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June 08, 2007

Will real estate consumers begin comparing hourly fees to savings?

What's a familiar story about agents vs "for sale by owner" properties doing "above the fold" on page one of the New York Times?  Because:

"The findings [-- that "One City'€™s Home Sellers Do Better on Their Own --] fly in the face of studies by the National Association of Realtors. The group has said that houses sold via its members' local multiple listing services get a 16 percent premium over homes sold by their owners."

The timing of the story is also important because it echoes a Wall Street Journal headline this week cautioning "What You Don't Know About Real Estate May Cost You."

One of the stunning findings in research conducted by the AARP and Consumer Federation of America is that "Only about one-quarter of respondents knew that they can negotiate broker commissions." Apparently another WSJ story three years ago which advised consumers that "It Pays to Negotiate Your Agent's Commission," has had little impact (despite a reference to The Real Estate Cafe's 100% rebate model ;-)

So how can an enlightened homebuyer or seller compare the value added by real estate agents versus their level of effort and cost of doing business?  One of the researchers in the NYTimes article concludes that real estate consumers will begin asking for time sheets:

"...sellers [and homebuyers?] will begin to examine more closely the cost of all the small tasks handled by agents. To justify a $12,000 fee on a $200,000 house, he said, "you'd have to have a very high hourly rate" for an agent's work."

Another industry critic, Mark Nadel, says that kind of disclosure could help deliver an estimated $30 billion annually in consumer savings.  Yes, existing fee-for-service business models like The Real Estate Cafe would benefit greatly from such a regulation, but if "unit pricing" is now commonplace in supermarkets why not require similar transparency in real estate so homebuyers and sellers can compare effective hourly rates? 

Want to see time sheets for our past clients and compare their total hourly fees to savings last year?  Ask our competitors -- traditional full commissions or competing rebate business models like Redfin -- for the same information so you can compare hourly fees and savings side-by-side.  (Our goal is to help you save so much money, you're GLAD to help save a life as well.)

Bill Wendel | 02:15 PM in Change Agents, Defensive Homebuying, Extreme Househunting, Inside The Real Estate Cafe, Real Estate Consumer Bill of Rights, Savings & Rebates, Unbundling the Commission | Permalink

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