Public Opinion About Real Estate Industry

The Consumer Federation of America recently released data collected by the Opinion Research Corporation for AARP regarding consumer opinions of real estate agents, brokers and the real estate industry. The study revealed some interesting things, namely that consumers don’t understand the real estate industry and its practices well-enough and what they do understand, they don’t like.  Neither reflects well on the industry.

The average consumer doesn’t understand the real estate industry. For example:

Only 36% of all respondents said they know “a lot” or “a fair amount” about “real estate agents and brokers and their consumer services. And in fact, only a minority knew that the local multiple listing service is the most complete source of information about homes for sale (34%), that one’s broker may not represent one’s financial interests, that commissions can be negotiated (26%), and that state real estate commissions regulate the industry (30%). In fact, 41% thought that commissions are set by the industry or its agents, while 13% believed they are set by state law.

Even among those that had used the services of a real estate agent in the last five years,

… far fewer understood that the local MLS is the most complete information source about homes for sale (44%) that one’s broker may not represent one’s financial interests, that commissions can be negotiated (31%), and that state commissions regulate the industry (38%).

The reality is that commissions are set by individual brokers and their agents. Commissions are 100% negotiable, both by sellers and buyers. In fact, it is illegal for brokers and agents to “set” standard commissions among brokerages. Many agents and brokers are very uncomfortable even discussing commissions with other agents or brokers.

The part of the survey I find the most interesting is regarding specific industry practices. While…

…over two-thirds of respondents (68%) and nearly three-quarters of those who had recently worked with a broker (73%) viewed agents and brokers, and “their consumer practices,” favorably. And even higher percentages viewed their own agent or broker favorably — 84% for respondents who had recently utilized their services.

Many of those surveyed had issues with some common industry practices…

Agents and brokers require home buyers to sign exclusive agreements with them in order to gain access to local multiple listing services. Yet, 63% of all respondents, and 70% of those who had recently worked with a broker, believe that buyers should not have to sign such an exclusive agreement to gain access to these listing services. They believe they should gain access, for example, simply by paying a reasonable fee.

 Many sellers and buyers do not receive timely disclosures from agents and brokers about representation and compensation. But larger majorities of all consumers (73%), and those who have recently worked with brokers (82%), support these disclosures “during the first substantial contact” or “when the consumer agrees to services.”

Five to six percent is a common real estate commission for the sale of a house. But well over half — 59% of everyone and 63% of those who recently worked with brokers — think a 5-6% commission on a $300,000 home sale is too high.

Despite the fact that realtors in a number of states have tried to limit competition by passing minimum service laws, three-fifths (60%) of consumers disapprove of these laws. And despite the fact that most brokers serving on state commissions continue to practice, most consumers disapprove (55%) of the potential conflicts created. Slightly less than half of consumers and those who have recently worked with brokers (42% and 47%) disapprove of state laws prohibiting agent rebates to buyers.