| | AUGUST 20198THOUGHT LEADERSHIPWhen I place an order to buy Microsoft stocks, I am being charged $4.95; when I shop for a hotel, insurance or a plane ticket, I can choose and compare between thousands of options, and with Amazon Prime, I no longer pay for shipping for most of my shopping. The internet has reduced inefficient middlemen in most industries; why haven't real estate brokers in America been affected? As a Frenchman, I am particularly shocked by the high six percent real estate commission paid in New York. The average commission paid to brokers in the UK, Australia, France and Belgium ranges from 1-3 percent.I live in New York, and prices here may rise & fall, trends may come & go, but one number remained unaffected ­ the `standard' six percent broker commission. With six percent, NYC has the highest real estate commission rate in the world and even within the U.S. If you try to negotiate, brokers will tell you that six percent is standard and `this is the way it is in New York'.The national U.S. average real estate commission charged by real estate brokers to sell a home stands at 5.36 percent. In the UK, real estate brokers charge 3.25 percent, and in France, it ranges from 2-4 percent. In the center of London, brokers charge 1.7 percent. In London or Paris, it's common for real estate agents to charge a lower fee for more expensive apartments. But brokers generally do not accept that in New York. To make matters worse, in London or Paris, the average commission is lower than what it is in the rest of the country. How do you explain this? Real estate in London and Paris is considered a safe and liquid `asset class'; in other words, it is easy to sell. For instance, it is easier to sell a studio by the Eiffel tower than a farm in Normandy; this is the reason why the agent trying to sell the farm needs to charge more. The same rationale should apply to NYC real estate. But it does not. It turns-out that real estate in NYC is actually higher than in the rest of the country, when the market is more liquid and transparent. Technology has changed the way business is done in ways that were unimaginable a decade ago. Experts say that residential real estate practices should adapt and evolve now, as buyers and sellers have unlimited access to property listings and other information that was once hard to get. Twenty years ago, brokers were receiving apartment listings over fax, had access to information not available to the general public, and were considered to have an insight into the business. Brokers are still useful and play a major role in real estate transactions. However, NEW BEHAVIOR IN THE U.S. & DISRUPTIVE TECHNOLOGIES LOWERING REAL ESTATE COMMISSIONSBy Georges Benoliel, Founder, NestAppleHaving graduated from HEC Business School and holding a Masters degree in Finance from ESADE Barcelona, Georges has 18 years of experience in the Finance sector, working with companies such as Paribas Affaires Industrielles, Arthur Andersen and Société Générale, and is also an active real estate investor.Georges Benoliel
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