We know, every story has two sides. But, not often do we think of words as having two sides. Consumerism is such a word. Its definition is to “protect” and “promote” the interests of the consumer. Two very different objectives not at all tied together. Still, the concept of consumerism, however you define it, has become a trendy topic. So we ask, which side of the consumerism coin is the real estate industry? Hint; if you were thinking “both”, you’d be wildly wrong.
Nobody questions the real estate industry’s promotion of consumer interests. They do a great job of that. But, no one who actually knows this industry thinks it protects the consumer in any serious way. Yes, the industry throws a lot of words at how great they are at protecting the consumer, but when it comes to the pocketbook, all pretense of protection quickly flies out the window.
Forget for a second how silly it is to force a home seller to pay the sales commission of the agent they are negotiating against, but why do we have to pay them so much? As we have done every year over the last decade, we will use Inman Park as the example of how little the industry actually “protects” clients.
In areas like Inman Park, with homes having historical DOM’s of less than 25 days, there is NO reason to offer a Buyer’s agent anything more than 1%. People are waiting to purchase these properties. Put a stick in the yard, send a tweet, there is a statistical certainty the home will be gone within a month. Every Listing Agent and Broker knows these statistics well.
Of the 39 sales transactions in Inman Park last year, want to guess how many Listing Agents opted NOT to give away their client’s money? One. Everyone else, willingly, even though they knew they didn’t have to, gave away a 3% commission to the buyer’s agent. Considering the average sale price of an Inman Park home is nearly a $1M dollars, a Listing Agent giving away a 3% commission equals $30K.
Over the last year, if Inman Park could have paid out a Community average of 1% commission, it could have saved their ex-homeowners over $750,000 dollars. “Area Realtors Surprisingly Open About Bilking Inman Park Homeowners of Nearly a Million Dollars”.
That could’ve been a headline. But, the AJC doesn’t write articles contradictory to the mainstream industry. They have all the same stats and can see the same patterns we do but choose not to write about it for fear it will upset the national chains. The Atlanta Business Chronical has people who study business models for a living and yet somehow the 3rd rail of the real estate industry gets a forever free pass. So much for, “Covering Dixie like Dew”.
The fiscal oddities associated with the real estate industry are baked into our culture. How else could we all agree on those buying million dollar homes not having enough money to pay for their own agent? Has there been collusion between agents, Brokers, media and educators? Who knows? But looking at the sales data from Inman Park, it’s pretty easy to see something isn’t right!
Clearly these home sellers were NEVER protected against the real estate industry itself. So, if we are to build a new real estate business model for the future, what happens every year in Inman Park is exactly what NOT to build.
The national franchising of the real estate industry, and how they conduct business, is another relic of the Boomer generation that subsequent generations have yet to clean up. There is plenty of room in our industry for Brokerages focusing on consumerism from the “protection” side of the coin. This is where, we believe the future will lie.
In trying to find realty business models that actually promote consumerism, we keep coming back to the flat fee, ala carte approach of Duffy Realty.
Over the next 2 blogs we will take a deep dive into the flat fee, ala carte business model. What works well, where issues can be expanded. What are the pitfalls of such an approach?
Simply put, the future of real estate can’t be with the same old tired franchise script. Let’s build something new.