As you can see from our website, we are a real estate brokerage that is doing business a little differently than others. While our company is new, we have been around the real estate business long enough to develop a wish list of things that we would like to see changed.
Some of the items on the list are wishful thinking and will likely never come true. Others are already in the process of changing. Allow us to be idealistic for a moment. We would love to hear if you agree (or disagree).
- Sellers pay the selling agent commission and buyers pay the buyer’s agent commission. – This makes complete sense, doesn’t it? But historically sellers have paid one large commission to the selling agent, who splits it in half with the buyer’s agent. The result is that buyers get to use the services of their agent, and end up feeling that they are not paying anything for the service. In a perfect world, the seller pays his agent and the buyer pays her agent. That allows for open competition on commissions for both the buying and selling side of the transaction, which is the way it should be structured. However, the likelihood of this changing is slim. It has been a long-established business practice to have the seller pay all of the commissions, and changing it will fundamentally alter the relationship between buyers and buyers’ agents. It is easy to see that this would put downward pressure on buyers’ agent commissions, so many agents will not willingly want it changed.
- Real estate data is made available freely to consumers, always – Historically, real estate agents have held on to key pieces of data and restricted what can be shown on MLS listings. This is an easy method to force consumers to contact real estate agents. In the age of the Internet, this no longer makes sense. Our customers should never have to call us if they want to find out a sales history for a property, how many days a property has been on the market, or what day a property has an open house. There is only one data point that should be kept private, which is information that would compromise the security of a home seller. (e.g., security system instructions or times when the owner/seller are not at home) Our local MLS has been making progress here, and certainly the pressure will continue as other sites like Zillow and Trulia continue to push out more and more data that used to be the exclusive realm of the real estate agent.
- Higher education requirements for real estate agents – It is no secret that the bar to becoming a real estate agent is low. In the state of Washington, you are required to have 60 hours of education and pass an exam. In contrast, it takes 600 hours of training to become a manicurist, 1000 hours of training to become a barber and 1600 hours to become a cosmetologist. Keeping the bar to entry this low leaves us with too many agents, a lack of experienced agents, and too many agents fighting for too few commission dollars. Washington has made some progress recently by increasing educational requirements to 90 hours for a first time agent. This is a good start, but we would like to see even higher requirements.
- A single, unified online listing database – Real estate brokers and agents waste a lot of money recreating property search features over and over and over again. Both full service and discount brokerages will likely disagree with me here, as most want to create a web search feature that differentiates them from competitors. From a consumer’s perspective, this does not make sense. Wouldn’t it be ideal if there was a single, really awesome website where all brokers put their listings and you could easily search? The MLS databases already exist to enable this to happen, and the MLS organizations would be logical candidates to host such a site. However, the MLS is controlled by brokers who want to direct traffic to their own sites. My contention is that brokers should compete on service, market knowledge, and price, not on their ability to create a fancy search website.
- Transparency in the mortgage industry – Throughout my years of real estate investing, I have had mortgage brokers attempt to rip me off on numerous occasions. I have caught it countless times on my client’s HUD statements as well. Mortgages and mortgage pricing are complex and confusing to most people, but I fail to understand why the industry cannot adopt simple consumer-friendly policies. There should never be an opportunity to slam a buyer into a higher interest rate at the last moment (and pocket the proceeds). If the buyer requests a rate lock, the broker should lock the rate and provide written confirmation. If the borrower does not need more cash to close the loan, the loan is sold at par with no Yield Spread Premium (YSP). If the borrower needs additional cash, the YSP is accurately disclosed and the buyer is made aware of the loan pricing matrix to see how the interest rate has changed to reflect the additional cash received from the lender. Lastly, and most importantly, the mortgage broker discloses how they are paid, and there is no opportunity to randomly change this. Seems simple, doesn’t it? Being a mortgage broker is a lot of work and they deserve to be paid for that work. I am simply advocating for tougher consumer protections to be in place.
What changes would you like to see in the real estate industry?