Federal Trade Commission
Real Estate Market in 2005
- Todays sellers want more options and more flexibility than theyve had in the past.
- Consumers want unbundled services
- Consumers want a more varied marketing effort put forth on their homes behalf
- Consumers want to reduce the transaction costs associated with selling real estate
- The traditional Realtor based real estate market is ill suited to service the evolving demands of the American consumer
- Competition must be fostered within the real estate services community.
- Rather than fostering competition the traditional Realtor based real estate services industry is stifling competition
- I will suggest a number of needed reforms
Home Sellers Demand Choice and Flexibility
- Three quarters of all Americans begin their search for a new home on the Internet.
- 54% of consumers who plan to buy or sell a home in the next two years believe agents' commissions are unjustified
- 47% state the probability of working with the same agent in their next transaction is unlikely
- The same study found that 94% of by owner sellers will sell their next home without the use of an agent.
- Agent commissions are slowly falling: the average agent commission in the U.S. is now between 5% and 5.5% down from 6% a few years ago.
The ForSaleByOwner.com Model Provides Consumers with Choice
- The category leader in agent free real estate, the company has approximately 70,000 property listings today (across all 50 States), representing approximately $20 billion in home value
- ForSaleByOwner.com has grown at an average historical rate of nearly 100% year over year.
- ForSaleByOwner.com allows consumers to pay a flat, up-front fee (that averages $300) to sell real estate in lieu of a 5-6% commission.
- Many ForSaleByOwner.com customers use the company in conjunction with a reduced commission MLS listing that is provided by the company (YTD weve listed nearly 5,000 sellers in local MLS boards around the country).
- In 2005 YTD, the company has referred out over $3,000,000,000 worth of real estate to traditional agents through its referral program.
- 65% of the companys sellers report that the home has sold due its service.
Consumers Would Benefit From Increased Competition in the Real Estate Industry
- While the NAR estimates that only 14% of homes are sold without agents, Realty Viewpoint found that more than 20% are actually sold without an agent.
- ForSaleByOwner.coms internal exit interviews indicate that by owner sellers are happy with the results of our service.
- From dealing with hundreds of thousands of sellers over the course of the past 6 years its our belief that consumers search out our services to avoid what they perceive as prohibitively expensive agents.
- And while average agent commissions have dropped they still have remained stubbornly high.
- These factors will continue to drive enormous demand for alternative real estate services models and those models should be allowed to flourish.
Industry Barriers to Competition
- The NAR
- Minimum Service real estate laws
- Efforts to limit exclusive agency listings from appearing on Realtor.com (signage issue)
- At the State Level
- Overly broad interpretation of licensing laws by Departments of Real Estate
- Broker Control of Departments of Real Estate
- For example, 6 of 7 members of the Missouri Real Estate Commission are brokers.
- Limitations on the exposure given to Exclusive Agency MLS listings.
- Repeal Minimum Service laws
- Nothing more than an attempt to prevent reduced commission MLS listings
- If the purpose is to protect consumers make it a disclosure law not an enforcement of commissions
- Eliminate licensing requirements for businesses that only advertise or list properties for sale but dont actively participate in the sales process.
- Allow the for sale by owner model to flourish
- Insure that Departments of Real Estate at the local level are more balanced, objective and consumer oriented.
- It would help guard against agents rubber stamping bad legislation
- Insure that Exclusive Agency listings are allowed to flourish by guaranteeing that the fullest possible marketing effort is made by the agent.
- Don't allow Realtor.com to turn away EA listings and limit sellers exposure.