In the perfect world otherwise known as the classroom, competition causes prices to fall until there is no economic surplus, ie profits, left. In the real world, monopolies and government intervention (or lack thereof) usually prevent this from happening.
Im doubtful the real estate business will change much without government intervention but it is nice to see come pressure from competition.
Real-Estate Brokers Step Up Rebates
As Market Cools, Rates Rise, Some Firms Offer Buyers Up to 75% of Commissions
April 5, 2006
As the real-estate market continues to cool, a growing number of brokers are doing what was until recently unthinkable. They are giving most of their commissions to buyers.
People selling homes typically pay commissions of 5% to 6% of the price, which is split between brokers representing the buyer and seller. On a $300,000 home with a 3% cut for the broker representing the buyer, BuySide would earn $9,000 and pay 75% of that, or $6,750, as a rebate to the buyer.
These new rebaters join a long list of entrepreneurs who over the years have tried to reinvent the residential real-estate business, which generates more than $60 billion a year in commissions.
Consumers often grumble about real-estate commissions, particularly because the surge in home prices over the past decade has pumped up the amount pocketed by agents. Many small firms have begun offering to help owners sell homes for a flat fee, usually a few hundred dollars, rather than taking a percentage of the sale price.
But the traditional model has proved resilient. That's partly because buyers pay nothing directly to agents (the seller pays agents on both sides of the deal), while sellers tend to assume that a smart agent will fetch them a fancy price for their home.
Fifteen states, including Missouri, New York and Oregon, ban or heavily restrict rebates on real-estate commissions.
