{"id":541,"date":"2006-10-15T11:52:46","date_gmt":"2006-10-15T18:52:46","guid":{"rendered":"http:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/?p=541"},"modified":"2007-07-16T21:09:35","modified_gmt":"2007-07-17T04:09:35","slug":"why-the-traditional-real-estate-commission-model-is-broken-and-needs-to-be-replaced","status":"publish","type":"post","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/541\/why-the-traditional-real-estate-commission-model-is-broken-and-needs-to-be-replaced\/","title":{"rendered":"Why the traditional real estate commission model is broken and needs to be replaced . . ."},"content":{"rendered":"

These are the concluding paragraphs of Mark Nadel’s white paper on real estate commissions<\/a>. The executive summary has been quoted all over, but I think this text is more compelling.<\/p>\n

For what it’s worth, I think Nadel has hit a home run. There are things he doesn’t know about, which we’ll get to in a minute. But he has the whole residential real estate industry dead to rights. This is an important thesis. If you don’t make time to read the whole thing, as least read this summing up:<\/p>\n

The traditional, straight percentage-of-sale-price residential real estate brokerage commission does not serve the interests of either home buyers or sellers. Fees are unrelated to the quantity or quality of service provided by brokers and their agents. The rate structure creates little incentive for agents to provide the value-added services of which many are capable, and also produces some serious harms to buyers and sellers. These harms include buyers not being alerted about available homes meeting their search criteria because the listing broker or seller has not offered an attractive fee to the buyer’s broker; and providing sellers’ agents little incentive to invest the effort to raise the net sale price of a home. The traditional commission rate structure has become structurally unsound and should be rebuilt.<\/p>\n

The foundation of a new fee structure should have buyers’ brokers setting their own fees or negotiating with buyers; not relying on standard, default commissions set by sellers’ brokers in the MLS. The traditional practice of sellers’ brokers specifying the fees that buyers’ brokers charge to the latter’s own clients, should be recognized by appropriate governmental bodies as at least an attempt to fix market prices. Antitrust law simply does not permit one firm to attempt to set the price that its competitors charge for a competing service.<\/p>\n

The situation today is very different from that of twenty years ago. At that time, sellers’ brokers noted their co-op fee offer in their MLS listing because they were making an offer to the agents working with buyers to join the seller’s broker in serving the interests of the seller. There was Read more<\/a><\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"

These are the concluding paragraphs of Mark Nadel’s white paper on real estate commissions. The executive summary has been quoted all over, but I think this text is more compelling. For what it’s worth, I think Nadel has hit a home run. There are things he doesn’t know about, which we’ll get to in a […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_crdt_document":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[4,6,5],"tags":[],"class_list":{"0":"post-541","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"hentry","6":"category-disintermediation","7":"category-marketing","8":"category-real-estate","10":"no-featured-image"},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":5446,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/5446\/offering-more-service-to-buyers-for-a-bigger-slice-of-the-buyers-agents-commission-redfin-moves-closer-to-traditional-real-estate\/","url_meta":{"origin":541,"position":0},"title":"Offering more service to buyers for a bigger slice of the buyer’s agent’s commission, Redfin moves closer to traditional real estate","author":"Greg Swann","date":"November 6, 2008","format":false,"excerpt":"When I represent buyers, I see my biggest responsibility as taking the fear away. Yes, I need to find and show houses. Yes, I need to write contracts and supervise inspections. Yes, I need to husband everything through the lender and the title company. But the job of jobs is\u2026","rel":"","context":"In "Disintermediation"","block_context":{"text":"Disintermediation","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/disintermediation\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":555,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/555\/defining-the-divorced-commission-a-short-hand-term-for-understanding-alternative-real-estate-compensation-models\/","url_meta":{"origin":541,"position":1},"title":"Defining the Divorced Commission: A short-hand term for understanding alternative real estate compensation models . . .","author":"Greg Swann","date":"October 19, 2006","format":false,"excerpt":"I just spent a very informative hour on the phone with Jeff Brown, and I want to summarize what I took away from our conversation. First, Jeff has a very different understanding of the term \"co-broke\" compared to the way it is used in Arizona. When we went to essentially\u2026","rel":"","context":"In "Blogging"","block_context":{"text":"Blogging","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/blogging\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":3181,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/3181\/nardoj-settlement-a-tale-told-by-an-idiot-full-of-sound-and-fury-signifying-nothing\/","url_meta":{"origin":541,"position":2},"title":"NAR\/DOJ settlement: “A tale told by an idiot, full of sound and fury, signifying nothing…”","author":"Greg Swann","date":"May 27, 2008","format":false,"excerpt":"After years of song and dance, the DOJ reached a settlement with the NAR that seems to have achieved absolutely nothing -- except the waste of a bunch of tax and dues money. At least that's what you would think if you read nothing but the NAR's spin. In fact,\u2026","rel":"","context":"In "Disintermediation"","block_context":{"text":"Disintermediation","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/disintermediation\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":4236,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/4236\/introduction-to-a-consumers-guide-to-the-divorced-real-estate-commission-the-ebook\/","url_meta":{"origin":541,"position":3},"title":"Introduction to “A consumer’s guide to the divorced real estate commission” — the eBook","author":"Greg Swann","date":"September 7, 2008","format":false,"excerpt":"[This is the introductory text to an eBook I have prepared discussing the idea of divorcing the real estate commissions, a topic I have discussed here at some length. You can find the eBook by clicking here. If you like, you can post a button linking to this book --\u2026","rel":"","context":"In "Egoism in Action"","block_context":{"text":"Egoism in Action","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/egoism-in-action\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":485,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/485\/repeat-after-me-mr-realtor-what-do-you-charge\/","url_meta":{"origin":541,"position":4},"title":"Repeat after me: Mr. Realtor, what do you charge?","author":"Greg Swann","date":"September 29, 2006","format":false,"excerpt":"This is my real estate column from today's Arizona Republic (permanent link). Today should be a fun day. My editor told me that, in respose to last week's column, a Realtor called him, threatening to turn me in to the Arizona Department of Real Estate. I can't imagine what the\u2026","rel":"","context":"In "Marketing"","block_context":{"text":"Marketing","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/marketing\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":2179,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/2179\/a-consumers-guide-to-the-divorced-real-estate-commission-why-buyers-and-sellers-each-paying-for-their-own-representation-is-the-most-significant-reform-that-can-be-made-today-in-residential-real-estat\/","url_meta":{"origin":541,"position":5},"title":"A consumer’s guide to the divorced real estate commission: Why buyers and sellers each paying for their own representation is the most significant reform that can be made today in residential real estate","author":"Greg Swann","date":"November 7, 2007","format":false,"excerpt":"Part I: How we got into this mess in the first place Can we be straight with each other? I'm not a soft and subtle kind of guy, and my working assumption is that you are sick to death of being hustled -- handled -- lied to. We yammer all\u2026","rel":"","context":"In "Marketing"","block_context":{"text":"Marketing","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/marketing\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/541","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/comments?post=541"}],"version-history":[{"count":0,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/541\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/media?parent=541"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/categories?post=541"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/tags?post=541"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}