All Forum Posts by: William Morgan

This entire thread is postulating what might change in the industry.  As I said I love my agents, they earn every dollar and I'm happy to pay them. I paid my broker $7850.00 to list my last flip.  I will be paying her ~$18,000 and $16,500 for listing my next two. For me it's worth it. But many consumers feel it shouldn't cost them 3% of their homes value just to list - is just not commensurate with the service, it's not a product of a competitive marketplace and this is why I think it might see change in the future.

"In stark contrast to other agency-based consumer service industries, real estate agents have been remarkably effective at maintaining margins and market share. One possible explanation for the success of real estate agents is collusion, and consequently the industry is facing regulator scrutiny." University of Chicago and NBER (source)

The DOJ and the FTC have brought several suits against Real Estate Boards for engaging in behavior that restrains trade [1] [2] [3] [4].  

Anti-competitive practices are well known and the been noted by several sources including:

1. The New Your Times - The 6 percent Solution (link)
2. Pepperdine Law Review - The Real Estate Brokerage Industry and Antitrust Implications: (link)
3. The Economist - The great realtor rip-off (link)
4. Consumer Federation of America: How the Real Estate Cartel Harms Consumers (link)
5. The American Anti-Trust Institute - Competition in the Residential Real Estate Brokerage Industry: (link)

Anti-consumer practices are openly acknowledged right here on BP! [1] [2]. 

Only strained logic would contend this is consumer friendly.  If anything is going to change in the current Brokering model, I speculate it will be with the commission structure.  There are numerous viable alternatives nipping at their heels.

It happened to Travel Agents

It happened to Stock Brokers

It's happening to Insurance Brokers

I think you will see it happen in Real Estate listings.

Try not to take it personally

@Jay Hinrichs I understand where you are coming from.  I wouldn't pay my agents 1 penny less than I do now and often send generous gifts after the sale for outstanding work. They do great things for me that make it well worth it.

But the cost of service for the average consumer is not set by the "free market", it's set by perverse mix of a government enforced, private monopoly.

I must admit I do find it difficult to justify 3% to list a property when there are a plethora of alternately viable platforms, were it not for aggressive lobbying and litigation efforts of the NAR. Technology has revolutionize the travel industry, the insurance industry and a host of others.

To be selfish I do not wish it to change at all.  The high cost of commissions make alternative ways of selling more attractive and feasible.

I think the real question is how long can they sustain their inflated commissions?

In most other modern countries (EU, Japan, etc) commissions total 2-3% for the entire transaction, in the US they are 5-6% for the same level of service. The reason, as noted by several economists, is the NAR's legal cartel with one of the largest Political Action Committees in the US. The NAR spent $55 million in lobbying in 2014 ( the 2nd highest that year). All of this money is to ensure that the vast majority of property sales are channeled through their affiliates.

The apparent purpose of all that lobbying is to artificially limit who can be compensated in a RE transaction and what venues a RE transaction can take place.

Licensing is not administered by a government agency but rather a private entity who benefits from the licensed activity. A more obvious conflict of interest can hardly be found. Having the licensing authority benefit from all transactions that fall within its purview is the reason that real estate commissions are 200-300% higher in the US than elsewhere in the modern world.

That is why a listing agent can command 3% of your home price for listing a house on the MLS. 

The free market wants to innovate. The NAR wants to defend it's monopoly. My money is on the NAR.

Grant Cardone -a great  motivational speaker, businessman and RE investor.

Where did you find these charts? - The Economist websites such as the site "Calculated risk" often publish these.  They can be found elsewhere too.

"Can you shine some light on the chart that is labeled "Price to Rent"...   Price to rent is a ratio that compares the average cost of purchasing a home to the average cost of renting a home. When prices of houses diverge from the rental of houses it has an implication on the valuation of a house in general - i.e. are they overvalued?  For example notice how much more expensive it was to purchase an average house than it was to rent an average house during the Bubble years ( circa 2007).  Prices diverged two standard deviations above  historical norms which sounded an alarm (to some) that housing prices were out of touch with reality. When you look at where they are now you can see less cause for alarm.

I'm not quite sure what the data categories are.  The chart has 3 lines which represent 3 different data sources - Case Schiller National, Core Logic and Case Schiller Composite.

I have two properties I need appliances for.

When you say "They rang it up for $___" is this happening automatically or do you have to apply some sort of coupon code or call the Commercial desk?  So far when I put the counter-top depth fridge (normally $1699) in the cart and check out online I am getting $1363 + 109 tax for a total of $1473.

Is there something I'm missing?

Exactly.  I love Grants books -10x is among my favorites.  But keep in mind Grant himself explains that he has become successful by working hard and taking action, NOT by correctly forecasting and timing the RE market (or any other). He did not predict and position himself ahead of the 2007-2011 RE crash - to the contrary.

Data provides much needed clarity in the face of "hunches" or best guesses. 

Presented without commentary:

@Arianne L. That's fantastic info, thanks!

@Kimberly H. Google forms can be completed on a smartphone too.  I avoid "free form" answers whenever possible so it takes only a few minutes to complete.  There are a couple of format tricks to make it work smooth.  POM me if you want to see an example.

We use Google Drive extensively to keep things systematized while attempting to reduce work.

We have a Master procedures that link by reference sub procedures designed so someone off the street can probably do the work. These procedures will contain forms, pictures or video's. For example, the Master Procedure to fill the unit will cite sub procedures on how to "Advertise using Postlets", "Set-up auto reply", "Choose applicants", "Show the Unit" etc. The idea is to be able to step through necessary tasks efficiently while having all the tools readily retrievable.

Since @Chris Bingham you had all of the basics covered, here are a couple of tricks we use that I didn't see mentioned yet. When applicants make the initial email they receive an auto-reply email containing instructions for:

1. a Google Drive link that allows them to download our PDF application
2. a link to a Google Form that is a pre-screen questionnaire based off of Brandon Turners questionnaire in his Rental how to book. This will dump info into a spreadsheet making it easily retrieved/saved. The Spreadsheet is also configured to turn a cell red alerting us to an undesired answer to a question, i.e. how many people in the household smoke? (anything more than "0" will turn red).  This questionnaire works so well I'm tempted to convert the formal application info a Google form.
3. a Link to a video walkthrough of the property

The result is that you quickly eliminate people who do not qualify without having to spend time with them.

Electronic Records

Everything is scanned.  I highly recommend Epson Workforce cloud ready printers with their document feeders.

Trello

On top of Google Drive we use Trello to organize track and collaborate.