Posted by nithi.vivatrat on May 27, 2009
As I talk to folks about the SmithAdams fee-for-service approach to real estate brokerage, I hear responses ranging from this:
“Way to go! It’s time to get rid of the commission model!”
to this:
“I don’t know – do you really think fee-for-service will replace commissions?”
To both, let me say this: hold your horses. We have no expectation that the fee-for-service model will completely replace the traditional commission model.
Why should there be only one way? You can hire an attorney on retainer or on contingency. We believe the same options should exist for real estate brokerage. No single way will be the right fit for everybody, so consumers should have choices.
That’s what SmithAdams is really about: giving consumers choice in real estate brokerage. No two consumers are identical — each person’s needs and wants are different. Consumers should be able to choose what services they need and are willing to pay for. If a consumer wants to pay based on a commission fee model, so be it. Likewise, if a consumer prefers a fee-for-service, pay-as-you-go model, that should be available too.
Here’s my long-term vision of a world of peaceful coexistence and competition between the two fee models. As more and more consumers opt for a fee-for-service approach, there will be more scrutiny of fees by consumers as well as demands for transparency. Commission-paid agents will need to better link their value-add to their fees. The good ones will have no difficulty doing so and will continue to thrive in this environment. The ones who cannot will eventually leave the profession. Over the long run, the overall quality of service to consumers should rise — whichever fee model an individual consumer chooses. Sounds like a good outcome to me. What do you think?
Posted by nithi.vivatrat on May 25, 2009
It is not uncommon these days for people planning on selling their homes to consider doing it as For Sale By Owner (FSBO). The lure of not having to pay a commission to a listing agent is powerful. Likewise, the proliferation of online real estate resources is making it increasingly easier for individuals to successfully market their properties without the assistance of an agent; this is especially true as a growing proportion of buyers find homes to purchase via the internet versus using an agent.
SmithAdams meld the savings and control of the FSBO route with the benefits of a full-service brokerage. Using our flat-fee, a la carte seller services, sellers can choose what services they need and are willing to pay for.
With SmithAdams, a DIY seller is still in control. We’re there when and if you need us, and there’s no commission for you to worry about. If you’re thinking about FSBO (and if you’re selling a home, you should), then please consider adding SmithAdams to your team.
Posted by nithi.vivatrat on May 21, 2009
These days, it is not uncommon for folks shopping for homes to do a lot of the tasks traditionally associated with a real estate agent: surveying neighborhoods, identifying listings, touring properties (via open houses), analyzing comparables, even contacting homeowners. The DIY home buyer has been greatly empowered by the proliferation of online real estate information resources such as Zillow, Trulia, and Hotpads that have eroded the information advantage of brokers. The most difficult part of the process for a non-professional, not surprisingly, starts after that: actually making an offer, negotiating the best deal possible, and working through the process to get to a successful close. This is where a real estate professional can add the most value. It is also, in my opinion, where the commission model makes the least sense.
Enter SmithAdams. Using our flat-fee, a la carte buyer services, the DIY home buyer can have the best of both worlds: no commissions but access to a real estate professional on an as-needed basis. Similarly to the way one would consult a lawyer, accountant, architect, or other professional on a fee-for-service basis, one can use a SmithAdams consultant – and pay only for the time used.
So to all you DIY buyers: SmithAdams is your trusted advisor, free from the influence of commissions and available at a reasonable cost. Don’t just take my word for it – read this case study of DIY buyer who used SmithAdams to get the job done.
Posted by nithi.vivatrat on May 18, 2009
Given how much of the discussion on this blog revolves around comparing the commission fee model to the SmithAdams fee-for-service model, I thought you might be interested in this lively discussion about brokerage commissions at ThinkOOB.com. It’s great to see that we are not the only ones actively thinking about this issue. I hope my contribution added to the dialogue.
ThinkOOB.com was created by Al Lewis, founder and president of Disease Management Purchasing Consortium International (DMPC) as well as all-around big thinker, to be a “community blog that rewards lay people for coming up with solutions to society’s problems.” To this end, ThinkOOB.com is offering a million-dollar prize to the first idea originated there that becomes policy at the state or federal level. There are some great discussions going on at that site.
In the context of government economic policy, Al coined a phrase that I love: the “methadone economy,” equating the new federal stimulus programs to a substitute — but still very addictive — for the “heroin” of the bubble economy. Great turn of phrase.
Posted by nithi.vivatrat on May 15, 2009
Some of you may have noticed that Christine Varney, Assistant Attorney General and head of the Justice Department’s Antitrust Division, made headlines in the past few days by clearly indicating the beginning of heightened antitrust enforcement. She also recently withdrew a Bush administration report that advocated less aggressive antitrust laws.
What you might have missed is the Justice Department’s announcement last week of a settlement with Consolidated Multiple Listing Service, Inc. (CMLS) of Columbia, SC. The Justice department argued that CMLS implemented anti-competitive restrictions such as prohibitions on home offices and “active involvement” requirements that would essentially rule out fee-for-service brokers who only charged for the specific services the consumer desired (a la SmithAdams). The result, according to the settlement: “Columbia-area home sellers [were] unable to hire brokers with innovative business models such as ‘fee-for-service’ brokers who would provide only the services the sellers desired at a lower cost than full service brokers typically charged.”
Fortunately for consumers, CMLS agreed to repeal these anti-competitive rules to settle the case. See the full text of the CMLS settlement here on the DoJ Antitrust Division web site.
Assistant Attorney General Varney commented in the DoJ press release:
“Today’s settlement will remove unlawful impediments to competition for real estate brokerage services in the Columbia area and will lead to more choices and lower brokerage fees for South Carolina consumers. For most Americans, purchasing a home is the most significant purchase of their life. This settlement demonstrates the Department of Justice’s continuing commitment to preserve competition in the real estate brokerage industry.”
Score another point for consumer choice.
Posted by nithi.vivatrat on May 13, 2009
Three little letters every real estate agent spouts. It has been called the “black box” of real estate, was the center of a major antitrust lawsuit from 2005-2008, and may be the key to selling (or buying) your home. What is MLS and why does it matter?
MLS stands for Multiple Listing Service. The singular use of “service” makes it sound like a monolithic system; in reality, there are actually many separate MLS systems across the country, one per region. For instance, the Mid-Atlantic MLS, run by Metropolitan Regional Information Systems, Inc. (MRIS) happens to be the largest real estate database in the country, listing properties in Maryland, Northern Virginia, Washington DC, West Virginia, and Pennsylvania.
An MLS system is a database where licensed real estate professionals list properties they represent for sellers with all the relevant details, such as room dimensions, contact information, tax records, photographs, maps, and of course asking prices. Likewise, MLS is the go-to source for brokers/agents representing buyers to identify prospective properties to show to their clients. WAIT! There is more to read… read on »
Posted by nithi.vivatrat on May 11, 2009
My apologies for my hiatus — lots of activity at SmithAdams keeping me busy, but I hope to get back on the blogging horse starting now.
I hope everyone had a wonderful Mother’s Day weekend. You might have missed Kenneth Harney’s Post article titled “Challenging Brokers’ Add-On Fees.” In it, Mr. Harney explains how U.S. District Judge Virginia Emerson Hopkins ruled against RealtySouth for charging clients an “administrative brokerage commission” (or an “ABC” fee). The court found no evidence that the consumer received any additional service for the fee beyond that which was already covered by the regular commission, violating a federal real estate settlement statutory ban against “unearned” fees.
This is good news for those of us advocating greater transparency and choice for consumers in real estate. Extra fees should not be surreptitiously slipped into an already complicated process. At SmithAdams, we believe that consumers should have total control over what services they choose and pay for. This ruling reinforces that competition, consumer choice, and the laws of supply and demand should determine pricing — not unilateral action by the provider of the service. Hooray!
