• English
  • Español
AGENTS: Did you know you can share a personalized version of this post? Learn more!

This Is a Job for Superman, Not Clark Kent

We found this past weekend’s New York Times article, You Don’t Have To Pay It, very interesting reading. It was a piece on whether it makes sense to pay a 6% commission to your real estate agent in today’s market. In the article, there are sellers, buyers and even agents debating what is the right number that should be charged to assist a consumer in completing a real estate transaction. We would like to add our two cents to the debate.

Forget what the actual amount of the commission is. The bigger question is whether you should pay a ‘full fee’ when hiring a real estate expert to guide you through the complexities of today’s rapidly changing housing environment.

If a full fee was the rule in 2006 when completing a deal was so much simpler, why would you now consider cutting the fee of your agent in today’s tumultuous market? You are depending on this person to help you reach your goals in a sale or purchase. In 2006, buyers were willing to pay almost anything to a seller just to get into a home. Banking entities seemed to be willing to mortgage any property for any buyer. The process was rather simple.

Today, a person looking to buy or sell should be willing to pay a full fee for two reasons:

You need an expert guide if you are traveling a dangerous path

The field of real estate is loaded with land mines. You need a true expert to guide you through the dangerous pitfalls that currently exist. Finding a buyer willing to pay fair market value for your home at a time that there are mass inventories of foreclosures and short sales will take a true real estate professional. Finding reasonable financing can also be tricky in today’s lending environment.

Experts in any profession, do not discount their fees; especially when the job is becoming much more difficult.

You need a skilled negotiator

In today’s market, hiring a talented negotiator could save you thousands, perhaps tens of thousands of dollars. Each step of the way – from the original offer, to the possible re-negotiation of that off after a home inspection, to the possible cancellation of the deal based on a troubled appraisal – you need someone who can keep the deal together until it closes.

When an agent is negotiating their commission with you, they are negotiating their own  salary. The salary that keeps a roof over their family’s head. A salary that puts food on their family’s table. If they are quick to take less when negotiating for themselves and their families, what makes you think they will not act the same way when negotiating for you and your family? If they were Clark Kent when negotiating with you, they will not turn into Superman when negotiating with the buyer or seller in your deal.

Bottom Line

We believe that famous sayings become famous because they are true. You get what you pay for. Just like a good accountant or a good attorney, a good agent will save you money…not cost you money.

Members: Sign in now to set up your Personalized Posts & start sharing today!

Not a Member Yet? Click Here to learn more about KCM’s newest feature, Personalized Posts.

35 replies
  1. Kristen Kelly
    Kristen Kelly says:

    I have said this to my husband over the last 16 years (he is a Commercial Real Estate Broker). Would I work on my own teeth? Would I perform my own surgery? NO, I would not. So why the heck would we not hire a professional to help us navigate the real estate process. And, by the way, Realtors don’t have money trees in their back yards. They deserve to get paid for their professional services just like a doctor or a dentist. Just let everyone else, they are just out there providing value to people who need it and deserve to be compensated for it.

  2. Susan jacobs
    Susan jacobs says:

    As much as I love your blogs this one hit a nerve. It appears that you didn’t do much research before writing this. Not ALL discount brokerage companies are the same. I am a franchise owner for Assist 2 Sell in the Northern Virginia area. I opened my office in 2005 because sellers wanted to know what I was going to charge them rather than how much should I list for. We work off a flat fee starting as low as $3995. and we are a FULL SERVICE real estate company. I do as much if not more than the average Realtor. Just because Myself or any other discount broker charges less DOES NOT mean we are bad negotiators or less skilled. This comment “Experts in any profession, do not discount their fees” is totally false. Have you heard of Pre-paid legal or Walk In Medical clinics? Both are discounted services.
    I once had a client tell me “that the definition to insanity is paying more for the same product or service that you could have gotten for less.”

  3. Greg Ferrao
    Greg Ferrao says:

    Susan, you go girl. I recently had to have surgery for a bum leg and I shopped around and found the cheapest doctor to fix me up. Went pretty good. My friends now call me “Limpy”, though. Maybe I should have stepped and found the best instead of the cheapest. Just a thought.

  4. Chuck Daily
    Chuck Daily says:

    I completely agree with your post. After selling real estate for 25+ years, the job is getting harder, lending is much more difficult and everyone wants a piece of the Realtor’s commission.
    I just say NO! If they want a discount Realtor, they are easy to find. You do get what you pay for.

  5. Terence Richardson
    Terence Richardson says:

    Good post. While I read in one of the Keller Williams magazines (it may have been Outfront or the Market Navigator Report) that discount brokers have lost a lot of market share over the past few years and now hold about 1.8% of the market down from 3.x%, I took the article in a different light. To me, Steve wasn’t targeting discount brokers per se but rather agents who don’t negotiate hard enough to earn their 6 or 7% commission rate when they take the listing and instead cut their rates because of whatever the reason may be. I’m sure there are some shrewd negotiators who work for discount brokerages but I don’t think that was the target here.

  6. Bob Wright
    Bob Wright says:

    Dear Susan-

    How can you possibly tell me that you provide the client with the same amount of services for less? As a Real Estate professional one of the most valuable assets we have is our knowledge of the marketplace and the ability to negotiate. With all due respect; how is it possible that you are providing the client with the very best negotiation skills when you work with a company that charges a flat fee? how is it that you can tell a client that you are giving them the very best negotiation skills while you are negotiating for THEIR money; when you can’t even negotiate for the money that you are taking home to support YOUR family? I apologize if this hits a nerve, however, negotiation skills do not pertain to negotiating for a clients money alone. Negotiation skills are you ability to negotiate anything in life whether it be a clients money, your own money, or your childs curfew…

    Your friend,

  7. Sylvia Metos
    Sylvia Metos says:

    I absolutely agree with the adage, “You get what you pay for”! I am not a discount broker, but rather a skilled negotiator with several years of experience not only in the specific field real estate but also in sales in general. I work extremely hard for my earnings and have rarely discounted my fees. Actually, I can think of only one time when I discounted my fees due to my clients having several properties that they wanted to sell at once. Volume does make a difference.

    If a client asks me to discount my fees, I ask them what aspect of my services they do NOT want me to utilize. Should I NOT have a virtual tour of their property? Should I NOT have a sign placed on their property announcing to the world that their property is for sale? Should I NOT have full color flyers regarding the property professional produced by my marketing department? Should I NOT have “Just Listed” post cards sent out to 200 of their surrounding neighbors? Should I NOT write an advertisement about their property and place the advertisement on 15 Internet websites? You get the idea!

    Clients who want to pay me less commission will receive less of my efforts! That’s precisely why I charge six percent (6%) and am worth every penny!

  8. Helen
    Helen says:

    Well, I think the word here is “average Realtor”! I do not consider myself and “average” Realtor. As a first round of expenses, I can’t pay for the professional 25 photos, virtual tour, color glossy graphics, and mail outs that I provide my sellers withint the first week they are on the market…much less the internet presence! That does not even include the time I put into calling agents that sell in the area, networking meetings I attend to promote my listings, open houses I hold to create interest for my listings. This is not limited by a zero dollar marketing budget. Even at minimum wage I can’t do that on $395.

    I have also spent countless hours and dollars on continuing education so that I can give my buyers and sellers the best possible, most up to date, information to make the absolute best decision they can! Sorry, you may be great, but the last “discount” agent I dealt with expected me to do their work for them, was less than informed about the neighborhood they worlked in, and in general, made the transaction much more difficult than it had to be.

    By the way, if I was going to have surgery, I would NOT go to doc in a box! I would go to a specialist! If I want information and help with the MOST EXPENSIVE THING I WILL EVER BUY, I want a specialist not a discount!

    Best of luck to you

  9. David Mott
    David Mott says:

    Thank you for opening this topic for discussion!

    I’m not a realtor, but am involved in real estate as an investment vehicle.

    In years past, it seemed okay to pay 6% sales commission on a 100K transaction (6K). Half of that went to the buyer’s agent, if any. It wasn’t hard to add that 6K to the asking price.

    Using a 200K transaction as an example, the commission is now 12K. I get exactly the same service, but now pay twice as much. These days, it’s not as easy to add the sales commission to the asking price though.

    With the advent of strictly buyer’s agent and seller’s agent marketing methods, as a buyer, I don’t pay sales commission directly (unless I agree to pay the full asking price). My buyer’s agent works hard to close the deal, with the understanding that the seller’s agent will split the 6% sales commission with them.

    As the seller, I see the buyer’s agent working hard for the buyer too. Lately, what seems to be happening in this market, is that the buyer’s agent isn’t working for the seller at all. In this buyer’s market, offers to purchase come in at much lower offering prices, extra demands are made at closing, etc.

    With the effort made by the buyer’s agent actually against the interests of the seller, why should the seller pay for this service at all? Why shouldn’t the sales commission be 3%, which pays for the the seller’s agent’s effort, and have the buyer pay their own agent 3% at closing?

    As a for instance, offering a seller 10% less on a 200K purchase is a difference of 20K. If this deal closes, the 6% sales commission is now adjusted down 10% from 12K to 10.8K. So, both buyer and seller’s agents realize a drop in sales commission from 6K to 5.4K, or $600.

    The agents just lost $600 each on the deal, but the seller just lost over 33 times that amount! If in this transaction, the buyer just realized a savings of 20K, shouldn’t the buyer be the one compensating their own agent?

    In our example above, if the buyer is saving 20K, I’d think they should come up with the 5.4K to pay their own agent.

    If I didn’t have to worry about paying 6% in sales commission, I could drop my asking price 3%, and maybe bring my asking price into a larger target group.

  10. Brian Hiatt
    Brian Hiatt says:

    @ Susan – while I certainly understand your perspective, I would be careful in comparing yourself to pre-paid legal or Walk in Medical clinics…
    If I am sick, I am not going to a Walk in clinic, I am going to my doctor who I know, and more importantly, I trust.
    Same thing with legal services, I would never, ever, ever use a pre-paid legal service, I would only use an attorney that was either known to me personally OR referred by someone who again, I trust.
    Having said that, I do not disagree with your perspective. It is not a given that if you discount what you earn you will give less. This is an incredibly competitive world that we live in today, and an even more competitive market that we are in. If you have carved out a niche for yourself, and are comfortable with what you make in return for what you do, then that is fantastic!

  11. Dale Murphy
    Dale Murphy says:

    There are many sides to the realtor compensation issue. The discount Broker business model can work depending on the area you work in and the expectations of the client pool. They may offer good service, but many have fallen by the wayside in the metropolitan area. Volume of business expected and type of real estate also play a part in it. The buyer in our area gets free service for an unlimited amount of time. The seller pays for a marketing strategy which includes the many varied and time consuming services of the realtor. The realtor works on an “educated guess” basis. Will the buyer stay with me and actually buy something, and will the listing be sold before the contract expiration? This society, in my opinion, is filled with over compensated jobs, which would take me too long to name. The realtor is not one of them. If buyers would chip in a few bucks initially, which they could retrieve at a closing, the seller’s 6% burden could be eased, and it wouldn’t be such bone of contention.

  12. Brandon King
    Brandon King says:

    While this article makes perfect sense, I know of many agents getting the 6% that do the same as these discount brokers. It’s also misleading because the 6% is really 3% to each side.
    Paying a higher commission, a client should expect more from an agent, but they can’t base the reality on the charges alone. It is always best to interview the agent and see exactly what they do including showing the proof of this in current listings or receiving a list of referrals from them. Many discount brokers do not pay the extra advertising fees to market the property as one should receiving a higher commission fee. ie., Sending out postcards to prospects, paying fees to top search engines to enhance the listing, color flyers, representation by a top name franchise, specialized training, etc.
    Bottom Line: 2 identical homes with only commission being different. Which one sells first? easy right.
    For thought: New home sales often offer agents 4% commission which is similar to an 8% listing. Discount broker rules say they are wasting money but I believe they are willing to pay more to get more!

  13. Brandon Smith
    Brandon Smith says:


    While I fully understand where you are coming from, I want to clarify the reasoning behind the commission structure for Realtors. At no point in time has the Buyer’s agent ever been working for the Seller. The role of the Buyer’s agent is to represent the best interests of the Buyer 100%. The commission is setup where 3% is used for your Sellers agent to do everything in their power to find a buyer and the other 3% is used for a Buyer’s agent to bring you a willing and able buyer. Its structured this way as the chances of a Seller having equity to afford both sides is much higher since the buyer already has lots of additional costs due to obtaining a loan. The design is meant try and make it easier for the Buyer which increases motivation to buy thus benefiting the Seller. In most markets (other than this one :(), the Seller is normally expected to have some equity into the property thus being able to afford it more than the Buyer which keeps the flow of Buyers coming in and Sellers being able to sell.

    When the market was better and everyone was making money and houses were consistently appreciating, the general public saw more value in housing and had little fear of losing money. It was much easier for the buyer to justify a listing price closer to the asking price. Today’s market is much different as the majority of the housing has either lost value or remained stagnant over the past few years so very few sellers price their houses at true market value because they can’t afford to. When a buyer goes out into this market to find a home, what they end up seeing is lots of overpriced homes and short sales/foreclosures. The buyers mindset has changed as they worry about values continuing to decline, competing with all the short sales and foreclosures and the overall investment of housing. Because of that, they are more inclined to write lowball offers like what you are talking about.

    A house is worth only as much as someone is willing to pay for it. Regardless of what type of market you are in, if you price a house and show it as a value in this market it will sell fast. As long as we continue to stay in a market like this, there will always be people looking to get the deal no matter how great it is. Its just some buyers mentality and it just a product of the times.

    My personal experience has shown me that this market is breeding more buyers looking for the steal or wanting to lowball more offers so they have a lesser chance of realizing depreciation due to the market or the presence of short sales and foreclosures. But every buyer I have ever worked with has been more than willing to pay full price on a property they see as a value as it stands out above the rest and they want to get the house before anyone else does. I have written extremely low offers and I have written full price offers in this market. As Steve Harney says, make your price compelling and you will have a substantially reduced chance of having a lowball offer come in.

  14. John Plepel
    John Plepel says:

    I am a full-time and full-service Realtor in suburban Chicago. Here are my thoughts:

    Susan: I agree with you when you say “Not ALL discount brokerage companies are the same.” My interpretation of the post was a little different than yours. The post was not focused on what full price is but rather cautions against agents that are quick to discount whatever their typical fee is. You use a “flat rate” commission structure which is different than someone that might use a percentage. While you may be a “discount” over another agent at higher sale prices, your fee may be as much or more than you competition for a more moderate priced home.

    I believe his point is that if you offer to sell a home for, say $3,995 but cave as soon as the prospect asks a question and agree to charge, say $3,000, you may be sending a message that you won’t fight for every last one of your client’s dollars when negotiating with a buyer. If you hold firm at the listing, even if it is at your flat rate fee, you show you have the backbone to represent your client’s interest later on.

    Please note: Per license law in my state, I am not advocating any commission rate “typical” or “market.” The example flat rate used in my post was taken from your original post. My “discount” example was an arbitrary discount of 25%.

    David: I think your recommendation falls under the category of “be careful what you ask for.” If you shift half of the price of selling a home to the buyer, the overall negative impact on property values may more than offset any savings for sellers.

    In you example, the seller would now be responsible for an additional $6,000 at closing. For a first-time home buyer using an FHA loan, this is almost equal to their down payment. Adding this to the other closing costs a buyer needs to budget for would likely push a significant amount of buyers out of the market, reducing demand and putting downward pressure on property values.

    The other argument is that more buyers would simply buy a home without the use of a buyers representative. In my opinion, which I recognize could be seen as self-serving, this would be very dangerous. A good agent adds value through consultation and interpretation of market data. While there are buyers that have the knowledge and skills to evaluate the market, many buyers don’t even know the right questions to ask. Further, most buyers are too emotionally invested to objectively evaluate market data.

    I do not think it would be good for the overall real estate market to have a less-informed, underrepresented average buyer. I can see many inappropriate conversations between a buyer and the seller’s agent that start with “It is typical in the market that…” With no representation of their own, the average buyer will likely concede to the “expert.”

  15. Greg Barnhouse
    Greg Barnhouse says:

    David, I’m not sure where you are from, but here in Texas, the seller always pays the commission agreed to in the the listing agreement between the seller and the seller’s agent.

    In that same listing agreement, there is an amount specified for payment to the buyer’s agent. I’m not sure what you mean by the buyer’s agent “working against the interests of the seller” as the buyer’s agent has fiduciary responsibility to the buyer alone. And, the real problem with your scenario above where you describe a case of “offering a seller 10% less on a 200K purchase” is that the property was likely priced out of the market to begin with. Of course, there are plenty of “low-ball offers” out there, but pricing a listing property removes some of the room for negotiation.

    Also, whether the buyer’s “broker” gets paid 3%, it does not mean the agent gets paid 3%. The buyer’s agent has to pay the broker, then there are taxes (of course), marketing and other business costs that must be paid. There are over 30 some-odd hands that touch every real estate transaction.

    The commission has nothing to do with the market value or “asking price” as you call it above. If you raise the list price by an amount to cover commission, you simply price your property above market value, which then induces lower than market value offers in an attempt to negotiate back to market value.

    Real estate is truly a commodity . . .

    Thanks for your post.

  16. Gerry Gibbs
    Gerry Gibbs says:

    @David Mott’s post:
    I like to have a little fun with folks during the discussion of commissions. I think a lot of consumers and a lot of practitioners get confused about commissions and property values.

    I ask, “How do the agent’s get paid?” The answer I offer is, we are paid out of the transaction. What does that mean?

    Naturally, the seller believes they pay the commission because most of the time, they negotiate the listing agreement with their broker and the commission is deducted at closing from their side of ledger.

    But who brings this money to the table? Isn’t it the buyer? So, arguably, the buyer is the party who pays the commissions. About this time in the conversation, a buyer is getting agitated because they had no say say in the negotiation of the commission.

    Here, I remind them that unless they are paying cash, its the bank that actually fronts the money for the deal – so I can argue it’s the bank that is paying the commission.

    At this stage, most people’s heads are ready to explode. Here’s the point. It’s simply about the way a transaction is structured. And a deal can be structured in a variety of ways to accomplish various objectives.

    Most of the time the structure is what we conventionally see – where the seller pays the commissions out of their net proceeds. Why? This is a win-win for buyer and seller. The seller gains a tax offset to their capital gains and a higher gross price. The buyer is able to afford more property because they don’t have to arrive at the closing table with as much out-of-pocket cash – the expense essentially gets financed into the mortgage balance. The key point is the price or value has implicity built-in an amount for commission since most transactions must account for this expense one way or another, regardless of who pays it.

    I frequently do deals where the deal is structured differently for reasons that make sense in the specifics of a situation. For example, with a developer or REO bank selling directly without an agent and not offering cooperative compensation … I’ll negotiate a deal in which the seller gives the buyer a 3% credit and the buyer pays my commission directly with this credit. This technically has the buyer paying the commission but avoids them having to have the cash in their pocket to pay me – enabling them to finance the expense such as a commonly structured deal does. When the seller doesn’t agree to the explicit 3% credit, we get it implicitly by negotiating the price 3% less but with the handicap the buyer must have the 3% in their pocket to pay commission.

    Anytime a seller is trying – innocently or deliberately – to unjustly enrich themselves by unfairly capturing and pocketing the buyer’s broker commission (3% in round numbers), it’s important a buyer’s broker advise their client accordingly so the buyer doesn’t end up paying the commission twice – explicitly and implicitly. It’s most often in FSBO and other unrepresented seller situations (developers and REO purchases direct from the bank) where the potential for this occurence is highest.

    Note: Agency has a variety of different flavors that vary by the legal framework operating in each state. I work in a designated agency state with the buyer’s agency being separate and distinct from the seller’s agency. Some of this discussion might be somewhat different in a sub-agency state where all agents work for the seller, even if assisting the buyer, but the basic point about commission being an expense of the transaction and paid according to the structure of a deal remains. I mention this because I’m a bit perplexed by David’s comment how about in this market, the buyer’s agent isn’t working hard enough for the seller anymore. In the framework where I work, no buyer’s agent ever works for the seller.

  17. joyce barber
    joyce barber says:

    You get what you pay for. After 33 years, I am doing more, researching more, changing more (that’s a good thing), working harder, and giving
    more and more. Yes, we earn full commissions! If someone feels they
    are not “worth” it, good to go. As for me and my work ethics and standards,
    I will not lower my standard, nor paycheck. This is not a hobby, it is my

  18. michael morris
    michael morris says:

    Ok its time for me to start putting my 2 cents in. Great blog number 1 and to bad everyone does not read them.
    Number 2 that interview that you did on Fox Business News was the best I’ve ever seen explaining what is going on right now in the Real Estate World. The way you spoke and the strong visuals you made helped the public see and understand what was happening.
    You hit it out of the park.
    Also you looked Great, maybe its time for your own show.
    Thank You Much,
    Michael J. Morris
    Owner Broker
    Coldwell Banker M&D Good Life

  19. Bill McCartney
    Bill McCartney says:

    Agreed! Never compromise your value… But you can’t blame them for asking. If you are up against commission objections you simply need to learn how to handle those objections more effectively and how to demonstrate your value more effectively. It’s easy to look across the table and blame someone else for there thoughts on your value but where is your responsibility in all of this? Don’t forget to look in the mirror once in a while… just a thought…

  20. Janet
    Janet says:

    @Susan: You stated: ” I opened my office in 2005 because sellers wanted to know what I was going to charge them rather than how much should I list for. ” This tells me that you are not educating your clients as to pricing in your area, but taking their money and allowing them to list for whatever Fantasyland price they want. You are telling them what they want to hear rather than what they need to hear. IMO probably the most important part of my job is helping the seller price their home to SELL, not to sit on the market with all the other overpriced stale leftover inventory. I don’t think that’s performing ANY service, full or otherwise.

    Regarding David’s comments: I may be wrong but I think when he says the “buyer’s agent” he means “the agent that brought the buyer”. I have to conclude that everytime he bought a house his agent did not properly explain the law of agency, and the David may not have read the disclosure he may have signed.

  21. TR
    TR says:

    I Believe strongly that as agents we are encumbered by the requirement of:
    “Even against our own best interests, our clients interests come first”. AND
    “There are no fixed broker fees”.

    What i read the author saying is:
    Why oh why would buyers or sellers beat up a good broker on their fee in this difficult world, when they gladly let us live it up when things were easy ? I do not remember ever not having to earn my way, but I do remember a time when this business was much less SiDEwAYS!

    Do not think this was an attack on discount brokers. In fact I think that “fee for service” or “bill by the hour” would be so worth it. How do we get there ? Now I sure do not like the presumption there is extra money laying around in a deal. Agents who “offer” via marketing to give back part of their fee upfront (as if there is an assumption of fee amount) really do not get it PERIOD. Prudent buyers or sellers should be concerned with this type of come on. The broker / agent that offers flat fee rate and full service agency could easily run the risk of over promising and under delivering. ON the other hand, How often do we do the work, ALL the work and for some reason the deal does not go through. Sometimes no matter what we have already done, given, sweat, cried, agonized over, etc. we have to give more. SO those of you with the turned down nose and pride in your heart about protecting our precious fee……… Remember this
    The Plumber gets paid to pull the truck in your drive way. In the absence of being paid as professionals we only get paid when the transaction closes.

    We should be paid like the professionals we are and be thankful when recognized for the vlaue we deliver.

  22. Steve
    Steve says:

    The rub with so called discount brokerage is with what buyer agent are paid, noncompetitive rates compared to other properties. A broker should be able to charge what every they want to list a property on the list side the sell side is where most short the commission on a sale to a buyers agent. I think that is where most agent get confused.

  23. Janet
    Janet says:

    Right on TR, I did a deal with an agent from a rebate company. He was inexperienced and I met him once: when he showed the house (to one of the neighbor’s children, by the way, even though his company was from 30 miles away, they’d called him rather than me, because of the rebate). After buyer and seller agreed on the price I never saw him again till the closing, nor did he return my calls. Even his buyers called ME for informatino (and he acted as the buyer’s agent”. He was not at the inspection nor the walk through. Everything worked out for the buyer, because I ended up handling both sides and being paid for one, when I should have double ended.

  24. Shaun Reilly
    Shaun Reilly says:

    The issue, that has been mentioned time and again, with the percentage system for a commission is that the hit to the agent is tiny for big hits to the client.
    On the $200K listing if the buyers come in at $180K the 2 agents will likely try to get each client to split the difference and sell at $190K. Looks good because the seller is probably happy to get them up $10K, the buyers are happy because they got the seller to drop $10K and the agents are happy becasue it was a quick and simple transaction and almost a full commission.
    In reality each agent cost their client $10K while only taking $150 out of their own pocket (assuming neither is the principle broker).
    Not much incentive to really work to get every dollar possible for your client.
    (for the record I am a licenced agent)

  25. John Schilling
    John Schilling says:

    It was announced in Albuquerque, NM recently that the number of Realtors is down by nearly 50% since 2006. The inventory of houses for sale is higher. Fewer Realtors, more houses for sale. If the law of supply demand holds true one would expect commissions to rise.

  26. David Mott
    David Mott says:

    I wanted to thank everyone who responded to my initial post. My main point was that with real estate prices in a downward spiral, whatever equity left to be realized may be ‘lost’ to sales commissions.

    The case of a property financed by a mortgage is a little different than the case where the property is owned outright (I’m going to pretend here that the county isn’t the actual de facto owner ;) ).

    I buy a fixer, spend quite a bit of time and money on it (as a business), then I see the real estate market eroded by the economy. The time and effort I spent is now at break even to even a loss if I use a full commission broker.

    I feel a need to reiterate that a 6% sales commission is half as much for a 100K property as a 200K property. If it helps, it’s one tenth of the sales commission on a 1 million dollar property.

    I know that a sales commission is what puts food on the table, etc. , but in my business, the difference in what I pay for the fixer house and what I sell that house for is MY income.

    Right now, I’m seeing sales commissions take food off my table. I swing the hammer, plumb the pipes, fix the wiring, ie: all the really hard work. Yes, there is real blood and sweat, with hopefully no tears when I hit my thumb with the hammer once again.

    Is the agent that collects 6% sales commission on a 100K property working as hard on that listing as their 200K listing or 500K listing?

    I can assure you that the property owner/manager is actually working twice as hard or more, as it’s based on square feet.

    It’s at the closing on the seller’s side where the sales commission is deducted. I am not confused about the sales commission agreement. Having a mortgage involved by the buyer has exactly no bearing on the cost incurred by the seller.

    You can justify a 6% commission all day long I suppose. BTW, I just checked zillow for Albuquerque, and the median list price is down over 5% yoy. And you want to ask MORE for commission?

    Thank God for fixed commission companies like Help-U-Sell.

  27. Kathy
    Kathy says:

    Responding to David Mott: I understand your frustration regarding operating these times as an investor of fixer-uppers. With most equity wiped out this is not the best time for your business, but I realize someone has got to do it, right? However, you choose to take the risk to invest your funds and sweat equity to profit from the sale; you don’t work for salary, or commission. The form of your compensation is not assured by a contractual obligation with the “real estate market”. You rely on your assumptions and on the advice of the “experts” you may employ, if any. As you know real estate agents don’t work for “profit”, they don’t have an inventory to sell; they help to sell other people’s possessions for a commission that is traditionally expressed in a percentile of the sale price and paid at completion of the transaction. Therefore, agents are benefiting when the property sells higher and are at a disadvantage at a lower sale price. They are not only mandated by law and required by professional standards, but incentivized by this form of compensation as well to negotiate the best terms for their client. Of course, by sharpening their skills to market the property in order to sell in the least amount of time, they also able to save money to the seller by reducing the carrying costs on an extended listing period. At these times of poor economic conditions and record foreclosures, with a timely sale, they may even able to help save their client’s credit and/or their remaining equity in the property, if any. I’d like to point out that they also invest time and money in their endeavor, not only you, before they reap the benefit of their hard work.
    Whether you are using a full service agent with a negotiated commission, or a fee-for-service agent, is entirely your decision. There is ample choice for different “business models” among brokerage firms and individual agents and I’m sure you can judge what serves your best business interest. One doesn’t need to be offended by anyone’s business practices. Of course, as long as it is within legal limits. I’m certainly not offended by buyers coming in to my open houses who are coached by commission kick-back brokers to collect any and all property and market information from the listing agent, so that they, the buyer’s agent, can give “value” (money) to them by offering part of the commission as credit at close of escrow (obviously they know they don’t work and deserve the full commission split). That is their business model; they offer the money promised to the buyer’s agent through the multiple listing for procuring the business. They actually advertise other agent’s listings and the commission kick-back and give the interested buyers property addresses. This used to be illegal not so long ago, having “third party” money going towards the purchase of real estate; title companies questioned the possible ownership interest of the depositor for insurability and, especially monay coming from an agent, it was considered “forcing” the sale (meaning buyers would not buy otherwise; it could lead to bad decision). Of course lenders used to be concerned about the borrower’s qualifications to purchase at the contracted price. Now, giving money to the buyer as an inducement to buy became standard of practice for it is considered benefiting the buyer by reducing the their out of the pocket expenses what matters most.
    Hey, David, why don’t you just hang up your tool box and join the crowd and get you license and start selling for commission. With such a deep understanding of the business, being on the other side as an investor, you can corner the market and make a killing (ooops! mind my language here) as a discount broker./sarc
    Seriously, why don’t you interview active agents in your area and learn who can help market your properties best. But before you’d do that, take a good look at the type and cost of your improvements that most benefit marketability of your properties without over-improvement and/or waste. You may even find a knowledgeable agent who can advise you before you make an investment on what to buy and how to improve it for sale before you start a project. Remember, sales commission is not taking the food off your table; it should be working for you. You could also sell as a FSBO (for sale by owner), if you are stuck and save all commission. It’s your choice. :-)
    Good luck!

  28. Ryan
    Ryan says:

    The fact that everyone is debating this topic should tell you something about this industry.
    Bottom line, this century + old business model makes no sense. Regardless of what canned speech you want to use to convince people of the “value” agents provide, is more often than not, falling on deaf ears.

    David M is absolutely correct. It takes no more work, no more time, and no more expense to sell a 100-200-300k house but the difference in commission is many thousands of dollars. Consumers are more informed and have more information at their disposal than ever before. We can no longer hide behind the MLS and information as a value offering.

    And please, stop comparing what we do as agents to Doctors, Lawyers, CPA’s, Surgeons, etc.. There is no comparison, and the laughable part is agents get paid more in many cases.

    Like it or not this industry is in the midst of a shift. A shift, that in my opinion, will absolutely change this industry for the better.

    Oh ya and one more thing. There is no such thing as a “discount” real estate company, or discount commissions for that matter. Discount is not a dirty word! Do you or have you ever shopped at Costco,Home Depot, Target, WalMart, etc.. How about a flight on Southwest? Oh wait a minute, you would never want to put your life in the hands of a “Discount” airline pilot. He (or she) couldn’t be as well trained and have the experience as a “full service” airline pilot. If they are willing to cut their fares, they must pay their people less, they must do less maintenance, and therefore it just isn’t safe!!
    (BTW Southwest is amongst the safest and the most on time carriers in the US)

    Can you see how absurd the argument is?

    Price and value are two very different things.

    There is room in the market for everyone.

  29. non-peanut-415
    non-peanut-415 says:

    I’m a real estate professional that works at one of the biggest full service firms in the world and I have dealt with Assist to Sell and Redfin agents in the past (just to name a couple of “discount” brokerages. After those experiences, I can tell you that I CRINGE any time I receive an offer from one of those “agents”. The words “sloppy”, “unprofessional” and “uninformed” immediately come to mind when I review their “offers”, rife with typos, missing initials/signatures, or just plain incomplete. Does this mean that all of their agents fit this trait? Not at all but why risk it?

    The old proverb rings true in real estate: “You get what you pay for.”

  30. ryan
    ryan says:

    If these “discount” agents are writing offers on your listings, what does their discount/model have to do with it? Working with/for old fashioned real estate models as well as modern real state companies, I can say there are good and bad agents on both sides. The model or what you charge has nothing to do with your professionalism, knowledge, work ethic, training, experience, etc..
    I guarantee you have agents in your “full service” firm that have very little experience. If they go out to list a home are they going to tell the seller, ” you know I have very little experience, I don’t have much of a budget for advertising, so it wouldn’t be right to charge you a full commission.” Or course not, they are going to go out and get as much as they possibly can. It that seller really “getting what they paid for?”
    Don’t be a hater. There are good and bad people in all businesses.

  31. Dave
    Dave says:

    Few things (or more) here are at work. To any seller who thinks the buyer should fork out some cash to the buyer agent; remember, it is a cycle, YOU didn’t pay YOUR agent when YOU bought that home you are now selling.

    My friend who is an insurance agent got his securities license and called me the next minute (I swear, a VAPOR TRAIL) to offer me his services…I politely told him that I would find an actual broker if I wanted to invest in tech stocks (this was a few years ago, so I dodged a couple of bullets, apparently…). People have jobs, get paid what they do, for a reason…it is what the market can support. Welcome to capitalism.

    Of course, this holds true both ways…if Susan, or anyone else CAN provide quality service for less, she/they will take over the industry. So far, that hasn’t happened. (I once had a conversation with somebody that ‘take-an-bake’ pizza was going to take over delivery…I won a free pizza by essentially betting that people would be too lazy to even bake a pre-assembled pizza.)

    The biggest fault for this whole conversation lies with Realtors at large. Realtor.com, and the myriad sites like it, including the company-branded sites, that give away everything but the keys to prospective clients (who now FEEL they are equal in expertise by the time they call, IF they call) have usurped a great deal of the ‘mystery’ and actual usefulness of agents (at least in the public’s eye). The nature of the industry is to be cutthroat and rivalistic to everyone; we are ALL the enemy of each other, so to speak…but that mentality has led to short-sighted decisions at times that hurt the industry as a whole. To paraphrase, ‘Greed kills’.

    Many agents are content with making every touch they can, regardless of the quality of the touch, to the point of wrecking some clients, embittering them, where they are distrustful of the whole industry. They view us with suspicion as glorified used car dealers in general. I get more business from cleaning up other agents’ messes than ever; particularly from sellers’ sides. I sometimes wonder myself if there are more than a hundred honest agents on the seller’s side of things…Is it ANY coincidence that the complaints about service fees and clamor for alternatives has risen since the advent of the boom, technology that reduces or eliminates actual human beings from the process has become more prevalent, or a focus on ‘office’ fees (cute invention that was…) have come about more than ever in the last few years? If a house that ‘talks’ CAN sell itself, what really IS the point of the agent? Paperwork? Golly, insert trained monkey reference here.

    Only when Realtors figure out that it is better for ALL of us to be smarter, not meaner; to help the client, not the ‘deal’; to provide a service, not a set of keys, will we return to the time when people felt across the board justified in paying for what a good agent knows is well-earned pay.


Trackbacks & Pingbacks

  1. […] This post was mentioned on Twitter by Jeff Miller, SarahGray Lamm. SarahGray Lamm said: Negotiating skills are crucial in today's #ChapelHill #RealEstate market. Look for a professional who can deliver. http://ow.ly/3O2zi […]

  2. […] This post was mentioned on Twitter by Brian Forrester, Kevin Lanham, HomeBuyer University, Kevin Lanham, benchmarkco and others. benchmarkco said: This Is a Job for Superman, Not Clark Kent http://bit.ly/fTYaA9 #homebuyer […]

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *