Industry must focus on better service, not lower prices

With more new business models emerging daily, most of them in the flat-fee and discount sector, at least one real estate executive is unconcerned that traditional brokerage could vanish within a decade.

"You can't deny that commissions have dropped in the last 5 to 10 years," says Lane Barnett, CEO of GMAC's Real Estate Franchise Business. "None of us are happy about that. Five years ago they were around 6 percent and now they're closer to 5 percent.

"But that's reflective of some of the dynamics out there. Prices have been accelerating. But there are too many Realtors now and so few transactions. Since a lot of them don't have anything else to sell, they compete on price.

"That's a slippery slope. Once you start discounting, you're always going to be a target. There's always going to be someone who will come along and discount even further. What do you do then?"

Barnett believes that historically the experienced professional real estate associate has provided consumers better service than the consumers have realized. He believes what's needed today is not lower commissions, but high recognition of what real estate agents do for their clients and customers.

"That's the whole reasoning behind our Premier Services program (at GMAC Real Estate)," he says. "If you provide the best service to the consumer, and the consumer knows it, the subject of the commission isn't even going to come up in the conversation.

"As an industry, we need to do a better job of selling the value of the services we provide. We shouldn't be eliminating services."

Since many full-commission sales associates have not done a good job explaining what they do, consumers have become reluctant to pay high-dollar commissions. "As a result, at the end of the day the consumer didn't trust us. We need to give them transparency. They need to know what we're doing for them."

Barnett also believes the flat-fee and discount brokers are making more noise than profits.

"From what you read, you'd think they were eating our lunch. But the data shows that discounters still have less than 2 percent of the market," he said.

Barnett is unafraid of the new wave of business models, and feels Realtor associations around the country are making a mistake by trying to legislate barricades to their entry into the business.

"It's protectionist and anti-consumer," he says. "Anytime you have to depend on lobbying to keep you in business, you're doomed. That's not a good long-term solution.

"If you train agents to provide better service, consumers will find it's worth the money."

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