BILL WENDEL
More options for buyers

Unlike traditional real estate brokers who typically charge a 5 percent to 6 percent commission, Pat Rioux charges homeowners a flat fee to post the home they are selling in the local multiple listing service.

For a flat fee of $555, Rioux displays for-sale properties in the Multiple Listing Service Property Information Network, or MLS PIN, for homeowners who are trying to sell their home without the help of a real estate agent. Rioux, who is broker-owner of List for Less in Marlborough, doesn’t offer the other types of services and guidance that most full-service real estate brokers provide.

That’s why Rioux was relieved when MLS PIN issued a reminder several weeks ago that brokers like her are allowed to post such listings for home sellers. MLS PIN’s reminder came after Realtors complained about brokers like Rioux who offer listing-only services.

“I felt it was not so much a victory, but an acknowledgement of a viable business model that’s been in existence, and disgruntled people can’t make it go away just because they don’t like competition,” said Rioux.

Rioux’s business and other firms that offer limited services or fee-for-service options to consumers have caused some confusion and drawn resistance in the real estate industry in recent years.

Some of the resistance comes because the emergence of limited-service, fee-for-service and flat-fee service business models, as well as so-called discounters that offer commission rates well below the market rates, are helping to put pressure on traditional commissions, according to industry experts like Steve Murray, a real estate analyst with the Colorado-based research firm Real Trends Inc. who spoke about the trend in April at the New England Realtors Conference in Chatham.

Other factors that have been eroding traditional commissions over the years, according to industry experts, are skyrocketing home prices, technological advances like the Internet that have made the home buying and selling process easier for consumers, demand for more customized services from consumers – especially from younger Generation X homebuyers – and competition from a growing number of real estate agents entering the business. In fact, the average real estate commission nationwide is 5.1 percent, down from 6 percent about a decade ago, according to a recent survey by Real Trends.

Commenting on the backlash against limited-service options, Rioux says, “I believe very much it has to do with being anti-competitive. The industry is working on such a thin margin now that anything that threatens it even worse Â… is a concern for them.”

Yet slowly, the real estate industry is coming to accept that alternative business models aren’t going away and that they must learn how to work in such an environment, according to some Realtors.

Cambridge broker Bill Wendel, founder of The Real Estate Café, which offers a full menu of services to buyers and sellers, said he was encouraged by a panel discussion he heard at the recent midyear meetings of the National Association of Realtors in Washington, D.C. The panel wasn’t critical of limited-service business models and didn’t question whether they had they right to exist, but instead focused on how they operate.

“The sense I had from this [NAR] panel wasn’t so much ‘What are these people doing with our listings in the MLS?’ as ‘what can we expect from these service models?'” said Wendel.

For its part, MLS PIN was very clear in its reminder about its long-standing policy to accept listings even from brokers who offer limited services. John Breault, director of customer support for MLS PIN, said a lot of members who were either confused or angry about the listing-only entries called to complain.

Some Realtors said they feared that sellers using listing-only services might be misled into thinking that such brokers were offering full services, while others were simply confused about how to work with brokers like Rioux and the home sellers they assist. MLS PIN felt it had to send out a reminder on its policy.

While PIN has had a longstanding policy to allow listing-only entries, the company last year began requiring that agents listing a property declare whether they have an agency relationship with the seller or are simply acting on behalf of the seller to post the listing. Since that time, according to PIN officials, complaint calls regarding listing-only postings have increased as their visibility has increased.

“The offices that are doing [listing only] are doing an alternative form of business and it is inappropriate for us to try to put a restriction on the way certain agents are doing business,” said Breault. “It’s not our place to restrict how our customers do business.”

In its statement to members sent out in mid-May, MLS PIN noted, “By requiring that ‘entry only’ listings be identified as such and that the listing broker/agent be required to respond to inquiries by other [MLS PIN] participants regarding the nature and extent of the agency relationship with the seller, MLS PIN believes that it has taken sufficient steps to protect the integrity of the data, while allowing access by new and creative competitors in the real estate industry.”

The statement continued, “We are well aware of reports of instances where consumers have been misled by ‘entry only’ agents. While that certainly is a serious matter, we do not believe the solution lies in an across-the-board denial of access to this service. Instead we suggest that anyone who becomes aware of possible consumer deception arising from an entry-only listing file a complaint with the appropriate governmental authorities as one would in any case of consumer deception.”

‘Unfinished Evolution’

While limited-service firms like Rioux’s have attracted consumers, research shows that 82 percent of the real estate transactions that occur are still the result of agent contact, said Judy Moore, president of the Massachusetts Association of Realtors.

Real estate agents with buyer clients rely on listing agents when they’re trying to show properties and vice versa, she explained. “There’s definitely a value when the agent is involved,” said Moore.

During the last decade or so, alternative services – such as flat-fee, listing-only or fee-for-service models – have been offered to home sellers, but there haven’t been a tremendous amount of choices for buyers, according to Wendel.

“That’s one of the untold and unfinished pieces of this evolution,” he said. Wendel, who charges clients $100 an hour rather than charging a commission, has been offering a full menu of services to both buyers and sellers for the last 10 years.

Sam Schneiderman, president of the Massachusetts Association of Buyer Agents, said he also has been offering the fee-for-service option to buyers as well as the traditional commission rate for full services for at least eight years. “Not all transactions require a full-service arrangement,” he said.

Most of Schneiderman’s clients, however, opt to pay a commission rate for full services and the buyers who do select fee-for-service plans typically have already initiated a real estate transaction and simply need guidance to complete it.

Unlike some in the industry, Schneiderman, owner of Greater Boston Home Buying Inc., says he does not believe that such alternative services are eroding traditional commissions.

“I have clients who are full-fee that would rather pay a premium for premium services,” he said. “I just don’t think it’s [alternative business models] putting pressure across the board on the industry commission-wise. There are a lot more options out there Â… and the consumer needs to pick what works for them.”

Schneider also said alternative service models are healthy for the marketplace and part of the evolution of the real estate industry. “Different markets demand different services,” said Schneiderman. “In a market like this you might see discount brokerages and flat fees, but as soon as the market shifts back to a more balanced market, then the fee structures change as well.”

Not all members of MABA offer fee-for-service in addition to straight commission options to homebuyers at this point, according to Schneiderman. MABA and the New Hampshire Association of Exclusive Buyer Agents are holding a training session on fee-for-service business models in October at a Nashua, N.H., hotel. The training will be offered by Julie Garton-Good, a national expert on fee-for-service consulting who established the National Association of Real Estate Consultants.