on the demise of the “sacrosanct” 6% real estate commission, highlighting the challenge real estate agents face in proving they are worthy of that 6% commission. The controversy rages on. Last month Inman News, a real estate newsletter publisher, ran a heavily commented-on article entitled “6% is dead“, while just this month even the consummate marketer himself, Seth Godin, asked “Where have all the agents gone?”
Seth’s blog reopened a wound or highlighted an obvious trend, depending on your point of view. Travel agents, stock brokers, literary agents, real estate agents – all are either gone, under assault, or have had their business model radically transformed. No doubt that middlemen have it tough, especially in challenging economic times.
Is the 6% commission truly sacrosanct for real estate agents, as 60 Minutes’ Leslie Stahl asserts? Or is there now – a couple years later, industry wiser, real estate boom over, hangover in full swing, home values depleted, agents scrounging for work – is there a realization that things have changed, and will never go back?
I see quite a few agents that “get it”, but honestly still the minority. Those agents seem to embrace transparency – being open and willing to work with their clients in different ways. The term “hybrid real estate” has emerged, and it is one that I think describes very well where the industry is headed. Hybrid combines traditional real estate with For Sale By Owner, Flat Fee Listings, and what some call a la carte services. A consumer can then select from a menu of real estate services that meets their needs. Want to sell a home on the cheap? No problem, just pay a flat fee to list it on MLS. Want to hold an open house, or need some help negotiating a sale? Work with an agent to provide those services for a fee.
For Sale By Owner has increased from 10% a few years ago to over 16% of the 5 million homes sold in the U.S. in 2008, according to the National Association of Realtors. In some places – like Ottawa Canada, the For Sale By Owner percentage is now up to 50%. Why is the percentage increasing?
It all comes down to perceived value. Is a consumer willing to shell out 12, 18, or even $30,000 for someone to sell their home? Not if their equity is getting squeezed. Not if a buyer can find a home they want to buy on the web themselves. Not if a competitive market analysis, neighborhood school rating, and price trend chart are a mouse click away.
But an agent that can truly demonstrate his or her value, subject matter knowledge, local expertise, and connect you to reputable home stagers, inspectors, and other real estate professionals - they will always have a place. They might just need to change their business model a bit.
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