NAR was actually investigated by the federal government (FTC i think?), who concluded much the same, but lobbying buried the report and nothing came of it.
MLS's maintain power by strictly controlling access to information. they have the most up-to-date and the most detailed information about properties, buyers/sellers and sales transactions, among other things. this allows them to be the arbitors of deal flow, giving their members the advantage.
and this is the linchpin that props up the 6% commission rate. it's classic rent-seeking, since marketing costs have been dropping, as you mention. a truly competitive market would probably put the commission in the 1-2% range.
(i did my MBA thesis on disrupting the real estate industry)
edit: here's one, but i don't think it's the one i was thinking of: https://www.justice.gov/atr/competition-real-estate-brokerag...
The part I've never understood is, as a seller, why wouldn't I want my property to have the largest exposure and the most interested buyers. Presumably, having people getting into bidding wars for something i'm selling is a benefit.
absolutely. the cartel doesn't help the top 2% of agents, because they're good enough to earn the 6% (or higher) anyway, but the monopoly works because the overwhelming majority of interested stakeholders benefit.
(that's not to imply that most agents are lazy though. a stat i dimly recall is that only about 10% of agents make enough to be full time.)
Given some luck/skill and a lot of hard work, maybe they become large enough to start hiring agents themselves, and the cycle repeats.
Source: On the fence about dropping my license right now.
In a given market area there are literally thousands of real estate agents. Even with a 1% discount off the top, what do you think the odds are that the best offer on the market just so happens to be a listing that your real estate agent just so happens to be the listing agent for?
Real estate is a racket.
Realtors are among the most sued profession out there... I'm not sure why you don't think they carry any liability.
I worked for a real estate company building an online real estate service since before the creation of VOW/IDX. Prior to that, the way we got access was through my boss's own real estate brokerage account with the state's main MLS. We expanded to support more MLS's in the area and each one was a huge pain in the ass. We had to have customers who were members of that MLS BEFORE they would give us access to their data. They would limit the data we had access to as much as they possibly could, and had absurd rules about what could/could not be displayed publicly, as well as privately when members of our customers' sites were logged in. It became much easier to get access to the data after the VOW/IDX implementations rolled out at each MLS.
but if you promote free and fair markets, you'd discourage/dismantle this kind of protectionism.
This depends a lot on the price of the house. Selling a million dollar home isn't 10 times more work than selling a $100,000 condo.
You're right, that the majority of the work of a 10 million dollar house is customer acquisition. And this isn't true of a 100k condo.
But this was my point, 3% of a 100k home is close to the competitive market price. But 3% of a 10 million dollar home is pretty far away from the competitive market price.
100x the comission might have 100x the competition. As a seller of the house, you pay more but you also get better agents.
The most successful agents I know close houses twice as fast as other agents. But they close them twice as fast as other agents because they're listing them under market value.
My wife was a real estate agent for 5 years but she got out of it because all of the most successful agents she met were more successful in ways that hurt the client not helped them.
Examples - convincing their clients to settle for homes quickly, convincing clients to list their house less than market value, weeding out easy clients.
It is what it is. RE is not a perfect market because goods really cant be commoditized.
I reiterate my point with one more argument: the average income of a realtor is very low: they make very little money. The number of active realtors is almost perfectly correlated with house prices: that means a highly competitive , and thus relatively efficient, system.
If you are buying a house, the MLS is the place you need to go. And that is mediated by a Realtor or Broker in most cases.
There's a brokerage in Canada now called "1% Realty" which pretty much serves the purpose of getting your home onto the MLS, and doing some very basic sellers agent services. Its whole shtick is that its fee is literally one percent.
In my opinion that level of sellers-agent fee is much better aligned with the actual hours of effort, and operating costs on the part of the listing agent.
Of course it's because of all the efficiencies you mention. Their job is significantly easier than it used to be. They can afford to charge less; they just forgot to tell the general public about that.
Source: I used to be a real estate agent. I left the industry because of BS economic incentives like that and others that incentivize you to not put your client's best interests ahead. That and the ripoff racket that is most brokerage licensing requirements and the arrangements enforced by law (that is heavily influenced by the NAR).
Not to mention housing prices have greatly outpaced inflation and real wages over that same period.
if you have the time have you attempted hosting/selling yourself? I know it sounds ridiculous at mentioning but I purchased my current home without any real estate agents, we did work through lawyers and there were fees there... but likely minimal (I paid under $1500) and I actually enjoyed working directly with lawyers rather than having real estate agents inbetween, this would be my prefered method if I were to sell/purchase again.
In the US the title company does _all_ the actual work in a sale. And takes _all_ the liability. Everyone else is a middle man.
I'm guessing it might be very similar in actual dollars, as there are a number of cities in the US where you can buy a house for $150,000. 3% would be $4,500 USD for a real estate commission. Then the broker would keep a good part. The agent might get $3,000 of it.
That being said, the National Association of Realtors (NAR) and their local branches are the definition of a cartel. My parents owned a real estate agency when I was growing up in the 80s and 90s. Back then, the cost of selling and marketing real estate was much higher. Most real estate advertising was done in print which the broker paid for out of pocket. Cameras used film back then which meant multiple trips to the property to take nice pictures. Someone had to always be manning the telephone because there were no mobile phones. The listing broker would have to arrange a showing with interested buyers and their broker. MLS was a huge printed catalog you would flip through to look for houses your clients may be interested in.
Nowadays, the cost of listing a house is nominal for a brokerage. Advertising is free because all of the real estate sites that consumers visit (realtor.com, zillow) pull directly from MLS. All cameras are digital so you can take that perfect picture the first time. There are now phone apps that automate broker access to houses to show their clients.
There are all of these productivity improvements for real estate agents on both sides of the negotiating table but the commission structure is almost identical to what it was 30 years ago. I believe the standard commission structure has gone from 7% to 6% in thirty years.