The same day, The Los Angeles Times published an op-ed piece called "Realtors' Bubble May Be Bursting" , by Jonathon Chait. By Friedman's definition, Chait's story is full of the new "snarkiness" -- that opinion is taking the place of journalism.
Chait is a respected journalist, a senior editor at The New Republic, where he has worked since 1995, says his biography. He has written for The New York Times, Washington Post, Wall Street Journal, Slate, Time, American Prospect and other publications. But that background doesn't mean that Chait is using his editorial position to readers' advantage.
Take this opening salvo. "If you have ever sold your house, chances are you had to pay somewhere around 6 percent to real estate agents. You were robbed. And the people who robbed you are, naturally, determined to keep on robbing you and everybody else for as long as possible."
Chait hasn't kept up with current events. Commissions have dropped to about 5.1 percent, according to research by RealTrends. Further, the National Association of Realtors suggests that commissions range even lower than that, and have stated that they have been unable to verify the 5.1 figure. According to the NAR, commissions currently are between 4.3 and 5.3 percent. Not only is that a broad range of commission rates, but it is significantly lower than Chait complains is the going rate for services he glosses over with palpable contempt.
"The purported reason we have real estate agents is that they perform needed services," he writes. "To some extent, they do. If you're selling, they show your house to buyers. If you're buying, they advise you what to look for. For both, they navigate you through a complex transaction."
Clearly, if Chait were to explore what lengths agents really go to "navigate" folks through their transactions, he wouldn't be so glib.
Homeowners and buyers have a choice to work with a Realtor or not. About 85 percent choose to because Realtors have created a superior marketplace for new and preowned homes, just as eBay has created a superior marketplace for new and used goods, and just as the LA Times has created a superior marketplace for news, and, uh, opinion.
Homeowners contract with listing agents for a commission rate, who shares part of his/her commission with another broker to bring buyers to the table. The agreement for compensation as well as the description and terms of sale of the listing are posted in the local multiple listing service, the "bulletin board" of agents.This service is not a public utility, but a business-to-business cooperative to get more homes sold.
The reason commissions appear to be protected by a "quasi-monopoly" as he calls it, is that the listing agents have a pretty good idea what other agents are willing to work for. The idea is to get the home sold for the seller, and making commissions as sweet as possible to selling agents (those bringing buyers) is one way to get this done. The listing agent can try offering less and see what happens as long as the seller understands that less money to the buyer's broker may bring fewer buyers and fewer offers. Many have tried and been successful, or otherwise commissions would not be going down.
So the real question is why do sellers agree to the commission rates they do? Apparently, they might understand the importance of offering an attractive commission to the agents who will be showing their home.
For one thing, sellers typically don't pay the costs of marketing their home upfront. Instead they get what amounts to an unsecured loan from the real estate agent, who only gets repaid for a profit if the home actually closes. Banks get prime rates for short term loans. Look at credit cards. Five to six percent seems cheap next to 21 percent.
Second, and perhaps most important, organized real estate is designed to deliver qualified buyers to sellers. Sellers don't want strangers poring through their belongings in the off-chance they might buy the home. Otherwise, sellers have the option of selling the home themselves and doing their own screening, showings, and negotiations.
Last, sellers realize that when they hire a Realtor, they share significant liability with a professional to stay out of lawsuits brought by buyers. An organized market increases the chances that the home will be marketed correctly and will be sold for current market value, whatever that value is, because organized real estate tracks comparables, trends, and other economic data.
Chait wants it both ways when he says, "Over the last couple of years, there have been signs that the customers aren't willing to hand over thousands of dollars anymore. Why? One reason is the hot housing market. As prices get higher and higher, agents earn more and more without having to do more."
Hmmm. Could that be why commissions are coming down - market momentum?
Yet, he says, "The second is the rise of the Internet. In most markets, broadening access to information has increased competition and reduced prices. Think about, say, the way you can search for used books online, or buy plane tickets without going to a travel agent. The Internet revolution has left real estate mostly untouched."
Here he appears to be ranting, and again the numbers contradict him. If the Internet is such a non-event, why do four out of five homebuyers turn to the Internet for information? Why are nearly 100 percent of homes marketed by Realtors featured online? Why have commission rates fallen 15 to 25 percent from six percent?
It's obvious to this journalist that Chait's piece, by Friedman's definition is "snarky." If one is going to write an indictment of another industry's commission practices, surely the first fact that should be checked is how much those commission rates actually are. This piece is absent the most cursory fact-checking, and appears to lean heavily on suggestion, hearsay, and innuendo. He also concludes that real estate agents are "furious" about competition and engage in acts to keep others off their turf. He even mentions that outside companies want access to Realtors' databases in order to put them out of business.
Since when is it a crime to protect one's turf? Don't journalists do the same with copyrights? Don't newspapers do the same with subscriptions? Why should the MLS database cost members to put together and be free to outsiders to use as they please?
Chait supplies little counterpoint. Where is the interview with a "full-service" broker to explain why fees are what they are at his or her brokerage? Escalating advertising costs, legal liability, deals that don't close for a myriad of reasons, and sharing the commission between as many as five entities (listing broker, listing agent, selling broker, selling agent, relocation company or lead generation company) surely are reasons that any broker would be happy to share.
Any business owner has the right to price goods and services at what the market will bear and to make a profit.
From the relative safety of his keyboard, Chait is allowed the freedom of the press -- the unchecked ability to bash an industry with impunity and sling about terms such as "price-fixing" and "mobsters" without fear of reprisal.
This isn't journalism -- it's a blog posted by a journalist.
"Once, way, way back during the 20th century, journalism was measured by such quaint qualities as dogged reporting and meticulous fact-checking," writes Friedman. "Blogs have caught on because they serve the public's desire for immediacy, opinion and entertainment. The blogs seem to want desperately to be hailed as the anti-MSM -- that is, the non-mainstream media."
He bemoans, "Snarkiness can be loosely defined as demonstrations of criticism, particularly when the target is the establishment, either in the government, the military, corporate America or the dreaded media."
"Snarky journalism, especially when it's witty and not merely mean-spirited, has an important place in journalism. But it also poses a danger," warns Friedman. "It's possible, if the movement continues to build more forcefully, that a generation of young journalists will take their cues and allow commentating to replace reporting."
Under an op-ed, a journalist can give his/her opinion without the time-consuming burden of providing corroborating facts; that's a standard that is far less demanding than that required by a report. Opinion doesn't require proof; it can simply be dashed off with a sneer of authority.
In other words, Chait has done exactly what he has accused Realtors of doing -- "earning more and more without having to do more."
