Real Estate Industry Change - Results from major lawsuits against the real estate industry
The real estate industry in the United States boasts a rich history spanning over a century. Yet, despite its longevity, it has often operated below optimal efficiency. As someone who has dedicated two decades to this field, I firmly believe that now is the time for significant change. The recent lawsuits against the real estate industry and the settlements agreed to from those, have the potential to be the biggest catalyst for change. If you are a homeowner, a family member is a homeowner or you someone you know and love is looking to enter into homeownership, this message is for you. The goal of the changes is better service and lower cost to the consumer.
So, why has the status quo persisted for so long? The answer lies in several factors. Firstly, most individuals interact with the real estate market only a handful of times in their lives, leading to a complacency with existing norms. Additionally, the influence of powerful trade groups, such as the National Association of Realtors, has often prioritized the interests of its members over those of consumers.
Let’s take a journey through the evolution of modern real estate and explore the opportunities for transformation:
Origins of Modern Real Estate: The roots of the modern real estate industry can be traced back to the early 1900s, driven by a pressing need to protect the rights of homebuyers and sellers. Before this, the real estate landscape resembled the Wild West, lacking regulation. The emergence of the National Association of Realtors brought much-needed standardization, ensuring the safeguarding of people’s rights.
The Flawed System: In the past, both the buyer’s agent and the listing agent technically worked for the sellers. Consequently, the tradition of the seller paying both agents was established. While this arrangement made sense within the flawed system, it wasn’t ideal. The 1980s marked a pivotal shift: buyer’s agents began exclusively representing their buyers, while listing agents focused on the seller’s best interests. However, the tradition of seller-funded commissions persisted.
Hidden Commissions: Buyer’s agents have historically been compensated through commissions paid by the seller. Unfortunately, buyers often remained unaware of the amount offered to their agent. Regardless of an agent’s experience or professionalism, all received the same payment—a practice that didn’t necessarily align with the quality of service provided.
The Opportunity for Change: For the first time in generations, we have a real chance to reshape the real estate landscape. Let’s reimagine compensation structures, transparency, and consumer-centric practices. By doing so, we can create an industry that truly serves the needs of buyers and sellers alike.
Here's how we can make it happen:
Eliminate Uniform Payment System: Historically, all buyer agents received the same compensation, regardless of their experience or the quality of service they provided. This system, while convenient, didn’t necessarily benefit consumers. New agents with minimal experience were paid the same as seasoned professionals with a proven track record.
The Need for Change: Lawsuits and evolving industry dynamics have paved the way for change. However, it’s essential to recognize that these changes won’t automatically take effect. We need an informed consumer base to drive the implementation of new rules.
Empowering Buyers: The most significant shift is that buyers are now responsible for determining the fee they pay to their agent. This change democratizes the process, allowing consumers to choose the type of agent that best suits their needs and budget.
Options Galore: With this new approach, buyers have several options:
Young and Ambitious Agents: Take a chance on a fresh, up-and-coming agent at a lower price.
Experienced Professionals: Invest more for an agent with a proven track record.
Negotiation Power: Engage with experienced Realtors to strike a balance between great service and cost.
A Free Market Approach: By introducing flexibility, we’re bringing the principles of a free market system to real estate. More choices empower buyers and sellers alike.
Payment Dynamics: Contrary to common misconceptions, this change doesn’t mean buyers must pay their agent out of pocket. Negotiating the payment as part of the overall offer remains an option, with fees still covered by the seller.
Benefits for All: Ultimately, this shift benefits both buyers and sellers. It strengthens the industry, fosters consumer-friendly practices, and enhances cost-effectiveness.
Remember, knowledge is power. Share this message with fellow homeowners and future buyers—it’s a pivotal moment for the real estate landscape!
There are more changes that need to be made. Follow me as I explore those in the coming days.