Is this Hurricane Redfin I hear?

I’ve read a wide range of opinion regarding the 60-minute segment on Redfin which aired last Sunday evening. The NAR has talking points out to help Realtors defend their work, towards the very end it even says “be glad it’s Mother’s Day” as viewership will be lower than usual. Wow!

Real Estate blogs have been buzzing the past few days – from questioning the business model, to wondering out loud the relevance of even watching the segment – opinions are very interesting to read. The most thoughtful and engaging opinions of course are from the best people in the business.

What do I see as the issue? Well, frankly the main problem with the Real Estate business is that the cost of the Realtor is the same regardless of the quality of the Realtor. Since the Realtor himself/herself if the product, then shouldn’t the price be based on the quality of the Realtor.

I mean Mr. Just Walked In wants to make the same as Mr. Star Agent with 5 years of stellar customer service and performance. Every Realtor I have talked to touts their service, but really as this blogger points out, how many really go the extra mile and deliver a genuinely distinct and differentiable service? That is why I don’t buy into the K-Mart vs. Nordstorm analogy. Just because you work for a big name broker doesn’t make you a superb product. In the same way working for a discount broker doesn’t make you a lesser Realtor? At least consumers do not seem to see it that way. Not the ones I’ve dealt with at least.

In a free market, any industry is considered out of balance when the quality of the product is not accurately reflected in the price. This will then force a correction. I think a correction is what we’re probably seeing at the moment in the Real Estate industry. Consumers want to equate the cost of selling with the medium of the sale (which is what they are paying for), and if they feel the Realtor is just skimming the surface then why shouldn’t they feel like they overpaid?

As in any other industry, Realtors deserve to be rewarded based on the quality of their work. A star Realtor is probably being underpaid with the 6% and is really leaving a lot of dollars on the table, which unfortunately is going to the under-performing Realtor. Not much of a merit based system is it?

Would it then be wrong to think that maybe, just maybe, a way  for a brokerage to distinguish itself is by offering a wide range of prices depending on performance/quality and leaving the choice to the consumer on the level of service they want to purchase? I’m willing to pay more for an investment fund manager with 30 years of experience producing 15% annual returns. However, I’d be hard pressed to pay the same percentage to a manager with limited experience and no track record. Isn’t that fair?

I’m just thinking out loud here! As a 20th century musical sage once sang,  “For the times they are a-changin”.

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