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Alexandra Clough
Jeff Ostrowski
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Monday, June 19, 2006
Drug lords, oil barons - and Realtors?
A consumer group labels the real estate industry a “cartel” - an epithet most frequently associated with Colombian cocaine kingpins and members of OPEC.
The Consumer Federation of America today bashed Realtors for anti-competitive, price-fixing practices, making it just the latest critic to fire a salvo at the real estate industry. The U.S. Department of Justice and the federal Government Accountability Office have lodged similar accusations.
But how accurate is the cartel allegation? The very word conjures images of a few powerful players gathering in a room, a stereotype that doesn’t exactly jibe with the highly fragmented reality of the real estate industry.
The National Association of Realtors points out that most of its 1.2 million members are independent contractors — meaning they choose how much to charge. True, they’ll push for the standard 6 percent, but newsletter RealTRENDS says the typical commission has fallen from 6.1 percent to 5.1 percent in recent years as consumers have negotiated for lower fees and as an increasing number of brokers offer discounted commissions.
Realtors readily admit that they once controlled information — shopping for a home in the 1980s meant going to a Realtor, who consulted the MLS book. But that has changed significantly. Today, listings are easily available on the Internet to anyone who wants to see them.
Then there’s this, which Realtors also like to point out: The typical agent gets paid only for finishing the job. True, 5 percent of a $400,000 sale equates to $20,000, but the agent doesn’t get paid until the deal closes.
Moreover, “cartel” connotes monopoly power. If you live in Palm Beach County, your mailbox probably is filled with “just-listed” cards, “just-sold” mailers and other blandishments from dozens of agents working your neighborhood. NAR points to the sheer numbers of agents, and the notorious ease of landing an agent’s license, to say competition is alive and well.
Or, as H.I. McDunnough said in Raising Arizona, “That’s one bonehead name, but that ain’t me any more.”
The feds aren’t buying the argument, though. The GAO wrote in a report last year that throngs of Realtors and price competition aren’t the same thing.
“While real estate brokerage has competitive attributes, with a large number of players competing for a limited number of home listings, much of the academic literature and some industry participants we interviewed described this competition as being based more on nonprice variables, such as quality, reputation, or level of service, than on price,” the GAO wrote in a report last year.
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Sink or swim time for condo developers
It’s sink or swim time for many condo developers throughout South Florida.
Big, grand condo plans are hard to keep when the market appears to be positively FLEEING from real estate. And that was before Tropical Storm Alberto started the hurricane season off with a shudder.
So, time to be creative.
Some developers are redrawing their properties, looking for ways to save money on construction costs. Others are building higher to get more income from the same-sized deal.
Some projects are probably dead in the water. Reports are some West Palm Beach condo developers are stirring around the few sales on their plate like so many unwanted peas at dinner, pretending things are fine while looking for an exit strategy from the closing table.
And then there’s Cliff Preminger. He’s the developer of Eighty Points West, the nautical-theme upscale condo planned for North Flagler Drive in West Palm Beach.
Like everywhere else in South Florida, condo sales have slowed there, too. But Preminger has decided to stay onboard and wait.
He still believes Eighty Points’ waterfront location will insulate the project from failure, even though condos remaining for sale in the 173-unit complex start at at a pricey $700,000. (He would not say how many have sold so far.)
Veteran real estate lawyer Steven Siegfried, who literally Wrote The Book (Florida Construction Law), thinks most condo projects will be built … eventually.
“The market is going to be like this for some time,” said Siegfried, a partner at Siegfried, Rivera, Lerner, De La Torre & Sobel in Miami and West Palm Beach.
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