An Englishman looks at the American way of selling and doesn’t get it. Sent in by a reader, this Financial Times article questions why agents in England sell houses at 3% commission while US agents get 6% (5% in Greenwich). Spoil sport!
I’ve mentioned here, many times, what a wonderful monopoly we have here in the real estate world. The state restricts entry into the field, through licensing requirements, fees and continuing ed requirements, and local groups like the Greenwich Association of Realtors does the state one better by charging several thousand dollars a year to join the GAR; don’t belong to the GAR and you don’t get access to our listings, which keeps riffraff from slum towns like New Canaan and Darien out of our pockets.
But the same argument can be made against almost every other business in the modern American economy: lawyers, doctors, barbers, manicurists and even storm window repairmen all benefit from rules limiting competition and each year state legislators oblige them by adding new protective barriers (you now need a license to work as an interior decorator, for instance). Perhaps starting with Realtors is a good idea, but the deregulation of the economy shouldn’t stop there. While I prefer that the doctor or dentist cutting me has completed at least some rudimentary training, I’m perfectly content to have a barber take a whack at my hair whether or not he’s completed 500 hours of barber school. Despite what some women say, a bad hair day is not going to permanently ruin my life and if the barber screws up I can go elsewhere next time.
And if home sellers want to pay smaller commissions they’re going to have to lower their expectations a bit. The Internet is relatively cheap (but by no means free – the real estate advertising sites like Trulia and Realtor.com charge quite a bit for placements and firms like Raveis spend millions keeping their own sites useful and up to date) and is clearly the best way to sell real estate today, but sellers demand more: they want color glossy brochures printed, on coated paper, that they can keep on their coffee table and impress their friends. They demand full-page ads in Greenwich Time even though newspaper ads don’t sell houses. They want their agent to host public open houses every Sunday although again, these don’t sell houses (good for grabbing prospective buyers for other houses, though, which is why new agents usually conduct them for the listing agent). They want agents on call seven days a week, at all hours, to show their house, answer their questions (“why isn’t my house selling, and don’t tell me it’s the price?!” and so on. None of these services are provided by the Internet. None are needed, either, so don’t demand them for free – there’s a disconnect between what sellers need, what they demand and what they’re willing to pay for.
I do think I’m working in an industry with a dying, obsolete fee structure but I’m hopeful that that model will hang around long enough for me to cash out and flee to the Rockies, where I’ll be able to read about my former colleagues’ woes. Fortunately for my retirement plans, there are so many billions of dollars at stake here that the real estate companies should be able to fight a holding battle for at least the next decade, long enough for me to scout out that place in Montana.
Of course, that’s probably what the airlines thought too.