Realtor Offering 1% Back (Austin)

[NativeAustinREBroker]

I completely agree with an earlier post that agents should chip in something these days! And I'm a broker by the way, but even when I was an agent, I often gave rebates, nearly all of them starting at at least 1%. I didn't reduce any service for this, I figured that I am lucky to be living and working in Austin and being able to do a white-collar profession and get a decent wage for it. If it requires every now and then handing over several thousand dollars, so be it, I can make that money up in referrals and good karma!

There is no easier license to get than a RE license folks -- that means there's a lot of greedy jokers out there that prefer to play salesman than play advocate... That's why I quit Remax, it was way too sales oriented. I got my broker's license and did my own thing. My agents and I are much much more happier and our clients actually become friends with us.

So, my best advice when looking for an agent, definitely ask them for a rebate -- no matter what. New home / old home... I'm tired of hearing horror stories of realtors who walked off with thousands and families who feel they've gotten the short end of the stick... 1% is totally fair. up to 2% might happen -- but beyond that you probly won't find anyone unless you pay that realtor a fee or something...

I routinely sell homes for 4% total commission, full service, I don't know why other people don't do this -- massive brokerage fees I guess...

[austin-steve]

Hmmm, first post. Welcome to the City-Data Austin Forums!!

To answer your question as to why everybody doesn't adopt your commission structure, and perhaps write "good kharma" profits in as part of their business plans, I'd say it's most likely because the discount commission model is a business model that has failed multiple times, in multiple markets, in various forms, over and over again, everywhere it's been tried. Nowhere in the US does a discounter dominate or even have a significant footprint in any market.

Thus, as a business owner, I want to follow and practice a proven and successful business model, not try to be the first one in history to make a failed model work.

Nobody has been able to create a widely adopted, mass market discount model that survives market downturns without severe loss of market share and revenue.

Since the real estate market is cyclical, and downturns are normal and to be expected, anyone wanting to remain in business longer than one up cycle will need to consider whether they want to run a business that goes broke when the market turns soft.

If you've discovered the secret to making it work, go for it. Take it national.

Steve

[FalconheadWest]

Originally Posted by NativeAustinREBroker

If it requires every now and then handing over several thousand dollars, so be it, I can make that money up in referrals and good karma!

You can't possibly make any money up if you're "routinely" giving the money back to the referrals and everyone else you meet.

No offense, but your business model doesn't sound so bright.

[rg80]

Yea I wouldn't really shop for a realtor who is going to give you "cash back". I mean yes its OK if your the cheap type that prefers to spend all of your time on it, but unless you have a reputation w/that specific realtor and have done many deals in the past its not good to find one willing to just offer their commission away.

Yes a new agent will probably do it, but anyone of experience who is actually "good" will not.

You get what you pay for.. so be careful! What is better - a 1% back realtor that can get you your $400k house at face value or a no cash back realtor who gets you a 400k house for $350k?

[nsumner]

Originally Posted by austin-steve

Oh, my favorite topic. I follow Redfin with interest, even though they don't serve Austin. I just wrote a long Blog article about them ditching the 2/3 rebate and going to a 50% rebate, and now offering "unlimited tours". They've let go of a bunch of employees and are finding that the "limited service with a discount" model doesn't work as well in the real world as it does on paper.

Redfin recently fired 20% of their workforce... they are struggling.

Also, how well of a representation are you expecting to get from a Realtor that is going to give you half or more of their salary. Beware... you get what you pay for!!!

[LoveATX]

Eventually all agents will be cheaper and negotiate the commission on a purchase/sale of a home. Its business 101 as some would say.

[FalconheadWest]

Originally Posted by LoveATX

Eventually all agents will be cheaper and negotiate the commission on a purchase/sale of a home. Its business 101 as some would say.

I think not. We have bills to pay too and I'm not in a habit of giving my money away when I need to put dinner on the table.

[austin-steve]

Eventually all agents will be cheaper and negotiate the commission on a purchase/sale of a home. Its business 101 as some would say.

Interesting opinion. Please go deeper with your Business 101 logic about "all agents being cheaper" and explain it. I have a different viewpoint.

Here is my version of Business 101, and why I'll never be "cheaper".

My wife and I are successful business people who happen to have chosen Real Estate as our profession. We both have 4 year college degrees, mine is a BBA in Management Information Systems from UT, hers a BA in Interior Design from Texas State. We are smart, hard working, entrepreneurial, and successful business owners in our mid/late 40's. At this education level, and stage of our lives, with our level of business experience, we possess a certain amount earning power.

We know what we're doing, are good at what we do (avg days on market 29 days for listings we've sold the past 6 months of this "bad" market), and charge accordingly for our services.

From that context, I can say that If your assumption is true, and if real estate becomes an industry/profession incapable of providing the income I desire, my wife and I will simply depart the industry and leave it to those willing to make less. We will then start or buy another more profitable business venture and do that instead.

That in turn will leave the consumer with fewer quality agents to choose from, as the talented agents leave the business for higher income opportunities. So, try to cut my salary if you choose, and I'll see ya later and do something different. Just as you might do if your boss came to you and said "I've decided to start paying you half of what you earn now because there are people less qualified than you willing to do your job for less".

Steve

[Austin-Willy]

Originally Posted by austin-steve

Interesting opinion. Please go deeper with your Business 101 logic about "all agents being cheaper" and explain it. I have a different viewpoint.

Here is my version of Business 101, and why I'll never be "cheaper".

My wife and I are successful business people who happen to have chosen Real Estate as our profession. We both have 4 year college degrees, mine is a BBA in Management Information Systems from UT, hers a BA in Interior Design from Texas State. We are smart, hard working, entrepreneurial, and successful business owners in our mid/late 40's. At this education level, and stage of our lives, with our level of business experience, we possess a certain amount earning power.

We know what we're doing, are good at what we do (avg days on market 29 days for listings we've sold the past 6 months of this "bad" market), and charge accordingly for our services.

From that context, I can say that If your assumption is true, and if real estate becomes an industry/profession incapable of providing the income I desire, my wife and I will simply depart the industry and leave it to those willing to make less. We will then start or buy another more profitable business venture and do that instead.

That in turn will leave the consumer with fewer quality agents to choose from, as the talented agents leave the business for higher income opportunities. So, try to cut my salary if you choose, and I'll see ya later and do something different. Just as you might do if your boss came to you and said "I've decided to start paying you half of what you earn now because there are people less qualified than you willing to do your job for less".

Steve

You are assuming that the commission amount would change but everything else stays the same (i.e. that a lower commission amount will result in lower profit), which is not a given. But even if your scenario were true it doesn't prove that lower commissions won't happen. If there were fewer agents, each agent would have higher volume, so the remaining agents may actually make more money even with lower commissions. It's really impossible to predict.

I always smile when I hear people in any industry say that the way it is is the way it's supposed to be and the only way it will work.

[austin-steve]

But even if your scenario were true it doesn't prove that lower commissions won't happen.

It's already been proven that consumers don't want lower commissions, so I don't think it will happen. Lower commissions mean reduced service. Consumers want full service. Every individual consumer will gladly accept a discount on their particular deal, but the consumer as a whole has spoken on this subject already simply by the fact that discounters cannnot capture market share nor can they survive soft markets. It's simply a business model that won't work long term.

Steve