Cutting out the middleman

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The NYT has an interesting article about how the Internet is disintermediating the real estate market. Realtors, of course, are trying to protect their 6%, primarily by controlling access to the Multiple Listing Service, but also by getting laws passed that make it hard for realtors to offer cut rate access to the MLS by requiring minimum levels of service--and thus setting a price floor.

One note, though:

There is one caveat: If you list there, you may be obligated to pay a commission to the buyer's agent, which is usually set at 3 percent. You can, however, build that commission into the price of the home, so the buyer actually pays it. Or, if the housing market is particularly hot in your area, you may be able to write into the contract that the buyer is responsible for paying his agent's commission.

This strikes me as fairly confused. There's some maximum amount buyers are willing to pay and they don't really care who the money goes to. If they have to pay the commission they'll just pay 3% less.

One difficulty in deciding how much you're willing to pay for a real estate agent--and consequently how much the price gets driven down--is that the uncertainty in the market price of the house makes it very difficult to determine if your agent is doing a good job, and it's very easy to believe that a small difference in quality could affect the price of the house substantially. While I doubt that my agent expended anywhere near 3% of the price of my house during the driving around process, I think it's quite likely that she saved us 3% in the negotation process.

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