One DOJ web page provides this insightful comment in a subtitle:
"With individuals assuming more of the responsibility to gather and assess information, less time and effort is required by real estate agents in assessing market conditions (for sellers) and in identifying and showing houses [(for buyers)]. The cost of an agent’s service, therefore, should go down reflecting this shift in burden."124
First this implies that everyone is assuming more responsibility gathering their own information. Some are and some are not.
The second part of the sentence: "…less time and effort is required by real estate agents in assessing market conditions (for sellers)…"
Nothing has changed in regard to the amount of time we spend to understand our local market. We still tour all the homes for sale whether we have a specific buyer for a property or not-we need to know the inventory. Agents cannot accurately asses the value of a home if they have not personally seen the comparables prior to the close of escrow. Isn’t that why appraisers call agents for the details on homes after they have closed escrow?
"…less time and effort is required…in identifying and showing houses [(for buyers)".
Buyers may see a home on the internet and may exclude it from the search which in theory should cut down on the amount of time an agent will spend showing homes. This is an oversimplified version of how agents really find their buyer a suitable property. As stated before, we still see all of the homes for sale in order to be a specialist in our area. Buyers often want to see a home in person despite their initial on-line impression and often choose homes which they never would have entertained if it were not for their agent insisting on them taking a personal look. In fact the buyer’s access to instantaneous information has meant that agents must react even faster to the market and in many cases less efficiently. Prior to the email alerts systems which buyers now often subscribe to, agents previewed new listings for their clients on a specified "tour day" often in a caravan style with one or more agents riding in one car. With the Internet being updated every 15 minutes, agents are relegated to seeing all of the homes which meet their buyers needs every day in anticipation of an inquiry from their client.
"The cost of an agent’s service, therefore, should go down reflecting this shift in burden."
Burden, what burden are they referring to? A buyer’s voluntary perusal of available homes for sale which is provided solely because agents now create virtual tours, videos and upload all of the information is not a burden, it’s a marketing tool; but it doesn’t take the place of seeing a home first hand. Who pays for all of this new technology? What about the extra time and money spent in production?-perhaps that is why fees haven’t gone down as they anticipated.
On another page they continue by saying;"As a result, [of commissions staying at the same rate] the actual median commission paid by consumers rose sharply along with the run-up in home prices."
On this page the DOJ offers up a seemingly perplexing chart illustrating an apparent incongruity and implying that real estate compensation should be going down despite rising home prices due to healthy competition. What they apparently failed to take into consideration is that markets do not react perfectly and instantaneously to the adoption of new technologies simply because they exist. The technology learning curve which consumers and agents are enduring creates a lag in the effect competition will have on fees. Additionally, the influx of new agents, though dramatic, could not keep pace with the run-up in the median home prices; Licensees could not get licensed and effectively start practicing real estate at the same pace of home appreciation to provide ample competition and offset the higher commissions (in real dollars not as a percentage).
Don’t get me wrong, we’re all for competitive practices, but if the Department of Justice is going to be analyzing this data they need some better advisors helping them understand the industry.