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The News and Observer
June 21, 2005
Discount Brokers Fight to Keep Home Listings on Web
6/21/2005
Discount real estate brokers who rely on the Internet are fighting a move by more traditional Realtors to limit their access to potential buyers.
At least four discount brokers filed complaints with the state Attorney General's Office last week over a plan by a group within the Raleigh Regional Association of Realtors to block most of their property listings from reaching hundreds of Web sites. Those sites include Realtor.com, the largest clearinghouse of homes for sale in the country.
The move would surely affect consumers, who rely increasingly on the Web to shop for and market their homes.
Traditional real-estate companies offer a range of services that include finding buyers and sellers, showing properties and negotiating transactions. They usually get about 6 percent of a home's selling price.
Full-service real-estate brokerage firms in the Triangle are considering a plan that would make it harder for discount brokers to reach home buyers online. Full-service agents are getting more competition from discount brokers, many of whom rely primarily on the Web to sell properties.
What discount or limited service real estate agents do: They offer limited service plans to help cost-conscious consumers buy and sell homes. For sellers, that means rock-bottom commissions or flat fees for listing homes on national and local Web sites while leaving most other responsibilities up to the client. Some provide made-to-order services for clients who want more help. For buyers, discounters provide cash rebates, gift cards and other incentives designed to increase the volume of business while charging less per customer.
What traditional agents do: They not only list homes on the Internet but also conduct showings, negotiate transactions, manage inspection issues and provide extensive consultation to clients. Most are unwilling to negotiate prices or tailor services. They receive a percentage of the home's selling price in payment.
Discount or limited-service firms, however, might get lower commissions or charge only flat fees for listing homes on the Internet. They leave the seller responsible for everything else, including open houses and negotiations. Anything above that can mean extra charges.
The seller still pays a 2 percent to 3 percent commission to the buyer's real-estate agent, but the savings can be substantial -- $4,000 to $6,000 on a $200,000 home and $10,000 to $15,000 on a $500,000 home.
If their homes were no longer distributed to national and local Web sites, discount brokers say, they would be cut out of the market. Those sites are their primary avenue of business.
They also say they are being singled out by the Triangle MLS, the association's information exchange responsible for the proposal to limit access, despite the fact that they are members who pay the same dues as full-service brokerage firms.
Raymond Larcher, who heads the Triangle MLS, said no actions have been decided on but said the proposal is designed to protect the accuracy of information on the Internet, and not to prevent Web-based discounters from reaching customers.
Realtors who support the plan argue that consumers are better served by full-service agents who can help negotiate transactions and deal with any complications.
"The largest financial transaction an individual is ever going to make is the sale and purchase of his home. That person needs someone during the transaction representing their interests," said Tim Kent, executive vice president of the N.C. Association of Realtors.
The fight goes beyond the Triangle. The National Association of Realtors has lobbied lawmakers in at least five states to impose minimum-service requirements for real-estate brokerage firms. It backed off last month when the Justice Department got involved but has since encouraged local chapters to push their own rules regarding discount firms.
The stakes are high for consumers.
While discount brokers have etched a mere 2.2 percent market share in the Triangle, according to MLS figures, they are gaining popularity swiftly. And analysts say they are forcing down the commissions typically charged by traditional Realtors.
Real Trends, a trade publication, estimates that commissions paid to brokers fell to an average of 5.1 percent last year from about 6 percent in the early 1990s.
"They're discriminating against us because we're becoming a popular choice for consumers who want to pay less," said Glenn Wallace, a Durham accountant who launched discount brokerage My Dog Tess three years ago.
My Dog Tess charges a flat $500 to post a client's home on the Triangle Multiple Listing Service, which is sent to hundreds of national and local Web sites.
If the Triangle MLS group follows through on its plan, those feeds will cease to include homes listed under "limited service."
"This is clearly an effort by larger firms to weed us out by discouraging our practice," said David Wilson, owner of discount brokerage Carolina's Choice Real Estate in North Raleigh.
Larcher of the Triangle MLS said any changes in how MLS data are distributed will apply to all member firms.
But discounters say that full-service firms generally do not provide limited services and therefore would not be affected. The top five discounters in the Triangle account for about 72 percent of all limited service listings, according to Wallace's complaint to the Attorney General's Office.
Other critics say the proposal will undermine consumer choice.
"The problem, both ethically and economically, is that the industry is trying to maintain a virtual monopoly," said Noah Pickus, associate director for the Kenan Institute for Ethics at Duke University.
"In every other business, from travel agents to stock brokerage, technology has increased people's choices between pared-down service and higher-end service models," he said.
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