Traditional realty firms are facing new challenges.

Commissions are shrinking amid pressures of new selling arrangements.

Milwaukee Journal Sentinel
By Michele Derus
January 31, 2005

It's the $60 billion question: Can consumers force the residential realty industry to be cheaper, faster and more transparent?

They sure can -- and they've already begun, several experts say.

Sixty billion dollars, the expected national tally of 2004 home sale commissions, exerts enough power to yank tradition out by its roots.

Consider the standard agent commission, 6 percent of selling price -- the norm for decades.

"Rates have dropped from 6 percent to about 5 percent in the last five years," said Steve Ozonian, national homeownership services executive for Bank of America, based in Charlotte, N.C.

Expect an even closer shave of future earnings, he told 200-some brokers at a December Wisconsin Realtors Association management conference.

"We've got a more focused consumer, and there's more focus on the consumer by alternative (business) models," Ozonian said.

Selling arrangements that change brokers' commission structures -- such as online enterprises, discount brokers, flat-fee servicers -- will grow from 1 percent to as much as 14 percent of the realty industry by the end of this decade, predicted industry consultant Steve Murray, co-editor of REAL Trends magazine in Littleton, Colo.

"Their message is clear: 'We will save you money,' " Murray said.

New message

That's a fairly new message in the realty business, which for decades limited consumer choices to full service at full price or do it themselves, Murray said.

"In every other industry, consumers have choices -- banking, securities, airlines or HMOs, apparel, cars, travel, music, movies -- everything we buy," he said.

Realty industry resistance has been fierce but, in Murray's view, will be futile.

Home selling, in boom mode for more than a decade, is big business.

The Internet has made it a more democratic one as well.

"There's 60 billion reasons why there are so many competitors," Murray told the broker gathering. "It's important that you understand it. You can't stop it."


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