Last week, the National Association of Realtors, one of the nation's largest trade groups, reached a landmark $418 million settlement over an alleged conspiracy to inflate real estate agents' commissions. Some say the settlement signals the end of real estate agents as we know them. But an award-winning finance professor specializing in housing economics says the end of this particular profession has been coming for some time.
In fact, Andrew C. Spieler, distinguished professor of business and finance at Hofstra University, likens real estate agents to travel agents. Like travel agents, real estate agents were once information “gatekeepers.” Because they had access to listings on the MLS that consumers couldn't find on their own, buyers had to “rely” more on agents to even begin their home search, Spieler said. luck.
“We just don't need them,” he says of both travel agents and real estate agents. “So there are still some, but the industry will be compressed.” Spieler is an award-winning academic who has won several industry awards for his real estate research.
It's not rocket science, he says. It's the internet. Homebuyers can access almost all the information they need to purchase a home online. His websites, such as Zillow and Realtor.com, allow consumers to get nearly all the information they want, as well as property photos.
Spieler said questioning the use of a real estate agent was “inevitable even without a settlement.” “If you think about what an agent can do for you, it's very different from what they used to do for you because there's so much more information available on the internet. And I think you are.”
Before the advent of the Internet (and more specifically, online real estate markets), homebuyers had to “rely” more on real estate agents to show them inventory, he says. In fact, it was difficult to even start looking for a home “unless you happened to drive by and someone had a for sale sign.” In the old days, a real estate agent would just print out his MLS listing information (which only they could access). [they’d] We’ll send it to you via email,” Spieler said.
“Now that part of the process has been completely removed,” he says. “Buyers have more information. And for me it comes down to 'What am I paying for as a buyer?'”
In fact, Spieler says the main purpose real estate agents now serve is to close deals with “minimal stress.” They are also useful in situations where a buyer or seller needs to act quickly to avoid “mistakes” in the transaction.
Let's talk about commissions
Returning to the NAR settlement itself, another major concern that buyers and sellers have when using a real estate agent today is commission rates. NAR has agreed to pay $418 million in damages across several antitrust lawsuits, including a $1.8 billion judgment handed down last Halloween. These findings revealed that NAR and other brokerage firms colluded to inflate real estate agents' fees. NAR still denies wrongdoing in these cases, but said it will block compensation offers to brokers on the MLS and require users to complete written representation agreements with buyers.
Fees can be especially tough for buyers and sellers of expensive real estate. For example, take home $2 million. At his standard 4% commission rate, the real estate agent who participated in the transaction would have made $80,000 (although this figure would be divided among the buyer's agent, seller's agent, and broker). Masu). Commission rates are typically 4% to 6% of the transaction price.
“The cost is high,” Spieler said. “And for what? In some cases, you can sell a house quickly. You find that person and you're shuffling through papers. That's a lot of money when you think about it.”
Analysts suggest that Americans collectively pay about $100 billion in real estate commissions each year, which could be reduced by 30% as a result of the NAR settlement. Such a steep decline in fee income has led some experts to believe that this does not mean the end of real estate agents, or, in Spieler's words, a significant “shrinking” or downsizing of the profession. It is claimed that There are currently approximately 1.5 million real estate agents in the United States.
But other real estate experts argue that the NAR settlement won't make much of a difference in the long run.
“I think we're facing a bit of a major transformation, but ultimately we'll find a workaround that will get us back to doing a very similar business as we do now,” Ken Johnson said. I am. said a former broker and current associate dean of the College of Commerce at Florida Atlantic University. luckAlena Botros.
But the NAR settlement means real estate agents' commission income could start to decline. Real estate agents may want more deals, but real estate is not a “commodity” like stocks, Spieler said. Additionally, inventory levels are historically low, reducing the opportunities for business.
That would “keep some talent out” of the real estate industry, Spieler said. This means that the industry's profits will decrease. We hope that the number of agents is definitely decreasing. ”
