Pittsburgh Homes Daily

Money Magazine’s Real Estate Survival Guide has plenty of fodder for good blogging. I’m pretty sure that I’ll be talking about it again later in the week.

Today’s Post is about the article - Real Estate Agents on the Cheap. The article appears to be long on speculation and short on facts and figures. The thesis of the article is that online real estate websites are unlocking the real estate information once tightly guarded by Realtors, and thus real estate agents will not be able to “command their traditional price” without that information monopoly. I think there are a couple problems with the analysis.

The only evidence provided is an example of a couple that successfully sold their home for sale by owner. Not only is it an insufficient sample size to demonstrate that people will be better off selling their home on their own, but it doesn’t even begin to demonstrate that commissions will drop. The Realtor involved in the transaction was able to command their traditional price - 3 % to represent the buyer.

It’s also unclear that commissions will decrease. First, the increase in commodity prices increases the cost for a Realtor to do business. Why would they drop their prices while costs are increasing? Second, the article makes the rather large implicit assumption that getting a home on the MLS will mean that it will be seen in the databases of all real estate websites and agents in the future. I don’t think that’s a safe assumption - and even if it is, the sheer amount of homes listed in the database could preclude it from having the same impact that it once had. Moreover, if consumers are shunning real estate agents on both sides of the transaction, it is unclear that the buyers will be engaged in a comprehensive and effective search of the entire market. Moreover, I don’t know that a home seller has enough information available to assess the traffic their selected fsbo website will provide - or whether they have to spend thousands listing on every website to make sure that their home gets in front of as many eyeballs as possible. The other problem is that listing on the MLS and an FSBO website won’t do you any good if all potential buyers are searching on Craigslist. The more real estate websites that there are, it may be that more sellers will just be tilting at windmills.

Will Realtors “hold the line’ on the 6% commission? I don’t know - but the article doesn’t even get to first base on the question of whether real estate commissions are, or will, or should, drop.