The stakes are high for real estate brokers as the industry's traditional model of commissions is under attack by discount brokers, the Internet and even regulators.
Most traditional brokers charge commissions equal to 5% to 6% of a home's sale price, with agents for the buyer and seller splitting the proceeds. Last year, commissions in the residential real estate market hit $61 billion, according to an estimate by industry publication Real Trends. With so much middleman money in play, buyers and sellers are finding ways not to pay standard commissions. The Web is helping discount brokers and for sale by owners expand their reach.
Today, it is still important to place a home on a local multiple-listing service ("MLS") database. There are more than 1,000 MLS's in the U.S., each specific to a local market. Most are owned by local organizations under the umbrella of the National Association of Realtors. Large, established brokers ususally dominate the boards of these groups and are attempting to maintain their middleman 6% real estate fees by relegating listings by discount brokers to a less prominent status while keeping sales by owners out of the MLS. Watch for increasingly tough tactics in the civil war of real estate middlemen attempting to protect their windfall commissions in a buyers market as sellers are caught in the cross-fire.
Source: The Wall Street Journal, October 12, 2005