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In general across a broad variety of services, competition has been driving commissions down. The internet has certainly helped in decreasing these costs to the consumer. For instance, you can trade stocks for $7 instead of $35 or more. Even management fees for index funds have been going down.
As home prices have gone up, so have the number of people with stars in their eyes, wanting and willing to become brokers. More brokers have to compete for business.
For some reason, we still have to pay (in general) a 6 percent commission to sell a house. New technology has not done much to reduce that amount. Here’s why, according to CNN. Traditional brokers act in certain ways that will ensure that individuals selling homes will not receive good service from a discount or online brokerage. Here are some of their tactics:
* Traditional agents, when serving a buying customer, do not show properties represented by a discount broker. Some traditional brokers won’t even help a customer if he or she was brought in my a discounter.
* According to the article, at least one discount realtor has been harassed by traditional agents who tell their clients that the discounter is out of business.
* Traditional brokers try to use leverage with politicians to seek legislative actions to restrain trade. The result of this has been “minimal-service” requirement laws. In some states, brokers are not allowed to perform just one service, such as listing on the MLS. The customer would be charged a full commission and would not even have the option of going to a discount broker.
MM over at PFBlog has recently finished selling his home without a broker. He is posting a series of tips for those who wish to do the same. It may be worth the effort — although tradiional brokers will surely try to convince you that it’s not.
First, I’ll need to worry about buying a house. That’s another issue altogether.
Updated September 2, 2011 and originally published October 26, 2005. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.