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| February 10, 2012 |
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Heartburn in Heartland: New Broker Models VS Full-service Brokers
by Blanche Evans
On the heels of a state Supreme Court decision in Iowa that put one flat-fee real estate broker's antitrust lawsuit against a "full-service" broker out to pasture, another set-to is brewing in Omaha, Nebraska. NP Dodge Co, among the largest real estate firms in Omaha, has notified a few smaller companies that their agents will be paid less on sales commissions than the co-op fee listed in the MLS. The reason - discount fees charged by the smaller companies, they say. NP Dodge says it's because the companies offer less than full service, causing the NP Dodge agents to have to work harder. In certified letters sent to six competing brokerage companies, according to staff writer Deborah Shanahan in an article "NP Dodge cuts fees to others" for the Omaha World-Herald published 9-2-2004, NP Dodge said that "beginning August 21, any purchase agreements brought by the smaller company agents for NP Dodge listings will result in a commission of one percent." According to the author's research, 66 percent of the listings in the Omaha-area Realtors' Multiple Listing Service showed a co-op fee of 2.4 percent, while an additional 25 percent showed a 2.8 percent fee paid to buyer's brokers. "We looked at companies with inexperienced associates or a reputation for providing a limited amount of service," Mike Riedmann, president for residential sales told the Omaha World-Herald. "Many of the companies that do limited services also offer those nonservices at a discount, so they often do go hand in hand." "When dealing with those companies," Riedman told the World-Herald, "NP Dodge agents end up picking up much of the work of bringing a sale to closing. The 1 percent commission is designed to compensate them for that." According to the paper, most of the companies which received the letters are new, with new business models. "BancWise, for example, is a mortgage bank that sells real estate. Alliance is a support brokerage where agents pay a $250 fee per transaction and keep 100 percent of the commission. Together, the six companies have nearly 10 percent of the 3,500 houses now listed for sale." NP Dodge has about 22 percent market share. Said Joe Marcarelli, an Alliance co-owner, "NP Dodge's actions indicate it's upset at the small companies' success." "He said, according to the author, that the big firms, with well-furnished offices at key locations, can't afford to discount commissions and compete with the new companies offering alternative ways to sell real estate. Alliance, for example, considers itself a "virtual firm," keeping only one 700-square-foot office for its 20 agents to "stop and drop." Kurt Geschwender of WhyUSA, said he'd never seen anything like the NP Dodge letter in his 34 years in the business. Ever since interest rates started dropping in the 1990s, the business has been a "free-for-all" and it's become tough to compete, he said." The following letter illustrates how difficult it may be to explain the situation to consumers - that if business models don't play equally on the field, that some may retaliate. Lower commissions to consumers is one form of retaliation, while lower co-ops to other brokers is another. Writes consumer Lance Schultz, " As a consumer, I fail to see how a move like this will benefit buyers and sellers of real estate. Meanwhile a concerned agent in Houston articulates why some new business models are a problem for existing brokers. Writes "Jon," Dear Blanche, Published: September 7, 2004 Use of this article without permission is a violation of federal copyright laws. Related Articles: |
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