Question:

Is real estate essentially MLM?

Is real estate essentially MLM?

Answer:

Is real estate essentially MLM? MLM has the following properties piece of cake to answer, as I am an avid enemy of MLM and author on it and am also a RE broker; [one RE brokerage is under investigation for permiting something like MLM for its agents] 1. Multiple levels of experience, expertise, and management, like any business. --expertise, yes, mgt no; one manager; the listing broker. 2. Always promises good pay, even to beginners --it promises nothing but a fiduciary relationship to the seller. --------------- 3. Selling something overpriced ---Fed lending laws require Fed insured loans to have neutral appraisals on all property being sold. The buyer then can choose to buy at the appraised value or risk paying more. Those who are not getting financing are smart to use their own appraisers and not to pay above FMV; fair market value. --------- 4. Commissions are split, and the people on top make more doing less --there are 2 types of offices, split commission and 100% offices where there are desk fees. There is NO ONE on top. Agents are not employees. Their brokers are not their bosses but their contractors. ------------[many agents make much more than their brokers!] 5. Takes time to build your network/customer base --this is a positive, not a negative. and it applies to every business on earth. ----------- Is that an accurate description of MLM/pyramid scheme, and does real estate differ much from this business model? -----------they have no similarity whatever. ONE RE office Keller williams is trying to bring that form into their office and when asked about commissions being earned by agents not related to a transaction, the office must convert the fees to profit sharing to keep from commiting a felony. IN profit sharing, all participants are equity owners. ------------ In mlm, there is no equity for anyone.
When I read about these scams that are multi level marketing, one flaw I see is you really are not trying to sell the product near as much as you are trying to sell new people on selling the product- because the product is unimportant. Most real estate sales people are selling property, most are not trying to talk you into selling property. I have been a real estate broker for 29 years and don't know anyone that has become wealthy from commission on real estate transactions. I do know people that have become wealthy from owning real estate. So I don't think real estate sales fits the definition of a pyramid scheme.
MLM, multi-level marketing, is a business model that requires more and more people to sell in order to make a profit. The riches promised are usually based on the residual income you make from getting people to sell under you. The model is flawed because by the time you and I hear about it every person on the world would have to join in order for us to make anywhere near the profits of the people ahead of us in the pyramid. So, although you point out some similarities, the argument is flawed because of the fundamental difference in the business model.
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