Real estate commissions in the United States are higher than any other industrialized nation. While fees in the U.S. are still averaging over 5%, in the U.K., for instance, they are 2%. That means that home sellers typically pay more for real estate services in the U.S. than other countries. Could it be that real estate is harder to sell in the United States than elsewhere in the world? Hardly – the Realtor® Multiple Listing Service – MLS – is one of the most efficiently run systems anywhere. Acting like the stock exchange, the Realtor® MLS allows all of the Realtor®s in a given geographic region to pool their resources and share access to information about properties for sale, making finding and selling a home tremendously convenient.
So why do many Americans continue to pay such high commissions relative to other countries? According to the independent study by Mark Nadel at the AE Brookings Joint Center, A Critical Assessment of the Standard, Traditional, Residential Real Estate Broker Commission Rate Structure, the real estate commission structure is a poor way to compensate a real estate agent for their time. Not only does it create a poor incentive for the agent to work for the best possible price for their client, there is often a complete disconnect between the time invested by the agent, quality of service and the amount paid by the client.
Discount Realtors and flat rate real estate companies offer alternatives to the traditional commission rate based system. With a discount real estate broker you can get the same bundle of services for less than the prevalent rate in your market. With flat rate, or limited-service brokers you can pick and choose the services you want on an a la carte basis. Either way you can stand to save thousands of dollars in fees, but with flat fee brokers you pay only for the services you use.
How could a nationwide MLS help for sale by owner sellers? FSBO home sellers who utilize the latest online flat-fee MLS listing services of websites like bloomkey.com could benefit from the creation of a nationwide MLS. These sellers who take advantage of the marketing exposure provided by the Realtor MLS and Realtor.com would have their properties made available to an even larger pool of potential buyers. With a national Multiple Listing Service, a listing in one city or region would immediately become available to be seen to Realtor buyer customers all over the U.S. With relocation now representing as much as 30% of the market in many areas, this could be a boon to seller’s of real estate, both traditional real estate agent listed and those listed for sale by owner.
Some states have already consolidated their MLSs into one large regional or statewide MLS. MRIS serves participants in Northern Virginia, Maryland, Pennsylvania and West Virginia. Connecticut MLS is a statewide MLS. There are already several separate data-sharing and other collaborative MLS efforts going on in California now in Northern California and Southern California and also in the Bakersfield-Fresno region. So, obviously the technology is certainly available for a national effort.
Then, what’s stopping the creation of a National MLS you might ask? Political infighting among the numerous city and regional MLSs is the main culprit. A nationwide MLS, while representing a tremendous benefit to it’s member’s and consumers, is being prevented by the individual MLS executives who face loss of control or even job loss that would be brought about with the consolidation. According to Scott Kucirek, head of the California initiative to start a statewide MLS, …”it’s a little about power and politics, and unfortunately in those conversations what gets left out is what’s right for the members. Everyone says they really are trying to do what’s really right for the members, (but) when you really look at it in many cases that’s not the intent. The politics is the issue.”
