POINT OF VIEW: Editor's Note

You’re worth it

For a long time, real estate practitioners have bristled at the idea that their work could be compared with that of other sales professionals. To those of us who cover the industry, the comparisons always seemed off as well. Selling stocks or travel, for example, just doesn’t have the same complexity as selling someone’s most expensive asset and source of shelter. Now, a much-anticipated study of competitiveness in the real estate industry by the U.S. Government Accountability Office shows that the comparison is wrong.

The study—ordered by Rep. Michael Oxley (R-Ohio), chairman of the House Financial Services Committee, and Rep. Barney Frank (D-Mass.), the committee’s ranking minority member, and released publicly Sept. 28—found that competition in the industry is based on things such as quality, reputation, and level of service, not on price. In other words, consumers don’t choose a practitioner on the basis of commission cost.

I believe consumers recognize that a real estate practitioner—like a doctor or attorney—will be shepherding them through a major life event. Say you’re in the market for heart surgery. Chances are, you aren’t concerned first and foremost with the surgeon’s fees. You want someone with experience and a good reputation who’s affiliated with a good hospital. The same principle applies when you’re selecting an attorney to defend you in court. When the stakes are high, you’re more concerned with achieving a positive outcome than with whether the attorney’s going to charge you $5,000 or $10,000 or $50,000. If you can get a good attorney for less money, that’s great. But price won’t be the deciding factor. The golden nugget of the GAO report is that homesellers are making that same kind of calculation when they select a real estate practitioner.

The report addresses a number of other important issues, including the effect of state laws and Internet-based brokerages, but this issue of quality of service over price stands out as a beacon. With all the media attention on the industry lately, a casual observer might believe that consumers were in full-scale revolt. Clearly, that’s not the case. They’re aware of the value you bring to the table and are willing to pay a fair price for it.

MORE ONLINE
GAO Report to the Committee on Financial Services, House of Representatives, “Real Estate Brokerage: Factors That May Affect Price Competition”