If the Bush administration adopts -- as widely expected -- a fixed-price "packaging" reform option for real estate services later this year, who will have the upper hand? Mortgage lenders? Realtors? Or maybe neither?

A new national study documents the key role realty agents already play in advising clients on choices of service-providers for most aspects of a home sale, financing and closing.

The National Association of Realtors' just-completed 2003 Real Estate Services Survey found that home buyers rely heavily on their realty agents' judgments on where to go for a home warranty provider, appraiser, and a mortgage. The study is based on responses from a nationally representative sample of 2,703 recent purchasers.

With home buyers already accustomed to giving serious weight to realty agents' recommendations, the door would appear to be wide open for real estate brokerage companies to offer custom-created, fixed-fee service packages of their own. Those service packages, in turn, could add new revenue to brokers' bottom lines.

The NAR already supports a so-called "dual package" approach to real estate settlement simplification and reform. The Bush administration originally proposed a "single" package approach, but as reported in Realty Times September 29, the administration is now seriously considering both single and dual packaging options.

In a single package approach, home buyers would be quoted a mortgage rate and an all-inclusive, guaranteed-price closing services fee. Buyers would then be free to shop for competing single package quotes and sign up with the most attractive. In a "dual package" regime, home buyers would shop for a fixed-price "mortgage origination" package (all lender fees, credit reports, appraisal and underwriting), and a separate "settlement package" covering all title and closing services.

Realtors and title companies tend to favor the dual package approach; lenders are lobbying hard for a single package final reform. But consider the implications of the latest NAR services study. It documents the important role consumers attach to the advice of a realty professional when buying a home: Agents' recommendations were frequently offered and important in the choice of home inspectors, environmental and termite inspectors, title companies, surveyors, and settlement attorneys. Along with the Internet, they also had an impact on the choice of mortgage lenders.

Most of these services could be available -- on a competitively-priced, fixed-fee basis -- through the realty broker in either a single or dual settlement package. The study found that 90 percent of all buyers in 2003 used title insurance services, 92 percent used a home inspector, and 70 percent used a termite or pest inspector.

Previous NAR survey research has documented strong interest in "one-stop shopping" by home buyers. Many of the largest realty brokerage firms already offer affiliated title and settlement services, plus homeowners insurance and even mortgage financing. Currently, however, Realtors do not offer guaranteed, fixed-price packages for the entire range of settlement services needed by their customers. In other words, there is no "one stop shopping" quite yet. But under the likely forthcoming packaging reforms, savvy realty firms will be able to jump into the marketplace, create partnerships with lenders and other service providers, and offer all-inclusive, single-fee packages to every customer.

For example, a home buyer might be able to sit down at the realty agent's office and get the following:

Published: October 13, 2003

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consmer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.