Thousands of realtors are now getting into things like blogging. And their new-found savvy comes not a moment too soon, as companies like Google and Craigslist (not just those scrappy startups) are seeking to cut out some major middleman as they launch or extend their own real estate initiatives. An article on the big players' entry into this most lucrative of commission-based fields mentioned that current average real estate commissions stand at 5.1%. If that's on the way to 2%, it means plenty of pain for your average garden variety real estate broker. A few exceptional players will probably make out OK. And yet the difference probably won't all be captured by these new online players. Surely the ultimate winner, if you do the math, has to be the buyer and the seller, with access to information growing, and commissions shrinking. What remains to be seen is just how far the "for sale by owner" concept can go in this market. Many agents do a lot for their fee, but the market looks like it will pressure many of them to offer a la carte services.
From the ashes of the old, for the sake of full employment, we can only hope new, creative business models emerge.
For now, don't get too excited, Danny cautions. It's the Google Base story again. And the accounts of who Google and Craigslist might threaten focus mostly on newspapers, a clash we've heard of before. What truly does interest the economists, the investment community, and legions of real estate professionals, though, is the fallout on those who earn commissions from transactions. Remember what happened to stockbrokers and insurance companies? Is that finished happening? We are in the middle of something and it's not clear how far it can push.
Posted by Andrew Goodman
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