Let me see ... on one hand, the Internet is leading a surge of consumer-directed information and services that would diminish the time Realtors need to spend to perfect transactions. That would translate to a need for fewer practitioners.

But contrary to this logic, the real estate industry is experiencing an across-the-board surge in new licensees -- so much so that the Federal Labor Department has sighted the industry for becoming a leading engine of employment growth.

How can this be?

Well, here in Silicon Valley, the surge is being led by Cendant brokerages. The "Help Wanted" section of the San Jose Mercury News recently was filled with Cendant recruiting offers, including "licensing." New industry recruits enter the licensing room under contract.

The inference here is that competition among brokerage managers, fed by the acquisition and consolidation of Cendant offices, has created the surge in new recruits. Since the real estate industry is uniquely exempt from traditional Labor Department laws, operating with a special version of the "independent contractor" regulations that effectively remove "labor cost" from bottom-line consideration, throwing warm bodies at the productivity challenge has long been the favored technique of broker managers.

The market is the hottest it has ever been, but a limited and rapidly diminishing inventory results in a balance of dramatically escalating prices -- not an increase in volume transactions beyond the capabilities of established practitioners.

The shortage of available homes translates into a scramble of too many Realtors chasing too few listings. High prices and through-the-roof offers from competitive bidding buyers has ushered in a new era of discounted commissions, as time on market and advertising costs drop to zero. Yet, the legal liability for the transaction is higher than ever -- more so in that the homes purchased far above traditional market value are most susceptible to default later on. Default later on traditionally results in Realtor scapegoating, as struggling home owners look for a deep pocket route out of their difficulties.

That this recruiting competition has spread to the rest of the country is not a good thing for the industry. Consumers have more options than ever, which adds to the escalating confusion of how to separate the professional practitioners from the onslaught of cold-calling warm bodies that will be long gone when the boom goes bust and default turns to industrywide anger and disrespect.

We've been here before. High-flying markets they come and go. This time, however, the combination of Cendant's competitive managers and booming markets has everyone flying to close to the sun.

Gary Edwards welcomes your questions and comments. He can be reached by e-mail at garyedwards@bigfoot.com.

Editorial Note: Content on this page reflects the opinions of Mr. Edwards only and not necessarily the views of any publication, organization or website owner.

Published: May 28, 1998

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