On the Future of Real Estate Agents
In last Sunday’s NYT Magazine devoted entirely to real estate, the authors of Freakonomics argued for the inevitable extinction of real estate agents: The Internet is a natural repository for the sort of data that drive the real-estate market. New sites like zillow.com let anyone try to figure out (if imperfectly) what his home is…
In last Sunday’s NYT Magazine devoted entirely to real estate, the authors of Freakonomics argued for the inevitable extinction of real estate agents:
The Internet is a natural repository for the sort of data that drive the real-estate market. New sites like zillow.com let anyone try to figure out (if imperfectly) what his home is worth; sites like craigslist.org allow buyers and sellers to easily find each other. As those services and ones like them become more popular, it is hard to imagine that the market will allow Realtors to maintain their hefty commissions.
Trulia CEO Pete Flint couldn’t disagree more:
At the end of the day, we still need a professional to help us make sense of all the information available to us both off and online and to carry out all the duties necessary when buying or selling a home. Ask yourself this, do you really have time to learn an entirely new profession on top of your own life responsibilities to buy or sell one house? How much is your time worth? I have looked at the data and crunched the numbers. At the end of the day, the real estate agent is worth every penny.
Let the debate begin.
Freakonomics in Real Estate [John Cook’s Venture Blog]
Endangered Species [NYT Magazine]
I dislike most brokers because of their sleeziness but think that there is probably going to be a place for them always. You are never going to purchase a house by looking up the description on the internet and ploping your credit card number. Someone will always be needed to show the house, screen the potential buyers for those just kicking the tires, do a qualitative analysis of the sales price etc.
Unfotunately, I think that its a service is worth about $30-$40 per hour in today’s labour market (assuming you need a slighly intelligent person to do the job, but no rocket scientist). That is in my view how brokers should be compensated. Certainly not the $30, $40 or $50 thousand that the brokers charge on a $1,000,000 place. By the way, I am trying to sell my place and just love how the brokers tout the 6% numbers like that is still the norm . I am also a lawyer, by the way, and see real estate transactions regularly. The norm I have seen is 3% for exclusives, and 4% for co-brokes. I wouldn’t even start discussing the situation with any broker that starts off telling me that 6% is the norm, but that they will cut me a deal at 5% — they are clearly just out to rip you off and will probably conduct the negotiations in a way that sells you down the river.
With real estate prices as high as they are in NYC, the 6% commission is absolutely absurd. Even 3% is rediculous. I just can’t think of any other job where people can make so much money by doing so little – and this is pretty much unskilled labor!
In some parts of upstate NY, houses average $60,000 or less. And brokers are doing just fine up there making their $3600 commission.
The difference is, now in NYC, everybody and their dogs are real estate brokers. Everyone is chasing those big commissions, so a lot of people I would guess aren’t making any money at all.
Furthermore, do we, as a society, want so many people working as real estate brokers? Wouldn’t it be better if these people were doing jobs where they actually produced something?
11:25-
I feel the same way- I can’t imagine using a broker to sell but I appreciate a broker when I’m buying. Rightly or wrongly I believe that certain agencies have weeded out some of the crap that you come to expect (rightly or wrongly) when it’s FSBO.
I suppose that perception of lower quality on FSBO will change as it grows in popularity.
Some people can and will and always have successfully been able to sell their own properties. I have twice. And once through a realtor.
Have never bought a FSBO – in 4 purchases.
No way a good percentage of people would be able to market, show, negotiate and deal with all the legal forms alone – without a realtor.
Also success in selling on own is the quality of product you are selling and the market you are selling into.
anonymous 10:50:
Surely it’s quicker to type ‘trulia.com’ than the paragraph you just posted…
There is no question the effect that the internet has in increasing consumer knowledge of the market. Even reading the NYTimes every week I wasn’t able to keep up with the market price in each neighborhood in the way I can with the mapping programs like Trulia. (I’m sure it helps that prices are rising more slowly than they were a year ago…)
Once you don’t need a realtor to set a good price there is really not much more you need them for except for that ‘exclusive cache’ that comes with being on the Corcoran listings. It’s impossible for me to believe that Corcoran is going to get me a sales price 30-40K higher than I can on my own. (Especially considering the Freakonomics arguments of how agents actually undercut the seller’s position in order to expedite a sale at any price- a practice I’ve witnessed first hand.)
Can’t be bothered to look it up, but isn’t Trulia a real estate, zillowish thing on the West Coast looking to take over the world? I’m certain this guy is just being smart and not looking to call out the REBNY and their cousins. Like when Travelocity and Expedia said, “Oh, there will always be a place for travel agents” and then laughed all the way home.
The problem is that since the boom every one got a Real Estate License and there are a lot more brokers/RE agent out there. So many people end up with a bad agent. I do think there are still many good agents out there who know the market and know the area they are selling. But many Sellers have also become very greedy and are blown away by some of these fancy sales pitch and brokers giving them big #’s that they ended up going with a agent who is full of hot air. I always think stick with the Realtor who knows the area. In Brooklyn we are now starting to see Manhattan Brokers comes to Brooklyn..
ditto 10:25