Realtors issue a blunt assessment of problems facing their business

The National Association of Realtors commissioned and released a frank and sometimes searing assessment of top challenges facing its industry. The critiques hit everything from the professionalism and training of agents to the commissions charged consumers. (Matthew Staver/Bloomberg)

  
By Kenneth R. Harney 

When the country’s largest real estate trade group bares some of its innermost worries, should owners, sellers and buyers of homes pay attention?

Absolutely, if you want valuable insights into current issues and problems in the housing marketplace. You might even save some money or avoid a bad experience with an agent or broker.

In an unusual move for a major American trade association, the million-member National Association of Realtors has commissioned and released a frank and sometimes searing assessment of top challenges facing its industry for the next several years. The critiques hit everything from the professionalism and training of agents to the commissions charged consumers, and even the association’s leadership.

To get the flavor of the report, consider these broadsides:
●“The real estate industry is saddled with a large number of part-time, untrained, unethical and/or incompetent agents. This knowledge gap threatens the credibility of the industry.” Ouch!
●Low entry requirements for agents are a key problem. While other professionals often must undergo extensive education and training for thousands of hours or multiple years, realty agents need only complete 70 hours, on average, to qualify for licenses to sell homes, with the lowest state requirement for licensing at just 13 hours. Cosmetologists, by contrast, average 372 hours of training, according to the report.
●Professional, hard-working agents across the country “increasingly understand that the ‘not-so-good’ agents are bringing the entire industry down.” Yet there “are no meaningful educational initiatives on the table to raise the national bar.”
●The commissions that realty brokers and agents charge are under attack and highly vulnerable to reductions because of pressure from cost-sensitive consumers. While typical commission rates in this country are around 6 percent, fees in other developed countries are significantly lower. In the United Kingdom, they average 1 to 2 percent; in Australia, 2 to 3 percent; Belgium, 3 percent; Germany, 3 to 6 percent.

●In response to consumer demand for lower fees, “a growing new generation of brokers and agents [is] exploring . . . new business models and pricing models that will most likely become commonplace in the next 5 to 10 years.” The reference here is to technology-driven discount brokers who are making inroads in many markets. Baby boomers looking to downsize and millennials seeking first homes are especially interested in shaving fees to save money.
●Realty brokerages face their own challenges, such as compliance with aggressively enforced federal regulatory policies. Among the most prominent, according to the report: the Consumer Financial Protection Bureau’s anti-kickback and referral-fee rules governing brokers’ financial arrangements with title companies, lenders and others. Though “most brokerage companies are either ignorant of the fact or believe they are in compliance,” says the report, “most are likely in violation already.”

The 160-page study — known as the DANGER report (www.dangerreport.com), or the Definitive Analysis of Negative Game Changers Emerging in Real Estate — was commissioned by NAR’s “strategic thinking advisory committee” and authored by industry consultant Stefan Swanepoel of the Swanepoel /T3 Group. It is based on a survey of 7,899 Realtors and interviews with 74 top realty chief executives, plus additional research. Other problem areas it details concern multiple listing services, state Realtor associations and NAR itself.

Sara Wiskerchen
, managing director of media communications for NAR, emphasized in comments to me that the DANGER study was stimulated by the “belief that it is healthy and helpful to hear what others are saying, especially those ideas that might be uncomfortable or disagreeable.” The association is “neither celebrating or disappointed in the author’s perspectives,” she added.
What are the takeaways for consumers? Top of the list: Since the study alleges that “a large number” of realty agents lack sufficient training and competence, make sure any agent you sign up with has the experience and track record that match your objectives as a buyer or seller. Among other things, ask about advanced training and certifications the agent has earned or is pursuing.

Given the report’s emphasis on the threats to traditional brokerages posed by innovative, tech-driven alternatives now growing in the market, check out their discount pricing, whether for a sale or purchase. But don’t assume that cheaper is always better. Some of these firms have their own shortcomings despite their cool technology tools: Agents may not be experienced, and their marketing skills, services and local knowledge may not come close to those of top-tier traditional agents. Always negotiate commissions with whomever you work. Your goal should be to hire the most competent agent for your purposes at the most affordable fee.

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