Lower Cost Options for Buyers & Sellers of Real Estate

As I get ready for 2008, I reflect back on the progress, and lack thereof, of an industry flailing with the challenge of providing more and varied options for people buying and selling homes.  Seems to me that the answer is in each and every agent being their own business within the company, and offering options to consumers, vs. the company as a whole trying to provide the more and many options consumers need.

How does a company survive?  How does an agent become one who stays vs. one who quits?  How do you accomplish these two objectives AND nurture the environment of better cost options for consumers all at the same time?

I’m throwing my thoughts out here, not necessarily in order of importance, to spark some discussion that may help us all in 2008 and beyond.

First let’s look at the agent specific issue.  It is that time of year when many real estate licenses go back to the DOL.  Not because the license is due for renewal, but because it is time to pay both MLS dues AND REALTOR dues.  Many who have held on to a license just in case they want to buy or sell a house, or to help their friends and family buy homes, are opting to turn those licenses in vs. paying the dues.

Brokers should step aside and even encourage agents to get out of the business of selling a house or two a year.  That is not to say that every agent who only sold a house or two last year should quit.  But if your goal isn’t to become excellent at what you do, and sell at least 10 to 12 houses in 2008, maybe it’s time to sign out altogether.  OR agents should (and their broker’s should let them) develop a model that provides a lower cost option to consumers indicative of the agent’s lack of expertise in the meantime.  Be honest with consumers about your credentials and price your services accordingly.  This way you will have assisted many in achieving their objective of lower cost, and at the same time increased your experience level by participating in more home sales and purchases.  Seems like it could be a win-win strategy, as long as the consumers are happy with a decreased experience level at a decreased price.

How does a company survive?  If the company has to charge the agent more and more to survive, causing the agent to charge consumers more and more to survive, well then maybe the company should quit.  OR brokers should charge agents less, so they can be free to price their services more fairly, and maybe all will become stronger as a result.

While consumers seem to want the transparency of a NEON SIGN heralding a cheap price for real estate services, seems the answer lies somewhere else.  The answer lies not in the smaller quantity of companies trying to configure into more and varied options.  The answer lies in the vast number of individual licensees each being free to offer varied prices.  More options for consumers would be greatly expanded if each and every licensee could negotiate freely with consumers and develop varied options, vs. simply the companies that house the licensees.

If an agent gets to keep most of the commission, vs as low as half of the commission, then the agent can negotiate better deals for consumer as a result.

My thougts are this.  I’d much rather have 60% of agents be excellent at what they do than the typical 10% to 20% of agents.  I’d rather have more agents paying less per sale, and paying the smaller cap rate, than lots of agents selling one house and paying 50% of the commission to the company.  I’d rather have all agents free to negotiate with consumers, than one set price  or small range of pricing, dictated by a company policy.  By giving each agent the freedom to create their own business model, consumers will have more choices than any number of companies can provide.

To Brokers, take your cap rate of say $30,000 per agent and reduce it to $20,000 or less.  Instead of taking half the commission from ANY agent, try to have double the amount of agents paying you the lesser cap of $20,000, than paid you the higher rate last year.  Now you will have more money, agents will pay less and hopefully charge consumers less as a result, and each agent will have more freedom to capture more money for themselves via better priced options for consumers.

At year end double check to make sure that the agents passed some of the savings that you gave to THEM, on to the consumers.  Don’t reward greed and don’t charge less simply so the agent can make even more.  Make sure they are honoring the spirit of the change by passing forward the benefit in a meaningful way.

Sounds a bit like a fairy tale, I know.  But it’s the time of year to dream and plan and strategize based on your highest hopes for all.  Peace On Earth…Good Will Toward “Men” is not just a quote from on high.  It’s a way of life, or it’s just a bunch of words.  Do your best in 2008 to create a better way for as many as possible, yourself included.