Boston.com’s real estate blog on fee-for-service model

Posted by nithi.vivatrat on June 26, 2009

BostonRealEstateNow, Boston.com’s real estate blog, had this post yesterday discussing the fee-for-service model of real estate. The post specifically mentioned Bill Wendel of Real Estate Cafe, a pioneering fee-for-service brokerage in the Boston area. Bill was also cited in this 2004 WSJ article about differing fee models in real estate.
The BostonRealEstateNow makes these two very good points:

Consumers have three choices:

• Buy and sell on your own.
• Pay a broker per hour; maybe pay for services that don’t lead to a purchase or a sale.
• Pay a broker by commission; pay nothing unless the purchase or sale happens. (There are some hybrid models that give rebates on commissions, but you are still paying commissions.)

And

The fee-for-service model is perfect for a consumer who is self-motivated and interested in doing a lot of his/her own footwork and research.

I made this comment — hopefully it will be approved soon:

Down in the metro DC area, SmithAdams (http://www.smithadams.com) offers consumers a fee-for-service alternative to the commission mode of real estate. Your statement that “The fee-for-service model is perfect for a consumer who is self-motivated and interested in doing a lot of his/her own footwork and research” is spot-on — that is exactly our sweet spot, as is a growing segment of consumers who are uncomfortable with certain aspects of the commission model (such as the potential for conflicts of interest).

You are right that many consumers fear paying hourly — but more and more of them are doing the math and making individual risk/reward calculations that lean towards choosing a fee-for-service model. In a world where the information advantage of the broker over the consumer has eroded significantly, many consumers just want to pay a broker to help them through the transaction — and pay the same way they would pay a lawyer — by the hour, even on a non-contingent basis.

You put it perfectly — the fee-for-service model is just one option that consumers should have — and each consumer can make the choice right for him or her. The commission model will always be a choice for many consumers, but the fee-for-service option should be there for others. Bill Wendel is definitely a pioneer in this area, to the great benefit of Boston area consumers. Thanks for your post!

An industry with its own set of rules

Posted by nithi.vivatrat on June 23, 2009

Just now, I was about to press “publish” on a well-sourced post containing general, publicly-available news (nothing nasty) about a large brokerage company, but then I suddenly realized it could be misconstrued as a violation of Section 15 of the NAR Code of Ethics. It got me thinking — it’s interesting to be part of an industry which essentially has its own set of rules beyond standard state and federal laws, covering areas of behavior such as libel and non-competition. Is the implication that the same laws that govern behavior in other industries are not adequate? Can it be proven that these rules “improve behavior”? And do these rules benefit the consumer, as well as the industry participants?

I don’t have the answers to these questions, though I am forming my opinions — I just throw that out there for folks to think about.

Alphabet Soup: Understanding MLS and its Importance to Sellers

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 »