Competition in Real Estate

The Department of Justice has been looking into the real estate industry to determine if fair competition exists. It started last September when the DOJ sued the National Association of Realtors (NAR) over a policy called “opt out”, where brokers could choose to not include their home listings on other brokers internet sites. The DOJ feels that some brokers might choose this route as a way to push new internet-driven brokerages out of business.

Last week congress held a subcommittee meeting entitled, “The Changing Real Estate Market” and heard different points of view about the nature of competition in the industry. As expected, NAR’s position is that there is plenty of competition in the industry and the consumer will ultimately dictate which companies survive and become successful based on their services and business model. Others argued that large traditional brokerages aren’t playing fair and create a hostile environment for anyone trying to get into the industry if they don’t conform to the traditional way of doing business. And both sides are right.

Here is how I see it-

There is a ton of competition in the industry. Millions of Realtors all competing for the same business. There are a lot of different companies with different business models and commission structures. New innovative business models (like BlueRoof) have to be strong enough to stand up to traditional brokerages, who don’t like them doing the same things for less, or even worse, doing better things.

Historically, new models have been torn apart, pushed out of business, or just held down as much as possible by brokerages and agents who don’t want their commissions eroded. I used to be in that same mindset when I was with Coldwell Banker and Prudential and GMAC.

Having competition that doesn’t like what you are doing is not always a bad thing. It drives you to be better and it can push some companies to think more creativitely- and this is good for the consumer.

The real estate industry is evolving and this is a very good thing. The consumer today is more educated about the process and wants a better value proposition. And they are increasingly demanding better service and flexible commissions and really, who can blame them?

Realtors have an important place in our society as a resource and representatives and if we focus on that I think our value will go up.

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