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October 03, 2006
Will real estate "consultants" replace real estate agents?
Several days ago, a blog reader asked:
Anyone know of any national source out there promoting or aggregating discount/fee based real estate agents/brokers?
The question comes on the 6th anniversay of the first course "Consumer-Centric Real Estate Consultant" (C-CREC) training offered on October 1, 2000 in Orlando, FL by Julie Garton-Good, founder of the National Association of Real Estate Consultants (NAREC.com). NAREC is one of two national organizations formed in the past six years to help promote alternative or fee-for-service real estate business models.
Here's my short history of attempts to aggregate alternative / fee-for-service real estate service providers:
1997-98: Pat Rioux, of http://www.listforless.com, worked with an assistant to develop a nationwide database of alternative real estate services. The same database was published on the International Real Estate Digest, http://www.ired.com, at approximately the same time because Pat also wrote for the site. IRED was a pioneer in the online real estate world, nominated around the same time for a Webby Award.
July 1999: The Real Estate Cafe (http://www.realestatecafe.com), publishers of this blog, hired Pat and her assistant to update their database. The directory of over 500 companies was available to visitors to the Cafe, then a walk-in, internet-based housing information center in Cambridge, MA -- the first nation when we open in 1995.
2000: Julie Garton-Good founded the National Association of Real Estate Consultants, http://www.NAREC.com. Their membership includes a wide range of alternative real estate business models.
November 2000: The National Association of Realtors (http://www.Realtors.org) released a strategic planning committee report, written by consultants at Arthur D. Little in Cambridge, MA, which predicted that the use of the term real estate "agent" would be replaced by real estate "consultant" during the second half of this decade. Think we're on schedule?
Early 2001: A well-financed internet brokerage concept approached The Real Estate Cafe about updating our database so they could license their technology to alternative business models. We've maintained a private database ever since.
2002: eBay real estate (http://pages.ebay.com/realestate/ ), which had focused primarily on auctions up until that point, and http://www.HomeGain.com launched a national experiment to link MLS listing-entry-only service providers nationwide with web-savvy sellers. The initiative was not pursued aggressively, and disappeared by year-end.
2006: http://www.AREBA.org, the American Real Estate Brokerage Association, was launched in the 2nd quarter of 2006. Their membership is made up primarily of flat-fee, MLS listing-entry-only real estate services.
Efforts to reform the residential real estate industry reform span nearly 25 years, beginning in 1983 when the Federal Trade Commission (FTC) investigated the industry and then rose in frequency eight years later when the Consumer Federation of American (http://www.consumerfed.org) first called the industry a "cartel." More recently, the FTC, US Department of Justice, and others have renewed efforts to create a more open, competitive real estate marketplace. Some predict that the fruit of their reform efforts, market innovation, and web-savvy consumers will yield $30 billion annually in consumer savings. Do you agree?
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There is no question that real estate agents as we know them today will have to change if they are to survive the onslaught of change and new business models. Todate they have however done surprisingly well in adapting.
Competition in the residential real estate brokerage industry is immense and intense and fundemental change to the way the industry operates is really happening.
Real estate consultants, as detailed by NAREC, is a very legitimate way for future real estate professionals to operate as and only time will tell to what extent this innovative way is able to become mainstream.
For details on the Top 15 Trends impacting the real estate industry read the latest Trends Report available at http://www.realestatetrendsreport.com
Posted by: Stefan Swanepoel | Oct 3, 2006 11:48:02 PM
Thanks for adding your high credibility perspective to this thread. I highly recommend your 2006 trends report, and look forward to the release of the 2007 report in January. Do you know if NAREC.com or anyone else will be making a presentation on fee-for-service business models at the National Association of Realtors convention in New Orleans in November? Even if nothing formal is planned, I'd be willing to help organize an informal meeting or networking event for "change agents."
Posted by: RealEstateCafe | Oct 4, 2006 12:20:23 AM
I don't know for sure but doubt whether NAREC is making a presentation at NAR this year. Letting me know if you put something together and I will try to attend.
Also invite your readers to visit our blog at http://www.RealBlogging.com.
Posted by: Stefan Swanepoel | Oct 4, 2006 6:59:03 PM
Very interesting post.
Since all-encompassing real estate comes in various forms, it is hard to imagine any one business model surpassing another for all types of real estate and ownership (TIC, 1031 exchange, lease, etc).
One model may work well for one while not for another.
Posted by: jf.sellsius | Oct 6, 2006 11:22:18 AM
There is no questions that real estate will exist in different fashions in differnt markets...just like US real estate is traded differently than foreign real estate. (Heard a statistic at the Inman conference in Miami last week that 90% of homes in Paris are sold FSBO...and 92% of marketing dollars in the Netherlands are online with limited to ZERO print media. The US will adapt and real estate "consultants" will exisit along with FSBO, flat fee, full service, half service, no service, a la carte and new forms that we dont even know about.
Posted by: Condo Blog | Oct 21, 2006 2:52:33 PM
While it is true that the industry has been fighting against small incursions for the past thirty years, only recently has there been enough access to alternative business models to push the revolution over the edge. Thanks to the internet the entire paradigm has changed and the necessity of an agent has easily become just an option.
I agree with the assessment that within the next few years the agent moniker will be replaced with consultant. What I cannot yet determine is exactly what role these consultants will actually play.
Posted by: Barrett Niehus | Oct 28, 2006 4:08:49 AM
Kentucky Real Estate Commission Slammed by Consumer Group
NewswireToday - /newswire/ - Elizabethtown, KY, United States, 07/28/2006 - A report by the Consumer Federation Of America labels the Kentucky Real Estate Commission (KREC) as "amongst the most aggresive at promoting the interests of the real estate industry over that of consumers"
At issue is the dominance of the state real estate regulatory body by active brokers and lawyers and their close ties to the industry that they are chartered to oversee.
There seems to be at least three major areas of contention that caused consumer groups, the Department of Justice, Antitrust Division, and the Federal Trade Commission to focus attention on state real estate regulatory bodies. They are:
• Minimum Service Laws and Rules imposed by the regulatory body on brokers that virtually eliminates the possibility of purchasing real estate services on an a la carte basis that has the potential to save sellers thousands of dollars on the sale of their house.
• Promotion by the real estate regulatory body of a convoluted form of representation called ""duel agency and designated agency"" that makes it legal to represent two opposing parties to the same transaction.
• The imposition of ""anti-rebate"" laws that make it virtually impossible for brokers to compete with each other for business based on the price of their service.
The Kentucky Real Estate Commission suffered a set-back in the 2006 state legislature when it's proposed minimum service law was struck down under pressure from antitrust official, flat fee brokers and consumer groups. The commission then circumvented the lawmakers and exercised its power to create a minimum service ""rule"" that has the same effect as the originally proposed law but did not require legislative approval. Kentucky's current minimum service rule has reportedly been a factor in the demise of some Kentucky limited service brokerage operations.
""Duel Agency and designated agency"" are promoted by the Kentucky Real Estate Commission and serve the industry well to the detriment of consumers, according to some observers. These convoluted deviations from common agency law make it possible for brokers to shield the fact that they actually represent neither party in the transaction while collecting a larger commission and remaining in compliance with Kentucky real estate license law.
Up until 2005, The Kentucky Real Estate Commission enforced an ""anti-rebate"" law that made it impossible for brokers to compete for customers based on the price of their service. Served with a federal lawsuit objecting to this provision as an antitrust violation and charging the commissioners with conspiracy, the Feds and the Kentucky Real Estate Commission reached a settlement agreement that forced the Commission to stop enforcing the rebate law.
The Kentucky Real estate commission was also criticized recently for running radio commercials (krec.ky.gov) that posed as ""public service announcements"" claiming that Kentucky licensees are ""trained real estate negotiators"" and by not working with one of them a seller could expect to lose up to 3% on their home sale. Pre-licensing training for sales agents and brokers in Kentucky actually offers no training in real estate negotiating.
Currently the Kentucky Real Estate Commission operates independent of oversight by any branch of state government. The panel is made up of active real estate brokers and a lawyer. They generate their own taxes (fees from licensee) and spend it in any way they see fit. Expenses like $20,000 for radio commercials require the approval of no superior agency or person. Some are calling on the state legislature to review this arrangement and an effort is under way to legislate a reorganization of the Kentucky Real Estate Commission to make it more responsive.
These and other industry friendly real estate laws/rules either created or proposed by the Kentucky Real Estate Commission (KREC) make them seem more like an industry tool than a consumer protection arm of state government in the view of many consumers.
Many of the rules, policies and laws on the books of real estate regulatory bodies nationwide are adverse to consumers and are forcing them to pay too much for real estate services according to reports. Real estate commission cover for the industry is not unique to Kentucky. The majority of real estate regulatory bodies nationwide need closer scrutiny to detect the abuse of power when and were it exist.
Agency / Source: TW Short Realty - FlatFeeDirect.com 270-769-2468
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Posted by: Terry Shortt | Nov 22, 2006 12:02:07 PM
Check out Stefan's latest Trends Report 2007. Just got my copy this week. It is even more detailed than last years and discusses MLS and the DOJ as well.
Posted by: Dan | Feb 15, 2007 3:59:22 PM
Wow this is informative post.Thanks for sharing this
such topic.Now i have an idea about real estate consultant and real estate agent.
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