Jim,
Mark Nadel the author of "A Critical Assessment of the Traditional Residential Real Estate Broker Commission Rate Structure" to my recent post in the Active Rain. Very interesting! You can read at http://activerain.com/blogsview/173179/Is-your-income-below. I am also posting a link to the corrected report of Mark.

Here is a key point of Mark's reply:
"...none of my suggestions involve government regulation; all involve educating home buyers and sellers about what services are being offered and what the options are so that they can demand the services they want and try to secure the best price-quality combination."

I cannot agree more with this approach.

Hi Jim,
This is good reading fro everyone involved and/or interested in real estate. Thank you for bringing it up. Mr. Nadel’s paper reads very well, independent on if you agree or disagree with him. As a matter of fact he is making a lot of great comments. What he doesn’t understand is what he cannot feel – the pain of doing real estate business. The current price structure is a “historical accident”. Current pricing sounds great (and is great) for 10% of agents who own 90% of the market. 90% of agents sells less and earns less (they own the remaining 10% of the market). According to the California Association of Realtor statistics, the average income of a California agent is $12,000 (twelve thousand dollars per year). This means that average agent sells a fraction of a house per year. Can you expect a quality of service from someone who does it once in a while? The problem is that everyone tried to become an agent (or broker – as there are many brokers as well) and lack of serious license requirements led to the “overproduction” of agents and brokers licenses. But this is good as there is a lot of competition between agents and brokers for the business for the 10% of the market. It is very difficult to dislodge those who are in business for long time and are doing very well. Are these 10% of agents and brokers best for the clients? Not necessarily – sometimes yes and sometimes no. They are simply in the driving seats and they don’t have much competition.

The competition between agents and brokers is not enough to “cure” the real estate business and improve our image with clients. Fortunately, we have Trulia and Zillow and even Redfin (I guess – we love to hate them, but they are good for our business, so let embrace them). All these companies are helping “to steer” up our stale business. And this is good. Change is always good and competition even better. Even MLS is starting to change. NAR has a way to go, but they will feel the DOJ heat pretty soon – and this might help to open up some minds within the “real estate establishment”

What is my point? My point is that we are lucky to witness the period of changes in real estate. It will be good for clients and it will be good for agents and brokers who are willing to change and adapt to changing clients requirements. Our commissions might drop to 3 – 4%, we will have also fees for different services, flat fees, but some successful brokers and agents will continue charging more than 6%. We are part of a great business, so let’s do our share to improve our service and our image.

Hi Jim,
Your post triggered me to writing the post in the Active Rain. It's title is "Is your income below $12,000 per year?" Please check it (the link below). Also, please check the post of a broker from Florida, Bryant Tutas on the subject. Mark Nadel responded to him and it lead to a great discussion on Active Rain. Here is the link: http://activerain.com/blogsview/29372/Compensation-or-perfor…

Thanks Jim for the homework. I will get started on this today. ;)

Jim,
Great information again! I have not finished my first cup of coffee yet! I will have to read it again this afternoon! You are always bringing something to the table. You would be fun to work with.