Paper Economy: Boo Hoo?

Tuesday, May 15, 2007

Boo Hoo?

Oh.. Boo Hoo.. That mean Lesley Stahl hurt the wittle twade organization’s wittle feewings…

Or so went the National Association of Realtors (NAR) sad, feeble smokescreen of a response to last Sunday’s 60 Minutes segment.

Well before you get all teary, let me remind you that the National Association of Realtors is not only Americas largest trade organization but also the most wealthy and influential Political Action Committee (PAC).

As such, they are routinely called to Capitol Hill to provide “important” testimony as well as certainly calling upon on our representatives (at least the ones they supported with campaign donations) to apply the best influence that money can buy.

Stated plainly, the NAR is far more powerful than any individual American using their campaign contributions and ongoing lobbying to virtually ensure that their interests are represented well in excess of the average consumers.

What happens if there is conflict between what would be in the best interest of the American consumer and what would be in the best interest of the NAR?

Ill let you decide.

The 60 Minutes segment merely stated the obvious, questioning the sense of the traditional 6% broker commission as well as pointing out that in the age of the Internet, the traditional real estate broker services are going the way of the buggy whip.

There were no new revelations in the segment as these are the very same issues many average consumers have asked themselves in recent years after seeing the obvious disconnect between the standard 6% commission Realtors have established and the actual work performed.

Yes, it’s true that, as NAR states, commissions are always negotiable and in fact average more like 5.1% nationally but one should use caution before jumping to the conclusion that Realtor commissions represent a free and efficient market.

The reality is that NAR has worked to prevent competition from limited service brokers who would otherwise charge minimal flat fees or commissions at or below 4% in exchange for services that generally assist sellers in listing their home with the MLS as well as providing a range of other Internet based marketing efforts.

Keep in mind that this attempt to stifle competition is really an attempt to prevent technology from doing what it does best, that is, bringing new and innovative services to the market that dramatically increase the efficiency of existing processes.

As we know very well, this efficiency is often translated to savings in the cost involved of a particular process which can be passed on to the consumer through free and unfettered competition.

Therein lies the real issue for the NAR.

The Mother of all “disruptive” technologies, namely the Internet, is bearing down on the NAR and instead of embracing the change and innovating, they are fighting it tooth and nail in an effort to maintain the status of the traditional full service broker model.

This is certainly NOT in the best interest of the consumer but is this really in the best interest of the association members?

You brokers out there ought to ask yourselves what services you have found to be most impressive recently.

The schlocky listing sites hosted by many full service agencies or the innovative services such as Zillow.com, ZipRealty.com, and Redfin.com.

Remember, it’s your future that is in flux here.

You can either choose to join the trend that will inevitably yield a host of new services and models for transacting the business of real estate, or fight it and likely be left behind in an ever dwindling cohort of “old timers” attempting to provide defunct services.

The complete 60 Minutes segment as well as Lesley Stahl’s post-segment Q&A can be viewed now on BNN!