This weeks top Question on Trulia Voices was asked by a home buyer who wants to know, “Do Realtors deserve a percentage commission?” He is in the market to buy a home and is looking for a real estate agent to “help” represent him. But, he doesn’t understand why a buyers agent would work hard to negotiate the price of a home “down” when their commission is based on the sales price - not to mention the co-brokerage agreement they have with the listing broker/home owner. So what’s the deal?
Feedback from our Trulia Voices Real Estate Community
Ali Moein is a real estate agent from Santa Clarita who says, “All good Realtors will serve the best interest of their clients.”
Real estate agent Maria Morton from Prairie Village says, “We want to get you, the buyer, the best deal because we are representing you. It’s a challenge. It’s stimulating. It’s what we do. We like pulling all the pieces together.”
Deborah London, a real estate agent from, Rancho Palos Verdes says, “Most agents love what they do working in the real estate business, including me, and we want “clients for life”. We aim to please our clients and we put their interests above our own. We are not after the “almighty dollar” and the small difference in commission that might come from selling one property for a slightly higher price.”
JR, a real estate agent from New York says, “Shouldibuy, do you really think selling a 200K house requires the same effort as selling a 1M property? Seriously? You obviously have no idea what is involved with marketing and/or selling a house.”
Linda Baker, a real estate agent from Los Gatos said, “First, the good news is that the listing agent has already negotiated with the seller how much compensation the buyers’ agent will receive. A good agent will show all property to you, based on what you want and how much you can afford. I always put my clients needs first, and they have been happy with the results.
The second point I want to bring up is if you are working with a trusted real estate advisor, you will see the value they will bring to the table, and how they will negotiate for you. It is not just about the price, but also the terms of the purchase. I work hard for my clients, not just for the current purchase, but for their future business as well as the referrals they will send me. And if you are not satisfied with the services, you won’t consider referring me.”
Tman, a home buyer and home seller said,”We sold our condo last month in Florida for $419,000 … the original agent wanted 5% or $21,000 to market it and sell it .. instead, we found a bevy of hungry quality agents that were more than happy to take it on for a $10,000 flat fee or 2.4% total — we saved $11,000
It doesn’t cost anymore to sell a $250,000 vs a $850,000 home … hungry savvy agents are abundant in today’s market … they would rather get some of the pie than none of the pie, don’t be bullied into thinking anything else.
Ute Ferdig is a real estate agent from the greater Sacremento area who says,”I am in favor of a compensation model that is fair to everybody and I am open to a healthy discussion. I am not interested in comments from those who don’t care about finding a workable solution. Stop complaining and running amok with rebates. Become part of the solution that benefits everybody.”
My Thoughts
Real estate commissions are negotiable. Always have been. If you sign an agreement with a buyers agent, they now have a fiduciary duty to represent your best interests. If the real estate industry were to start from scratch today, would the commission model be the best one to implement? I don’t know. The issue is not black and white. Lots of variables involved. What I do know is that home buyers and home sellers have plenty of choices when it comes to buying or selling a home. Ditto for Real estate agents and brokers, many business models to choose from. When it comes to selecting a local real estate agent super star, due diligence is a must. Do your homework. They provide a tremendous amount of value and piece of mind to you when buying or selling real estate. Consumers shouldn’t be afraid to compare your options.
So, Should Realtors be paid a Commission based on a Percentage of the Sales Price?
Popularity: 4% [?]
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September 2nd, 2008 at 2:53 pm
Real estate agents should be paid a commission based on the difficultly of the client. Typically the smaller sales prices are far more difficult because all of the parties involved are broke.
September 2nd, 2008 at 4:07 pm
% of sales price based commissions make 0% sense. Total misalignment of objectives between client and professional.
Rebates are a novel and compelling sales tool, so they’ve gained some traction, but ultimately are not a long term solution.
I believe re-pros and consumers should negotiate a fee based on time involved and hard marketing expenses…unfortunately, neither side is typically equipped to do so effectively and transparently, especially the consumer, although this is changing quickly.
A re-pro who explains their value in terms of:
‘I will work hard…’
‘I will take care of my clients…’
‘I look out for my clients best interest…’
…gee thanks.
As a consumer, I’m not looking for a friend, I’m looking for someone who is keenly aware of their local markets and is extremely efficient at disseminating through and/or widely marketing the information required to find me a property or a buyer.
September 2nd, 2008 at 5:32 pm
Hi Rudy -
These posts/threads always elicit a fair amount of activity, so I’m jumping in!
(Preface: I’m only commenting on the buy side of the real estate transaction in this reply.)
We here at CondoDomain.com believe that the old 6% commission model is outdated and obviously under attack by a panoply of alternative business models. Models such as our flat fee, 1% commissions, MLS listing only, etc. are all only now becoming available to buyers because of the power and saturation of the Internet.
Our web-based, flat fee, buyer brokerage model continues to gain traction and great admiration (from our buyers of course!) since we launched in Boston earlier this year. Our philosophy is that if you are willing to spend some time home hunting on your own, we will happily return a substantial portion of our commission to you when you’re ready to buy. We are saving people thousands of dollars – thousands of dollars that they would previously never see again – when they buy through us. Especially in this market/economy, who is going to walk away from that?
The Internet has unquestionably leveled the playing field for consumers by providing them with a wealth of information that, while previously obtainable, was considerably more difficult to acquire. The days of the Realtor as property information gatekeeper are coming to an end. With more buyers searching, finding, comparing and analyzing properties from the convenience of their computers, they are going to increasingly question why a 6% commission is justified. Especially when THEY are doing the majority of the legwork themselves!
While we do not think the ‘traditional’ 6% commission model will ever fully cease, we are confident that ever more web-savvy buyers will continue to take advantage of our flat fee model and save themselves tons of money. Come take a look and spread the word!
September 2nd, 2008 at 6:01 pm
Do sports agents get paid a percentage of the money they negotiate for their clients? Yes! In fact, in many cases it could be up to 10%!
Agents who list property take ALL THE RISK of spending time, money and energy marketing the property. Other options are available though.
Just like attorney fees you could do a flat fee or even a download a form off the internet. For me and my family, I think we’ll pay a little bit more for a skilled negotiator. Statistics are on my side.
Oh and most of those downloadable forms (real estate, wills, ect) aren’t even applicable in many states.
September 2nd, 2008 at 11:47 pm
Those agent answers are pretty weak, not shocked though.
To answer the home buyers question. why would a buyers agent work hard to negotiate the price of a home “down” when their commission is based on the sales price…?
(i give all agents permission to use this line. just give me a little credit) It will get you the buyer everytime.
Agents are always working for their “next” deal. Agents want referrals for busting their ass. If they don’t do a good job for the buyer than their referral network will break down.
This is not a bs line. I live by it. No matter what deal I am working on I am always working for my “next” deal. I pay little attention to how much I am getting for compensation because I know I have the buyer. I need to make sure the buyer tells friends about me so I can survive.
A good agent “focuses” on the current deal and “works” for the next.
September 3rd, 2008 at 11:55 am
Realtors are paid in many ways, not just as a percentage of sale price… some offer consulting services for an hourly rate, some flat fees for a la carte services, and yes, others a percentage of the sale price.
It is a matter of who is assuming the risk that the work will be done regardless of whether a closing happens or not. You see, if the agent gets paid a percentage, they are assuming the risk in so far as they have to advertise, run around town, pay fees, etc. all with the possibility that the house will not sell, or the buyer will go elsewhere, or the seller will cancel… so the agent assumes all the risk in terms of costs… with a consulting model, such as an hourly rate, the consumer assumes the risk, paying up front fees regardless of whether they buy or sell or not.
In all industries I am aware of, and I am aware of many having been an attorney in mergers and acquisitions for many years, whomever assumes the risk bears the burden of the cost… when the risk is high, the payoff is larger. This is true in venture capital, lending, insurance, and yes, in real estate brokerage too.
So if an agent was to be paid regardless of whether the house sells or not, the risk is low, and so the cost to the consumer is low as well. If the consumer assumes the risk, the fees are less. If the agent assumes the risk, and does a great deal of work and expends resources with a great chance that no payment will ensue, then by all standards, the payoff should reflect that fact.
This does not even account for how the commission is split between two agencies, and in fact 4 parties (two agents, two brokerages) and also does not account for the costs incurred by agents (E&O Insurance, license fees, MLS membership, car and gas costs, advertising costs, etc.)
I also want to say that in most instances, the cost of selling a $100K house is lower than that of selling a $1 million house. Transaction costs such as title insurance, are higher, in many cases advertising costs are higher (glossy high end magazines vs local newspaper, for example) so when people say that the costs are the same, they are mistaken… at least in most instances.
Hope this helps.
September 4th, 2008 at 9:29 pm
I have always though as a buyers agent the system is broken! The better the deal you negoiate for your client the less money you make. So you are basically being punished for doing a good job?