I was reading a commentary in the Boston Globe this weekend called [Brokers helping to drive up Northeast housing prices](http://www.boston.com/news/local/articles/2006/07/16/brokers_helping_to_drive_up_northeast_housing_prices/) and that was the last straw for me. The whole idea of Big Brother and the Real Estate Industrial Complex (great name for a band) is simply ridiculous. The idea that real estate brokers are to blame for high housing prices is the classic “I am a victim” whine and frankly I am getting tired of it for its sheer simplicity and lack of scope.
Are there bad real estate brokers? Yes.
Are there good real estate brokers? Yes.
Do we see this inconsistency every profession? Yes.
Is the profession undergoing a change? Yes.
Are we prone to stereotype? Yes.
I for one, am always critical of the stats generated by NAR because they are often misleading. Thats not what I am talking about here, rather, the troops in the trenches – are actually real people.
When a seller lists a property for sale, is it the real estate broker’s job to get the highest possible price they can for it? Yes.
Lets recognize them for what they are: sellers of real estate. They are not statisticians but they have to deal with numbers every day. They are not pyschologists, but they hand-hold wacky clients every day. They need to put the positive spin on their efforts because thats what selling is. Do some real estate brokers go too far? Yes.
I speak from first-hand experience since real estate appraisers were made to blame for the S&L Crisis in the late 1980s.
Were there horrible appraisers back then? Yes.
Are there horrible appraisers now? Yes (the appraisal profession is worse off now).
That being said, the latest housing boom has begun to change the profession, [bringing in better educated professionals as brokers [SFGate]](http://www.sfgate.com/cgi-bin/article.cgi?file=/gate/archive/2006/07/14/carollloyd.DTL).
As the order-takers fade, better marketers and more economic-savy individuals will begin to gain market share within the real estate brokerage profession. But this is volatile. The profession’s very low barrier to entry will likely cause these new improvements to weaken again when the next housing boom arrives. Then I suspect the bashing will begin anew.
Tags: real estate industrial complex, REIC
If you haven't already, sign up for
'Housing Notes' to receive weekly insights and research. 
Favorite "How to Value" Posts
Well, yes, there is good and bad in every industry, but I don’t think industry standards are as low as in real estate brokering. In what other industry can a representative be “dually loyal”? Can you imagine a lawyer doing such a thing? My wife and I are searching for a house, and right in a recent listing (on the internet, for a major residential brokerage, for all to see) was the promise of a several thousand dollar bonus for the buyer’s broker if a buyer closed by such and such a date. Almost anywhere else this is called a kick-back, but nobody seemed taken aback.
Jon,
Any chance you can elaborate on why you think the appraisal profession is worse off now?
The quality of appraisals has diminished since licensing was enacted and thats because the states view the appraisal license as a revenue source. There are no significant funds for enforcement and the fact that the state says an appraiser licensed, gives them entre into the lending community. At the same time, retail banks have shuttered their in house appraisal operations and have shifted emphasis on mortgage brokers as the source of origination as well as appraisal management companies. The appraiser whose sole focus is on the combination of speed and making the number are thriving. It will serve to make the profession largely obsolete if things don’t change soon because all players at the party know the bulk of the reports generated or only for the file and don’t have a lot to do with value.
Thanks for the quick reply Jon.
I’ve been in the business a few years, and the amount of real economic analysis I do is quite minimal. I wonder at times how complicit we are in what seriously appears to be an overvalued market.
It is true, the only value an appraiser has these days is how fast he can write a consistent report without glaring errors, and whether or not the value achieves the client’s expectations.
Dear Techy It’s called an incentive not a kick back. In a market where there are more sellers than buyers, a seller will often offer an additional incentive to attract more brokers to bring their buyers for a look. It would be a good idea for you and your wife to engage a buyers broker to help you in your search. After all, they know the product and you don’t. You sound angry and frustrated with the market so you diss the broker. Not productive.
I had a situation where there was a buyer’s agent incentive, and it made me very uncomfortable, as a real estate agent.
My client liked the property, so he bought it. I took the first $1,000 of the incentive, and gave the buyer the rest ($2,000), because of the appearance of a conflict of interest.
I would do the same thing, again, if it happened.
$1,000 for my trouble, the rest to the buyer.
It definitely is an ethical dilemma.
Carnival of Real Estate…
Carnival of Real Estate #2
July 24, 2006
Pick of the Week
You play the game well you’ve got the knack your hand in th……
It is Past Time to Raise the Bar!…
It is far too easy to get a real estate license. There, I’ve said it (again). It’s probably going to irritate a lot of people but that’s just too bad. It’s ridculously easy to get a real estate sales license. All you need to do…
[…] blogs on low barriers to entry in real estate: Matrix, Portland Real Estate, Paul Caloca, Kristal Kraft and DailyPundit. Jim Duncan has an entire blog […]