 |
| 30 Yr Fix |
6.10% |
0.01% |
| 15 Yr Fix |
5.78% |
0.01% |
| 1 Yr ARM |
5.12% |
-0.04% |
| 5/1 ARM |
6.00% |
-0.02% |
| 30 Yr Tres |
4.31% |
0.15% |
| Fed Prime |
5.00% |
-0.25% |
|
|
|
|
 |
Free Subscription To News Alerts
Stay up to date on breaking news with our free News
Alert Service. |
|
|
CFA Hits Real Estate Industry On Low Entry Barriers and Lack Of Oversight
8262
Views - Printer Friendly - Email
This Story To A Friend
The Consumer Federation of America had a lot of critical things to say about
the real estate industry in general and the National Association
of Realtors (NAR) in particular when Executive Director Steve Brobeck, testified
before a subcommittee of the House Financial Services Committee in late July.
Brobeck spoke about lack of competitiveness but nothing was as sharply worded
as his comments about the training and qualifications of those
working in the industry or about those who regulate them.
Brobeck quoted NAR's assertion that the real estate industry is indeed
competitive because there are so many licensed real estate agents.
"On the contrary," he said. "The huge glut of these providers
actually helps maintain the cartel and its control by dominant brokers."
Brobeck claimed that there are 2.5 million licensed agents
and only about 7 million sales nationally each year. Since this obviously leads
to most brokers completing only a handful of sales each year, "most enthusiastically
support a system that keeps commissions rates high."
Brobeck states that having so many licensed providers is, from an economist's
point of view, a hugely inefficient marketplace Why there are
so many is because of what he called extremely low barriers to entry;
for example, training sessions that can be completed in one long weekend or
more typically two weeks. With such modest requirements he expressed dismay
that new licensees are able to charge the same rate as experienced ones.
The CFA maintains that NAR has absolutely no interest in changing this system
(of encouraging more persons to obtain licenses and become active Realtors)
because it generates about $100 million each year in membership fees.
He quoted a broker who had written him "only last week" who said
that NAR membership fees were $84 per head and that NAR had 1.3 million members.
"NAR," the broker said "has nothing to gain and much to lose
by raising standards and it will use its powerful lobbying force to ensure that
efforts to do so are defeated."
[An editorial comment: NAR dues, whether they are currently more or less than
$84 per year, are only a portion of the fees that agents pay to state and local
associations as well as NAR to maintain a status of a Realtor. These membership
fees are required for any agent working for a firm that is affiliated with NAR
and usually does not include other fees to place or access listings with local
multiple listing services or what can be hefty fees to use lockboxes.]
Brobeck stated that NAR is supported by major real estate firms because these
firms have to only pay their salespersons through commissions so they benefit
from having large pools of salespersons even if not all are terribly productive.
Moving on to regulation of the industry, Brobeck stated that,
in most states, residential real estate services are overseen by a real estate
commission or board which regulates licensing but that most of these commissions/boards
are "dominated by practicing brokers."
Per CFA, this is no accident. According to a study it released the week before
this testimony, more than two-thirds of commissioners sitting on these regulatory
bodies are required by statute to be active, licensed real
estate licensees. CFA further found that nearly four-fifths of all commissioners
earn a living through real estate transactions and 70 percent are real estate
brokers or salespersons. More than 25 percent of commissioners worked for one
of the four major brokerage firms and another 10 percent worked for large regional
firms that are dominant in their local markets.
This industry control of regulation harms consumers through both what they
do and what they fail to do. Consumer complaints may not be sufficiently addressed
or staffing levels are not adequate to do so. Few states rigorously enforce
agency or other disclosure laws. On the other hand, CFA maintains that some
commissions have actively pursued measures to restrict competition by actively
supporting minimum service laws.
CFA called upon states to prohibit practicing brokers from
serving as commissioners; to be a member of such a regulatory entity an agent
must agree to surrender his license for the duration of his services. Alternatively,
active agents could serve on advisory committees to boards composed of fulltime
professionals as is done with public utilities and insurance.
On the federal level CFA congratulated the Department of Justice, the Federal
Trade Commission and the Government Accountability Office for the roles they
have played in "trying to prevent dominant brokers and their trade association
from increasingly restricting competition." CFA further called on Congress
to authorize the FTC as the most logical agency to take responsibility for protecting
Internet-business models that might be threatened by non-competitive business
practices.
So, gentle readers, what is your take? Are the barriers to
entry into the practice of real estate too low? If yes, who does this most advantage
and who does it hurt? And when it comes to regulation of the industry, who or
what should be in charge?
Related Tags
Select a Tag for more information related to that Tag. (View
All Tags)
nar
|
Comments (13)
| My 31 years as a home inspector has exposed me to all sorts of agents. The main problem is home buyers not shopping for an agent first. Many work with the lister, a relative, or someone whose qualifications they've not checked out. Agents who work on referrals only tend to give good service. Its a shame that the buyer broker concept has not succeeded. It galls me when an agent shops home inspectors for a low fee. When I get those calls, I ask what discount the agent is giving the buyer!. |
|
| Above Posted By:
Roger H
| Wed, 20 Dec 2006 07:59:04 EST |
| The general public places blind faith in realtors & mtg brokers, while they begrudge appraisers a few hundred in fees. They pay tens of thousands to someone who has no idea what to ask for their home or encourages them to over-pay for "investment" property. Inexperienced realtors are a hazard to cosumers, and it's not even illegal. The appraiser risks it all for a few hundred About Time flat-fee listings were popular. There are too many agents & poor quality. 3% for typing in a listing??? |
|
| Above Posted By:
Doreen Campbell
| Sun, 12 Nov 2006 20:02:40 EST |
| Do you think there is any connecction between all the "FRAUD" in the business of home ownership and the unqualified professionals that write the sales contracts and ones take the loan applications? Think again. |
|
| Above Posted By:
noone special
| Thu, 9 Nov 2006 12:27:05 EST |
| I agree that the standards do need to be raised, but I also think tha in order to keep that license a Realtor should be required to have a minimum amount of hours per year. I think that the consumer that does not get the full service or best service come from part time Realtors looking for a little extra cash. I believe that in order to serve your client you need to be full time. |
|
| Above Posted By:
Scott
| Thu, 9 Nov 2006 09:53:25 EST |
| I am a licensed Insurance Agent and I can tell you that there are a lot of frauds and incompetents in this industry as well. What sets the successful vs unsuccessful agents (either industry) apart is Referrals. If you're not good at what you do, chances are you won't be as successful. The standards of entry into the RE field are as great or greater than to become an Insurance Agent. Lesson - eyes wide open to all who enter the gates of life. We all need to become educated, savy consumers. |
|
| Above Posted By:
Denise
| Wed, 8 Nov 2006 15:26:49 EST |
| So, all of those CPAs at Arthur Anderson just did not have high enough job entry standards? What do we think the commission structure will look like if real estate agents have to be lawyers in order to sell property? |
|
| Above Posted By:
Gil
| Wed, 8 Nov 2006 08:37:09 EST |
| Regarding making the standards as high as doctors...Be that as it may, I bet there would be far more malpractice suits if doctors had NO training...but just brought in some friends and family members to operate :-) I am not stating an opinion either way, as I see both sides, but I think it is a fairly easy route to entry. Fortunately, however, I am familiar with some very skilled agents who worked their butts off to learn on their own. But I also think problems could be reduced w/ training. |
|
| Above Posted By:
Mary
| Wed, 8 Nov 2006 07:44:21 EST |
| We could raise the entry standards to the level of other professions, like lawyers and doctors, for instance. That would provide more high-quality, low-cost service to the consumer, I am sure (that was sarcasm, in case you did not notice). There are always going to be incompetent practitioners. If high entry standards guaranteed compentency, then we would never see legal or medical malpractice suits. |
|
| Above Posted By:
Gil
| Tue, 7 Nov 2006 22:15:22 EST |
| Being affiliated with one of the big guys, we are not allowed to discount our services in any way, and we are supposed to be independent contractors? The backwards integration where we are "strongly encouraged" to use particular vendors for mortgages, home warranties, etc. can't possibly be in the best interest of the consumer. |
|
| Above Posted By:
anonymous
| Tue, 7 Nov 2006 19:35:03 EST |
| I am a rookie, less than a year in the industry, and my broker is one of the big guys. If I knew then what I know now, I would have made a different choice. Competency is in no way related to success in this business. It is a process similar to throwing mud pies on a wall and see what sticks. If you have lots of friends and family to support your endeavour, there is a greater chance for success. |
|
| Above Posted By:
anonymous
| Tue, 7 Nov 2006 19:31:01 EST |
| I agree that most Brokers use numbers to fill their coffers with people who are NOT qualified to sell real estate. Reminds me of '' cult - members '' of a certain religous order headed by one single person whose ring one must kiss, kneel down to , etc. '' a bunch of blind sheep led by a sheepherder '' |
|
| Above Posted By:
GEORGE
| Tue, 7 Nov 2006 17:15:54 EST |
| The barriers to entry are non-existent so I would say they are far too low. This is an advantage to a Broker who wants warm bodies to bring in business from their family and friends. It is a distinct disadvantage to the consumer since many agents have no idea what they are doing. In some cases their broker isn't too swift either.
Inexperienced agents create opportunities for fraudsters who seek them out and prey on them and their clients. I know only a few competent agents. |
|
| Above Posted By:
Tim
| Tue, 7 Nov 2006 15:08:02 EST |
| Look whose talking! NAR has to follow laws and regulations.. but who regulates CFA ?? The CFA is a worse offender of membership issues than it alleges NAR is. Membership in the NAR may have low qualifiers and a $84 dues but membership in the CFA is based on the size of your membership contribution... from as little as $75 up to $20,000. The size of the contribution determines CFA 's agenda. The CFA doesn't care about consumers or the industry.. just its big donors. |
|
| Above Posted By:
Anon
| Tue, 7 Nov 2006 14:51:36 EST |
Post A Comment
Please fill out the form below to submit a comment.
|
 |
|
"State Regulator's Group Finds Loan Mitigation Efforts "Disappointing" This is truly dissapointing. I dont really think these lend...
Read
|
No surprise here. I'm a lawyer working these cases for borrowers for the last 4 years. The lenders/servicers have little to no wor...
Read
|
I am very glad to see this article I own a small real estate office and everyday I have people tell me that banks are NOT helping ...
Read
|
|