I am throwing this set of questions up for the readers to play with. They are posed in a guest column in the Toronto Star wondering why real estate commissions have not fallen in the wake of technological advances that have completely changed so many industries.
So please have at it in the comments to his questions as I will try to forward them to the writer of the article after a bit.
As free market consumers of services or products, we hope to see pricing naturally evolve to provide value. Thus, if a company is charging too much, competition will drive the price down and, conversely, if a company is undercharging, the price will be raised or the company will go belly up. We don’t have to go far to see an example of competition and technological efficiencies pushing a price down – it has happened in many mature service industries, notably the telephone long distance market.
But why in real estate – with such a large market, with so much competition and with the MLS up on the Internet – have the many attempts at discounting failed to dent the dominance of the full MLS commission? Why do customers pay such a frightening price for such limited service? What do realtors offer? Limited training (usually about 90 hours of classroom training – that’s a little more than two weeks education), some pricing counsel, some tour guide service, a little research and a willingness to shepherd the buyer through the requisite paperwork. How does somehow who might not even have a university degree and who has simply passed a licensing exam earn thousands of dollars for potentially a few hours work?
And, finally, with the Internet, eBay and the entrepreneurial savvy of thousands of businesspeople, how has the full-bore real estate commission remained dominant? Why have discounters failed to get significant traction? via TheStar.com
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{ 2 comments… read them below or add one }
As free market consumers of services or products, we hope to see pricing naturally evolve to provide value.
There’s your problem right there. Faulty assumption. Free market? Come on.
Oh where to begin, and why am I the first to comment. lol
Actually, seeing this reminds me of a youtube video I just watched talking about Redpin (yes, …pin, not …fin). Here’s the link to the video:
http://www.youtube.com/watch?v=ZZzbrftTF0g
This is obviously a comical answer to a serious question, but it seems very fitting.
Something I’ve noticed is that with all the new technology, I seem to be working more to market my clients’ listings on every site possible to gain maximum exposure.
And why don’t people ask this when they’re using a Realtor to help them find a house? Realtors will drive buyers around for weeks on end, only to have the client walk into a builder and buy the house without representation. I guess if someone else is paying the commission, it’s not a problem. Enjoy the video, and maybe after I wake up a bit, I’ll have a better answer to the question.