The question is whether RE agents can compete on price, and WSJ gives strong evidence that the ability to do so is restricted in a lot of states in a way that’s orchestrated by RE industry lobbyists. TX may be an exception.

Wish I could elaborate more, but am pressed for now.

Thanks for the points.

Our recent legislation in Texas was meant to cure a problem that was created when Discount Brokers would list a property in the MLS and then, in the comments, instruct the Buyer’s agent to “submit all offers directly to Seller”.

It has always been a violation for a real estate agent to go around a listing agent and try to deal directly with a seller. In fact, an agent can lose their license for an ethics violation like that. So it created a problem when a listing agent would instruct a buyer’s agent to violate Texas Real Estate Commission rules.

The new law clarifies this and allows the consumer to still purchase a minimum level of service, but outlines the circumstances under which a buyer’s agent can work with a seller who has chosen an anbsentee listing agent. This actually makes it possible for agents to legally work with Discount Brokers whereas before, many Buyer’s agent simply would not deal with those listings at all because they could not legally do so.

But that doesn’t mean that there isn’t cartel-like behavior to protect the “Full Service” broker as noted.

I would think that corporations doing frequent relos like P&G would be in a position to negotiate rates in the 3%-4% range if they weren’t hamstrung by a lot of state laws.

Also you still have the fact that commissions in other countries average 1.5% lower. There must be a reason for that.

I am a Realtor in Austin TX. Consumers are free to choose from many different Discount Brokers, or to interview and negotiate fees with any number of full service Brokers when choosing a real estate agent to list and sell their home in Texas. There is no restriction whatsoever on the commission rate that a consumer and a real estate agent can agree upon.

Austin currently has a Broker running heavy radio spots (disparaging “high commission” Realtors) offering a 1% commission (the ad ommits the fact that the 1% is for the listing side only and there is a $3,500 minimum). Other companies offer a flat $500 listing fee to place a home in the MLS, plus additional services ala cart.

Discount Brokers have been around Austin now for at least 10 years. None of these companies have captured significant market share. Perhaps this is because Austin’s real estate prices have remained flat for the past 4 years while many other parts of the country have seen the tremendous price increases we read of so often. I personally do not feel threatened by nor hold any ill will toward Discount Brokers. It just isn’t the business model I choose, and I am able to justify the fee I charge to those who choose to utilize my knowledge and experience.

The truth is, real estate is a hard business. The latest NAR salary survey shows the average agent with less than 5 years experience averages $34K per year in commission earnings. Subtract from that amount the business expenses and you see why almost half of new agents wash out of the business in the first year. Marketing and selling real estate just isn’t as easy as many think. If Discount Brokerage was as desired and needed as the WSJ article seems to claim, full service Brokers would have been run out of business by now. Why is that? It’s the same reason some people drive a Volvo while other drive a Yugo. The consumer can choose the level of service they desire and most seem to desire a full service Broker.