From online financial advisors to the new fee-for-service brokers, the question is being asked, "Why should Realtors be paid by commission?" After all, many brokers agree that the same steps must be performed to get a home to close whether it is a $100,000 starter home or a million dollar mansion. In fact, the starter home is often more difficult, so why should the price of the home determine the Realtor's fee?

Just the fact that the question is being asked and acted upon by emerging Internet companies should cause Realtors to seek the ghostly handwriting on the wall. Realtors may soon quickly arrive at the same place as the travel and stock brokerage industries - slashing prices while turning over many of the chores of home buying and selling to the consumer.

Consumerism, particularly by those who are computer-enabled, is demanding lower costs to the real estate transaction from all principles. Buyers can already apply for a loan (and ask online lenders to cut the junk fees) and shop for a home online, putting the Realtor further down the food chain. When asked, many Realtors are hard-pressed to justify their fees to such pro-active customers who only want them to help them close the home. That means Realtors are often asked to either reduce their commissions or to provide select services at specific fees.

Commission is the fee structure of tradition, but Realtors may find that tradition holds no stronger shield than it did for the travel industry, particularly for agents. Consumerism and the desire for lower fees drove tremendous changes in the airline industry, at the expense of the travel agent, the airlines, and the passengers.

Less than three years ago, travel agents were stunned to wake up one day and find their 10 percent commissions had been cut to a $50 maximum per ticket by the airlines. Quickly taking the place of the now obsolete travel agent are Internet companies run by third-party technicians. These entrepreneurs found they could operate a travel business on virtual cost-cutting, and many have been successful. The same is true of online stock brokerages. The emergence of low-cost, low-ante stock brokerages has revolutionized trading. From day-trading to ordinary Joes being able to participate in IPOs thanks to their online trading companies, buying stocks will never again be the domain of the wealthy only.

The real estate industry faces the same situation with fee-for-service and discount brokerage which will only continue to impact the real estate industry. These third-party companies such as Homebytes.com and others, are betting on the consumer, not on the traditions of the industry. They are taking advantage of the buyer-friendly aspects of the Internet to create services and attractions that will capture the buyer's attention and loyalty. This flies in the face of the traditional real estate practice in which the seller is sovereign.

The only way to beat back the competition that third party companies and other discount brokers present will be in the restructuring of fees, the clarification of agency relationships, and improvement in service delivery. To stay ahead of the daily challenges posed by Internet-enabled competitors, Realtors will have to go beyond continuing education to proactive learning.

The increasing popularity of the Internet delivers a clear message. Demand for online services, competitive pricing, and better service will only increase. If offer and transaction management can be handled by online brokers with automated systems and licensed agents serving as customer support staff, there is no incentive for consumers to compensate individual agents at their current rates.

The best defense for an agent is to be able to outline and assign realistic values and profit centers to their services. This exercise could prove enlightening in a number of ways. Agents could quickly learn where they are overspending their time and resources and which activities bring more "rain" or revenues to their businesses.

Published: June 30, 2000

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Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment. Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's. Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. To contact Blanche, email her at . For more articles by Blanche, click here.