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Published in RISMedia
As more than 31 million small businesses across the country were recognized during National Small Business Week, it’s a good time to look at how small, local operations drive so much of the economy and search for ways to continue to level the playing field for them and for consumers. When it comes to “buying local,” small businesses could not be more front and center than when it comes to purchasing a home. In fact, of the 1.5 million REALTORS® across the country, more than 1.3 million are small businesses like me who are focused on our local communities.
Of course, the local economic impact of housing is about more than just real estate agents. Preparing a home for the market often involves photographers, cleaners, landscapers, decorators and more, many of whom are small business owners themselves. Taken in total, small business has a significant impact on real estate—in fact, every home sale generates roughly $88,000 in local economic activity, and every two home sales supports one American job. Overall, real estate accounts for nearly 18% of the nation’s GDP.
When you consider this real estate economic “food chain,” many think of it as beginning at their housing search—the listings. Real estate listings aren’t simply picked up from websites or public sources, they are created, licensed, vetted, verified, marketed, publicized and shared by independent contractors and small business real estate professionals like me and my team, and then posted on localized data hubs. These hubs allow even the smallest businesses to immediately compete with large ones by creating and participating in this marketplace, where all have access to the same reliable and trusted data.
Part of an ongoing fight to maintain equitable accessibility to these listings for all consumers and a level playing field for small business brokerages has to do with so-called “pocket listings.” Such listings allow for the marketing of properties to select consumers before opening them up to all potential buyers. Addressing these types of private listings is critical to ensuring fair competition among small businesses and crucial consumer protection, especially in hot markets where properties sell extremely fast. New guidelines implemented in late 2019 ensure that listings must be submitted to the local marketplace within one business day of marketing a property to the public. This is important in supporting a transparent, pro-consumer market, benefitting both sellers and buyers.
Next, let’s consider house hunting and the choice of whom to work with throughout this important process. Another benefit of the real estate marketplace is that it spurs entrepreneurship and innovation and allows consumers to choose their business partners, whether they be small enterprises or large ones. This also allows for choice in service models and the fee payment options, including different commission options or flat fees. It is noteworthy that one of the compensation models, a success or contingent fee, is strongly pro-consumer. If the real estate agent does not sell the property, he or she does not earn a fee.
When it comes to the offer prices for properties and closing fees, the real estate marketplace also makes the transaction more affordable. The commitment to cooperation—in which the listing broker pays the buyer broker—allows countless first-time homebuyers and low- and middle-income Americans to be able to afford both a down payment and professional representation.
And we know that these savings go a long way. For many prospective buyers, saving for a down payment is difficult enough. The average American household has about $8,800 in the bank. That’s barely 50% of the average down payment for a starter home. Most lenders don’t allow real estate broker commissions to be financed. As a result, for every 1% of broker commission fees that first-time buyers might have to pay, the prices for their homes grow by another $2,000. Buyers, particularly first-time buyers, benefit from the advocacy and representation that licensees provide, particularly given the competition for properties and the complications of the home-buying process.
So, having celebrated small businesses in America last week and in the spirit of keeping that momentum going forward, I’m proud to be a REALTOR® who is one of the more than 4% of all U.S. small businesses. We’re out there each and every day participating in a real estate marketplace that advances small businesses and promotes equity for consumers.