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New Math On the Old Commission
The do-it-yourself approach was "a complete disaster," says Dan Kilcoyne, with his wife, Shira, and daughter, Madeline, at their new home.
(By Ricky Carioti -- The Washington Post)
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The most effective way to create real price competition is to bust that system and end commission splits between brokers who represent buyers and sellers, he said.
"The effect of the split is to make it extremely disadvantageous for any seller to list a split below 3 percent in most areas," Brobeck said. If they do, the buyer's agent could bypass the house and take clients only to those sellers who guarantee a 3 percent commission.
Also at issue are the multiple-listing services, cooperatives formed by real estate brokers in which all their properties for sale are lumped together in one database. Most of the nation's 900 such services display members' listings on Internet sites that can be accessed by the public.
Last month, the FTC said five multiple-listing services charged with barring the listings of some discounters from appearing on public Web sites agreed not to engage in those practices. The agency sued another two Michigan firms, facing similar charges, that refused to settle.
But traditional brokerages argue that the market is competitive and efficient because of the listing services, as Tom Kunz, president and chief executive of Century 21 Real Estate LLC said at an FTC hearing last year.
"The residential real estate industry is one of the last great industries where entrepreneurs can open up shop next door to the largest brokerage firm in town, join a cooperative group called an MLS and share in their competitor's inventory, invest relatively little in the start-up costs and actually make a living," Kunz said in a statement.
Keim, the Alexandria homeowner, was oblivious to all this when he and his wife, Jane, put up their for-sale sign in June. All he knew is that he didn't want to pay a 6 percent commission.
But a month later, with no potential buyer in sight, he considered hiring a traditional agent.
Then he spotted a flier from RealEstatebyOwnerInc.com, an Arlington flat-fee brokerage.
He googled. He called. He signed up online. For $199, he got a posting on the multiple-listing service, the usual disclosure documents, a yard sign, and some hand-holding from co-founder Michael Schmidle.
A day later, he got an offer that he felt was reasonably close to his $730,000 asking price. He paid the buyer's agent a 3 percent commission and the deal closed in September.
Schmidle, a real estate agent since 1973, formed his company in 1999. Later his wife, Teena, and her colleague Eric Kutch, both former Long & Foster agents, joined him.
