Real Estate Reference Disintermediation - Removing the Real Estate Agent from your Real Estate Sale
Tuesday 19 February
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  by David B. Zwiefelhofer

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  “Disintermediation”. It used to mean the withdrawal of funds from an institution to invest elsewhere at a higher rate of return. (Like any of us knew that). Now it’s the new term for what the internet, or more specifically, the world wide web, is doing to distributors and middlemen.

Real estate agents are the ultimate middlemen (middlepersons?) and a revolution is underway in their industry. The web is allowing buyers and sellers to meet without the need for an intermediary.

Before the advent of the web, the real estate industry maintained its monopoly status through its choke hold on home listings. “In the 1940s and 50s the National Association of Realtors® and local associations enforced an agreement requiring all members to sell at a fixed commission rate, and established entry barriers by only allowing members to access the Multiple Listing Service.”

By keeping the MLS, the largest database of homes on the market, closed to non-realtors® they controlled the dissemination of market information and thus, home sales. If you wanted to buy a house the only place to find one was through a real estate agent.

This control of information had a predictable effect on real estate commissions. “From the 1920s to the 1960s commission rates rose from 2 percent up to 6 percent. ” This dramatic, three-fold increase is a clear demonstration of monopoly power.

With the rapid expansion of the World Wide Web to its near ubiquitous presence today the dissemination of home market information can’t be controlled by any entity. Real estate agents are purely “go-betweens” (connecting buyers and sellers but never buying or selling themselves), “their position is vulnerable if buyers and sellers develop new ways to find one another. For example, buyers and sellers can now use the Internet to by-pass traditional real-estate agents.”
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