This weeks top Trulia Voices question from Austin, Texas is pretty timely as it coincides with the recent real estate commission survey by Consumer Reports. “B” is thinking of selling their home and wonders why an agent should get 6% for helping them sell it. B states their home is worth $275k - a figure which has not been substantiated - and @ 6% commission, they would owe $16,500 for the services of a licensed real estate agent. B says this is enough to put their child through one year of school. Since all commissions are negotiable, as a real estate agent, how do you validate your time, effort, expertise and knowledge to potential home buyers and sellers?
Let’s take a look at what our community members had to say about this:
Russell Lewis, a real estate agent from Austin, Texas was the first to answer and he said, “I do understand your reluctance and somewhat distrustful attitude because there are plenty of people in real estate industry who do not perform up to professional standards. On the other hand there are many full times professional who work diligently every day to earn every dollar for their services along with many satisfied customers who are glad they employed a real estate agent to help them with what (for most) is the single most important investment of their lives”
Jeff Kessler, a real estate agent from Austin Texas said, “You can negotiate with any agent 6% is usually just a starting point.”
Austin real estate agent, Carol Anne Pease said, “That might cover one year at UT and they won’t negotiate on tuition. Good point though. Interview several realtors before you decide to put your home on the market. Find out what your are getting for 6%. Half of that commission goes to the buyer’s agent and that person splits it with their office.”
Perry, a real estate agent in Austin says, “Put an add on Craigslist and sell the house. It’s possible and I know lots of people who do it.”
Austin real estate agent, John Watts asks, “My question to you is: Would you be happy to reduce your salary for the job you perform? This is what you are asking the realtor to do when they also have to pay for all of their expenses, taxes and give a portion their commission to their broker.”
The commission debate has been raging for as long as I can remember. There are arguments on both sides of the coin. Real Estate agents live and breath real estate everyday as opposed to home buyers and sellers who move only every so often. At the end of the day, real estate agents in my opinion, are an essential part of the real estate transaction - and are worth every penny!
For some additional news from Consumer Reports on real estate estate agents and commissions, visit Market Watch and Inman News.
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August 5th, 2008 at 4:34 pm
Great post Rudy! On the other side of things, the consumer also needs to look at the property they are selling. Is it a high end property which will require a lot of print advertising dollars upfront? Is it a property in a neighborhood where the average market time is 250 days or 25 days? Is the seller also going to buy a house from me? Is their house in tip-top shape and priced well? If a seller is going to get me to reduce my commission, they better have their homework done too. They need to show me how THEIR house is going to cost me less time and money to sell than the average home. Then, we can talk about reducing the commission.
Tina in Virginia
August 5th, 2008 at 4:42 pm
Rudy,
Two things:
I think it is important to mention that while 6% may be the national average commission agents receive for selling a home, it is not the standard. There is no standard commission. Commissions are set individually by each broker for his or her office, and as you mention, all commissions are negotiable.
Additionally, I agree that expecting a REALTOR or Broker to haggle their commission down is a poor choice for those who want their home sold quickly and with maximum effort. The first thing an agent does when they take is listing is start spending money - Lots of it if they’re marketing it the way most sellers expect.
Articles like the one that just ran on MSNBC.com, http://www.msnbc.msn.com/id/26014642/ gives the public the wrong impression. REALTORS are hard working people. Their knowledge is valuable and their time and efforts shouldn’t be taken lightly. They do what a Craig’s list/e-Bay model could never down. They interpret information – for the magnitude of a home purchase, this skill is pretty valuable.
REALTORS, like everyone else, have families to support, their own mortgages to pay and out of pocket healthcare that most brokerages don’t offer. Like John mentions above, almost all their marketing expenses are out of pocket, not to mention gasoline, computers, enormous cell phone and wireless internet fees. The knowledge, tools and connections REALTORS have are worth every penny of their fees and often more.
I wish more sites would focus on how to emphasize the value of a REALTOR. Your article is very commendable. MSNBC.com and Dateline only seem to be interested in devaluing the traditional brokerage model. I have nothing against new models or limited service brokers. In some markets, their model works. Consumers need to be educated that they’re going to get the service they pay for or learn to expect less if they’re only willing to pay less.
Regards,
Seth
August 5th, 2008 at 4:54 pm
Hmm, why is anyone worth the money you pay them for the work they perform? When it comes to a REALTOR, the only ones that are worth anything are the ones that actually sell homes, not just the ones that list homes for sale. In today’s market, if an agent has a good record of selling homes, that is something to be coveted.
Recently, I had a new client that has worked with many agents all over the country, purchasing many multi-million dollar homes. He had a quote for me, which I love: “Most agents are not worth 6%, a few agents are worth 8%.” And then I told him I’d be happy to charge him 8%…and he said he’d be happy to pay 6%.
August 6th, 2008 at 12:25 am
Trulia Vocies and this Blog just cannot give the voice to both sides this argument deserves. “Commission Sales” always seems to be like money is given away. For people who get a monthly salary they will never know what it means to work for no pay until you get the job done. The risk of working for no compensation until a closed sale creates a higher reward at the end of the job.
RISK = REWARD Nobody wants to talk about this. Once we get paid, part goes to the broker, E&O insurance, etc. After what is left, 20% goes to self employment taxes, we have no benefits so health insurance and retirement funding needs to be accounted for. Now after all that has been taken out of a commission now take out a Realtor’s expenses as the company does not pay for our dues, memberships, advertising and other costs that quickly ad up. What is left over comes home to feed our families. It is not anywhere near what most home sellers believe
Yep, it’s easy to think that Realtors are overpaid when you earn a regular paycheck. If we took away the security of a salary for those who think 1099 business people are overpaid I think we would see a little more respect for negotiated commissions.
FYI - during the 1970s and 1980s million dollar homes sold with 6% & 7% and the cost of living i.e. gas, groceries etc. meant that that commission dollar went probably ten times farther than it does today.
Were those Realtors overpaid then? Now that the average commission is closer to 5% and the cost of living has skyrocketed and the Agent today does not have the same spending power….are they really overpaid?
August 6th, 2008 at 2:08 am
It is a good question and I loved the discussion like here!
Thank you. And Thanks to everyone.
August 6th, 2008 at 11:28 pm
With all my respect to all of the parties involve in this discussion, I like to answer the question to Mr. Seller with a different approach . I think we ( Realtors ) do not need to explain it too deep, why, we charge what we charge . Our job is different then that, of a lawyer or any other professional ,who can calculate the time that will take him to do the job and charge accordingly.
Realtors are paid to get a job done regardless of time, sometimes we get paid , sometimes we do not.
Mr. Seller, do you want your house sold ? Answer = yes …that is what I thought.
Mr. Seller if you could sale your house on your own and not pay a commission , will you do it ?……Answer….Yes ! ….That is what I thought.
Mr. Seller, Have you been able to sale it, on your own…? ….Answer…….No!……That is what I thought, since you call me today.
Well, Mr. Seller no problem , …..I have an army of Realtors that, EAT,DRINK,DREAM, ETC,ETC,ETC Real Estate 24 /7 and we all, are going to be selling your house……..do you know why…? Because , you are paying us 6% commission .
Mr. Seller , how soon , do you want your house sold…..?……answer…….Tomorrow!……..very good answer…..Mr. Seller…..
Now, I will ask a question , to the ones that disagree with the 6% we get paid,…………….If we get the house of Mr. Seller the next day under contract,…..Have we done an outstanding job……..? …Yes or Not…? …………If you are fair, your answer will be yes….., in this case, the quickest we do our job , the best that it is……………………..so , that is why we deserve to get paid 6%…………
I will ask the last question to mr. Seller, …………….Mr. Seller, how much will you pay me if I do not sale your house at the end of the listing contract.?……….Will you reimburse me all the money I spent , trying to sale your house ?……….answer………..I will pay you ZERO, ZERO, ….plus …..I will hire another realtor to get the job done……….OK………Now, Mr. Seller , since, all you have is a win, win, situation here……….Do you still think, 6% is too much ………………answer………….no, I do not think so……. I am sorry I have been misjudging you Mr. Realtor, for the last century………..
Again ,with all my respect to all of you………….I say this, to the Realtors , ………Realtors this is the massage we need to start telling mr. Seller……….Do not explain were every penny goes to……….since it does not matter to Mr Seller……….
All it comes to, …………………………….this is what we do and this is what we charge,….
By the way Mr. Buyer : I have 17 Acres , of ocean front property for sale in Trujillo , Honduras.
If you want details of it. write to sinclairrealtor@gmail.com
thank you
August 7th, 2008 at 3:31 pm
Jose,
I hate to have to be the wet blanket, but what you posted is 25 year old canned ham - that is sold as a scripted dialogue by the dinosaurs of our industry. For a minute I though Jim Droz was writing your post.
Sellers are smarter, more educated and don’t need you to tell them they are not smart enough to sell their own home. Most of the time a FISBO is all about thinking that Agents are overpaid. The seller compares their monthly income to the commssion they are paying out and thinks that agents don’t do anything. There is a very large error in comparing salaries vs commissions. This all about perceived value not about you thinking you are giving a seller an epiphany on how homes really sell.
FISBOs will always be a part of the market, limited services respresentation is going to become more popular with a small segment of the market and negotiated commissions will dominate our industry.
August 8th, 2008 at 10:13 pm
Ted,
Do you know the percentage of FISBOs that end up making te sale.?
For your information very, very Little.
Do you know why?
Because , BUYERS have very busy lives, and do not know have the time to search for houses and follow up for a month a transaction they barely understand, especially when they have free services one phone call away.
So Ted, Buyer have us in business , not Sellers….do not forget that….
Lets close our file here, because you are taking it too personal, and we ( Realtors ) do not need more bad press. …
August 9th, 2008 at 5:35 pm
Jose,
Nothing personal here. Our business is in the middle of a huge paradigm shift. The Brokers who wish, hope and think that after this Bear-Real-Estate market ends that it will be business as usual are in for a big surprise.
I was simply pointing out that your script above is not new, it was devised and constructed when tape recorder answering machines were still hot selling items and cell phones looked like two-way radios from Viet Nam. Broadband is dominant in my trade area, the average house has 5 computers and most are laptops. All the families I know in the community have cell phones and their kids all have cell phones by middle school. I can go on and on my point is more that the diolague script above is insulting to the people in my trade area.
Just look at Cable TV, how many DIY channesl are there? We have Home Depot & Lowes on every Corner. You can go on youtube and watch free tutorials on all kinds of stuff. People for years have been shown they can do many things on their own.
Does this make Real Estate agent less valuable? No. Our potential clients are far more educated and deserve disccusion that matches that understanding rather than polling a person for one word answers and then dominating the discusison.
August 11th, 2008 at 12:42 pm
Why even go with an agent in the first place? The main objective of any home seller is to get the highest price for their home, and studies from Northwestern University and Stanford Universities have each found that “for sale by owner” sellers are as effective as agents in maximizing the sales price of their home. In fact, the universities found, once commissions are factored into the equation, FSBO sellers actually get more money for their home.
http://www.forsalebyowner.com
August 12th, 2008 at 1:33 am
Eric,
There is a reason Departments of Real Estate exist in most states. Not just to protect consumers from agents, but also to protect consumers from consumers.