Real Estate Industry Controversies / Problems

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The real estate industry is VERY entrenched, and FSBOs (For Sale By Owners) are so popular largely because the public views commissions as excessive.  To see just how entrenched the industry is, consider the following articles <These forms require Adobe Reader.  If you don't have it, Click on Adobe Icon>:  :

The Justice Department Gathers Information on "Bully Tactics" of Full-commission Brokers

Justice Department Sues Kentucky Real Estate Commission for Limiting Competition

Justice Department Prepares to Sue National Association of Realtors (NAR)

The Justice Department did sue the NAR in 2005, and Here's A VERY Interesting Article in the Reader' Digest written as the suit progressed.

On May 27, 2008, the Justice Department announced a settlement with the NAR which essentially stipulated that full-service brokers could not block internet-based brokers' listings.  If you'd care to read further details on that settlement, you can view the Justice Department / NAR Settlement by Clicking Here.

The NAR has particularly been adversarial toward "Assisted FSBOs" (AFSBOs).  What do these AFSBOs do that so provokes the ire of the NAR?  Simple.  AFSBOs, who ARE licensed real estate brokers, advocate that it really MATTERS NOT who the listing agent is because they're ALL going to merely place the property in the MLS and hope that one of the thousands of other agents in the MLS system brings along a buyer.  Therefore, AFSBOs offer to place the property in the MLS for six months for a VERY nominal fee, which is frequently only slightly more than an unassisted FSBO website charges.   Beyond paying that nominal fee, a client owes the AFSBO nothing.

Because the AFSBO fee is so low, it affords clients several options:  1) save the difference in commission, 2) allocate some of that savings to a buying agent (i.e. the commission a seller agrees to pay a buying agent, who is the one bringing the "loaded gun" making the home sell), or 3) some combination of the two.

Traditional listing agents don't like AFSBOs because they interfere with the game plan of maintaining a "fraternity of realtors" who all prefer to charge a premium price AS LISTING AGENTS.  In short, they resent AFSBO's willingness to place properties in the much-coveted MLS at bargain-basement pricing.  In essence, they view AFSBOs as selling the "800-pound gorilla" service the MLS offers for a song.  They also resent the fact that AFSBOs openly encourage clients to utilize the savings toward enhancing buyer's agents' incentives (see # 2 above).  This resentment is present because, under the "fraternity of realtors" system, maximum success for an individual agent is attained by obtaining as many listings as possible rather than by bringing buyers to the table.  The name of the game is # 1) get the listing, then # 2) obtain half the commission when some buying agent brings a buyer, and # 3) advertise how many listings the agent has in order to procure even more listings.

Serving as a buying agent is HARD work, especially if done properly with the goal of getting the best value possible for the buying client.  Traditional listing agents much prefer to allow OTHER agents to do that sort of grunt work while they procure even more listings.  Obviously, AFSBOs, with their cut-throat pricing in terms of the LISTING AGENT side of the equation, pose a significant threat to that model, hence the resentment toward them.

To analyze the various FSBO options (both Assisted and Unassisted) available, feel free to visit our FSBO page.