Insiders provide a guide to the real estate marketplace

National Association of Realtors </br>study arms sellers and buyers </br>with key information

When the country’s largest real estate trade group bares some of its innermost worries, should homeowners, sellers and buyers pay attention?

They will, if they want valuable insights into current issues and problems in the housing marketplace. It might even help save some money or avoid a bad experience with an agent or broker.

In an unusual move for a major American trade association, the million-member National Association of Realtors released a frank and sometimes searing assessment of top challenges facing the industry for the next several years.

The critiques hit everything from the professionalism and training of agents to the commissions charged to consumers and even the association’s leadership.

Consider these broadsides to get the flavor of the report:

• “The real estate industry is saddled with a large number of part-time, untrained, unethical and/or incompetent agents. This knowledge gap threatens the credibility of the industry.” Ouch!

• Low entry requirements for agents are a key problem. While other professionals often must undergo extensive education and training for thousands of hours or multiple years, realty agents need only complete 70 hours on average to qualify for licenses to sell homes, with the lowest state requirement for licensing at just 13 hours. Cosmetologists, by contrast, average 372 hours of training, according to the report.

• Professional, hard-working agents across the country “increasingly understand that the ‘not-so-good’ agents are bringing the entire industry down.” Yet there “are no meaningful educational initiatives on the table to raise the national bar.”

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• The commissions that brokers and agents charge are under attack and highly vulnerable to reductions because of pressure from cost-sensitive consumers. While typical commission rates in this country are around 6 percent, fees in other developed countries are significantly lower. In the United Kingdom, they average 1 to 2 percent; in Australia, 2 to 3 percent; Belgium, 3 percent; Germany, 3 to 6 percent.

• In response to consumer demand for lower fees, “a growing new generation of brokers and agents [is] exploring … new business models and pricing models that will most likely become commonplace in the next five to 10 years.” The reference here is to technology-driven discount brokers who are making inroads in many markets. Baby boomers looking to downsize and millennials seeking first homes are especially interested in shaving fees to save money.

• Real estate brokerages face their own challenges, such as compliance with aggressively enforced federal regulatory policies. Among the most prominent, according to the report: The Consumer Financial Protection Bureau’s anti-kickback and referral-fee rules governing brokers’ financial arrangements with title companies, lenders and others. Though “most brokerage companies are either ignorant of the fact or believe they are in compliance,” said the report, “most are likely in violation already.”

The 160-page study, known as the “DANGER” report (www.dangerreport.com) was commissioned by NAR’s “strategic thinking advisory committee” and authored by industry consultant Stefan Swanepoel of the Swanepoel/T3 Group. It is based on a survey of 7,899 Realtors, interviews with 74 top realty CEOs plus additional research. Other problem areas it details concern multiple listing services, state Realtor associations and NAR itself.

Sara Wiskerchen, managing director of media communications for NAR, emphasized in an interview that the study was stimulated by the “belief that it is healthy and helpful to hear what others are saying, especially those ideas that might be uncomfortable or disagreeable.” The association is “neither celebrating or disappointed in the author’s perspectives,” she added.

Consumers will likely have several takeaways from the study. Top of the list: Since the study alleges that “a large number” of real estate agents lack sufficient training and competency, agents should expect more clients to question their experience and track record. In particular, they may ask about advanced training and certifications.

Given the report’s emphasis on the threats to traditional brokerages posed by innovative, tech-driven alternatives now growing in the market, more clients may also ask about discount pricing, whether for a sale or purchase. And agents should expect a growing number of clients to try to negotiate commissions.

Ken Harney is a syndicated columnist.