We’re exploring a controversial topic, specifically, with real estate market efficiency in mind, are Seller Agents really needed in your real estate sale?
You own a home. You want to sell it. You don’t want to pay a traditional real estate brokerage 5% or 6% to do it. Why not? To put it succinctly, at its most basic level, you believe the exposure provided by the combination of the Multiple Listing Service (MLS) and the Internet is sufficient to attract a qualified buyer.
As a seller in a real estate transaction, the commission to which you agree compensates two (2) parties, the Seller’s Agent that you personally hire to market and sell your property, and separately, the agent representing the buyer you hope to attract. Given the Internet enabled MLS, it’s argued that the only party you need to compensate is the Buyer’s Agent. The power of exposure given to you by your property’s inclusion in the MLS and the subsequent propagation of that property information across the Internet will generate the exposure, demand, and qualified buyer you need. For all practical purposes, that service is not worth the 2% – 3% that you would pay a Seller’s Agent to accomplish those tasks.
Getting Your Property Into MLS
Thus, your main concern should now be how to get your property into the MLS in the most efficient way possible, so that this Internet enabled MLS does its job in exposing your property to the masses. It’s your confidence in the ubiquitous availability of information in today’s society and the deeply rooted desire of buyers to seek out information that allows you to even consider going it on your own as a for sale by owner (FSBO) type, foregoing a Seller’s Agent, and also foregoing the 2% or 3% that you would typically pay them…to expose your property.
What you’re starting to realize is, if your property is in the MLS, it will be exposed.
Across the US, this exposure and the current dynamics of the residential real estate market in general are based on the guise of a local MLS system. That’s the baseline, and the only practical and comprehensive entry point. Real estate agents still hold the keys (pun intended) to the MLS system, and you’ll need their involvement to get your property into the system, and to be exposed.
Who are the MLS innovators?
The dynamics have been changing, are changing, and are changed. A firm like RealDirect (http://www.realdirect.com) is changing things for New Yorkers with what they call Owner Managed Listings, and a platform like Entry Only New England (http://entryonlynewengland.com) is giving Massachusetts homeowners the opportunity to list on the MLS without a Realtor for a one-time fee with something called a flat fee MLS listing.
It’s going to be the discovery that there is a need for such services, that the consumer deserves that choice, along with the continued refinement and availability of such services that gets us started down the road toward a goal of what some might call real estate market efficiency.
Real Estate Market Efficiency
The US operates in an economic system or arena referred to as capitalism. While you’d be hard pressed to prove that it’s truly a free market system, nonetheless, its aim is market efficiency, a phrase that was first coined in the efficient market hypothesis (EMH) of Eugene Fama in 1970 whereby at any given time, prices fully reflect all available information on a particular stock and/or market.
In the context of the real estate market, we are heading toward market efficiency when alternative means are used to expose a property to buyers in such a way that the cost of doing so takes into consideration that a Seller’s Agent, and their corresponding commission, is not always necessary given the ubiquitous availability of property information, namely on the Internet. In addition to real estate commissions, there are other large barriers to overcome to achieve real estate market efficiency, yet, a flat fee MLS listing, or entry only MLS listing as it’s known in some locations, is a first step towards such an end.