Is 6% commission too high? (real estate market, loans, how much)

[bjbond7]

Being a real estate agent is totally different then a car salesman. Does he drive to your house take pictures or pay out of his own pocket to get pictures, spend hours making brochures, sending out e-mails and making phone calls, and negotiating the best deal for you. Agents spend a lot of there own money in advertising with out knowing if they will make any money at all. A lot of people think they do nothing and make 10k and that is why so many people get their license but so realize it is not so easy and only the good agents will survive in this market. By the time you pay for taxes , your broker , licenses, ce's, and marking materials and other expenses that 10k is not so much. If it takes awhile to sell as it does in this market it may only come out to be a 1 or 2k a month. I used to feel like most people that it is easy money but having a mother who was an agent for 30 yrs and a husband for the past 6 yrs. I know that is stressful and not easy $$$$.

[Mark Sr.]

Originally Posted by Fairfax Mom

I have sold many homes through the years and I NEVER, EVER paid a full 6%. I have dealt with major companies, Remax, Weichert, etc. - only a fool pays 6%! I sold homes in good market and bad and I always got full service for 5% max. - virtual tours - the whole shebang. Only fools pay full price. My last home sold in one week! That was in a good market but - as I say - even in a bad market I never paid full price.

Good for you Fairfax Mom. You probably were one of those bragging about having the mortgage with the lowest interest rate at those 2005 cocktail parties, with out taking into account points, origination fees, junk fees, etc.

When I first speak to someone about selling their home I am negotiable when it comes to commission, we'll start at 6% and I offer to let them go up from there.

A smart home seller needs to find an agent that will enter into a true client/agent relationship, and put their client's interests ABOVE ALL OTHERS.

From 2003-early 2006 in my market we had a strong sellers market. IMO, if you saw a sign that read "sold in (4 or less) days" chances are you essentially had insider trading going on and the seller lost out, usually without a clue. The agent might have discounted and worked both sides of the deal.

I had one particular example where a small townhome in a terrific school district did not have comps that were keeping up with the market values (which in this case would show later with a low appraisal). I listed the property on Thursday (and personally input it to the MLS on THE SAME DAY) at what I knew it would appraise for, and I stated in the listing that the seller would review any and all offers on the following Tuesday at noon. I held it open for 5 hours on both Sat. and Sun., and welcomed all firms agents. We received 14 offers and I instructed my seller to accept one that was for $20k over asking price with a guarantee of any amounts over appraised value.

I could have sold this home to a friend or investor for full price in a day. Say I brought a buyer at our $120,000 asking price, discounted my commission to 4.5% and went to closing. The seller would have paid $5,400 in commissions for a net of $114,600, and could brag like FairfaxMom that they would never pay above 4.5% commission. (Listing firm's total cut is $5,400)

Instead it went like this: Another agent brings the buyer, $140k sales price, no home buyers inspection, no appraisal contingency (or any other for that matter for the seller to worry about) and a closing in 30 days. The seller paid a full 6% ($8,400) for a net of $131,600. (Listing firm's total cut is $4,200)

By the way, this particular seller had the nerve to ask (when seeing the self promoting pen the buyer's agent gave to her buyer as a gift at closing) "where's my gift?". I quickly pointed to the HUD statement's "cash to seller" line item.

But I here I am, a typical greedy real estate agent, and I focus on the seller (my CLIENT's) best interest, instead of my commission. I get no credit, less of a commission check, and a "where's my gift?".

With all the comparisons to car dealers/salespeople I will note: A car dealer will profit even when he/she sells his/her MOM a car. That is how it is and is how it will always be. I am not trying to beat them up. I have a couple friends in the corporate side of the business and they strongly agree.

Any business has good practicioners and bad ones. In real estate the masses usually go with the most visibly successful agent in their immediate market. Or it's a friend or relative they are trying to "help out". 20% annual real estate appreciation for a few years helped distort what truly good agents can do for sellers. In todays market you cannot just pick an agent out of the sky. All commissions, no matter what percentage of sales price, are earned by an agent once the transaction has closed. We only get a check if the seller gets one.

-Mark

[Fairfax Mom]

Mark,
I am not trying to put you agents down - I agree you have a hard job to do. And why put car salesman down - they are selling something - just like you are.

Are you meaning to tell me you wont take 5% in a very good market?

I interviewed about 10 agents until I found one I liked - she had sold two homes for me - so I trusted her. She was very good at what she did. Back in 05 homes were selling even faster than one week. I dont think it was insider trading - but - if that type of thing happens - it just shows me another ditry trick that a real estate agent can be involved in.
I dont go to cocktail parties and brag - even though I have a very low mortgage and researched all the fees - down to the penny - I am just a working class person with kids - I cant afford to pay full price for anything - and come on - selling a 500k house gives an agent a whole lotta money.....and the woman I used owned her own agency - so 6% of 500k would be a little steep, dont you think? Let the rich people pay 6% - us poor folk need a break.

[Mark Sr.]

FairfaxMom,

I used your post to make a point. I hope it was not perceived as an attack, as that was not my intent.

If you trust your agent, negotiate whatever you can as you already have the most important part of the deal. Trust is paramount.

In a booming market in any sales field everyone is an expert, whether they are in that line of work or not. I witnessed this with the dotcom stock boom of '99. I had a couple hotshot friends who would constantly brag about how much money they "made" in the stock market that day. After the bust, the only "day-traders" were full timers/experts in their field.

A full-time serious RE agent knows much more about their market than just about any non-licensed expert out there.

Focusing on commission percentage paid by a seller should not be done unless both the agent's level of service and willingness to put the seller's interests in the first and only bracket, can be compared from one to another.

I will not take a listing at 5%. If I did, the norm is to keep it 50-50 on the split with 2.5% to a selling agent. This immediately puts the seller at a disadvantage in the MLS over 6% listings to agents who count their commissions before closing.

Now If I get a solid, trouble-free offer in the first few days of a listing and the seller asks for a discount, I have the ability to give it. Of course I will ask for a future bone (i.e.: referrals)

-Mark

[McScootch]

Mark, you make some very good and valid points. I wasnt, in my earlier post, trying to compare Car Salesmen to RE agents in an ethical way... only in the sense that, by nature, the services or products offered by both will be negeotiated. I apologize if my comments offered any offense.

But I still have the question..... if your a representing a buyer and you come accross a discounted comision sale, why on earth would you (not you in particular) not see that sale, even with it's discounted comision, as money in your pocket? Are there really agents out there that will try to steer their clients into a purchase that will put more money in their pocket over 0.05 - 1 % of the comision?

[Mark Sr.]

Originally Posted by McScootch

Mark, you make some very good and valid points. I wasnt, in my earlier post, trying to compare Car Salesmen to RE agents in an ethical way... only in the sense that, by nature, the services or products offered by both will be negeotiated. I apologize if my comments offered any offense.

But I still have the question..... if your a representing a buyer and you come accross a discounted comision sale, why on earth would you (not you in particular) not see that sale, even with it's discounted comision, as money in your pocket? Are there really agents out there that will try to steer their clients into a purchase that will put more money in their pocket over 0.05 - 1 % of the comision?

Thanks McScootch, no offense taken. And to answer your question - you bet there are.

There are unscrupulous people in any field, and in my somewhat limited dealings with car salespeople I have met two that I have used over the years that really stood out. It was because they were honest, realized that I knew their product (the vehicle I was buying) at least as well as they did, and did not BS me. I later referred others to these salespeople with similar results. I have met plenty of the "typical" car salespeople as well, but I do not assume all are like that.

When I as a Realtor focus on the my client's (the seller's) net during the entire process, the commission is an earned and well deserved result of a successful closing.

-Mark

[Fairfax Mom]

No offense taken. I guess our realtor gave us a discount because she sold our first home five years before and then we hired her again to sell out next home.

But dont you think that real estate agents - even very good ones - will give a discount in this market because most of them are very desperate? Only one home has sold in my neighborhood in the last 7 months - people are very desperate.

[Mark Sr.]

Today I just listed a $340k home where the owner lives across the country. He listed it in July of '06 with a Navy buddy's wife, and she discounted her commission quite a bit. It went under contract twice and both fell through due to home sale contingencies. So it essentially showed up as "under contract" in the MLS for 3-4 months. He had a long period of paying the mortgage and expenses, with no rental income then a big disappointment.

It has been rented since but the rent does not cover expenses. The owner has even thought of walking away from it.

The seller asked immediately up front if I would discount my commission and I said no. I then explained what my strategy would be for his home and instructed him to check out some references that I provided. He interviewed me and 3 other local agents by phone from CA.

We have priced it correctly and it will sell. He will not pay me a dime until he gets his money at settlement. More importantly, he will be able to move on and enjoy life a bit more when he is relieved of this part of his financial situation.

In short, when he pays 6% of $339k he will be better off than than paying 4.5% of $0.

2007 was bad for many agents in many markets. I was fortunate to have my best year since I was first licensed in 1995.

-Mark

[mojo_1979]

Originally Posted by Mark Sr.

Good for you Fairfax Mom. You probably were one of those bragging about having the mortgage with the lowest interest rate at those 2005 cocktail parties, with out taking into account points, origination fees, junk fees, etc.

When I first speak to someone about selling their home I am negotiable when it comes to commission, we'll start at 6% and I offer to let them go up from there.

A smart home seller needs to find an agent that will enter into a true client/agent relationship, and put their client's interests ABOVE ALL OTHERS.

From 2003-early 2006 in my market we had a strong sellers market. IMO, if you saw a sign that read "sold in (4 or less) days" chances are you essentially had insider trading going on and the seller lost out, usually without a clue. The agent might have discounted and worked both sides of the deal.

I had one particular example where a small townhome in a terrific school district did not have comps that were keeping up with the market values (which in this case would show later with a low appraisal). I listed the property on Thursday (and personally input it to the MLS on THE SAME DAY) at what I knew it would appraise for, and I stated in the listing that the seller would review any and all offers on the following Tuesday at noon. I held it open for 5 hours on both Sat. and Sun., and welcomed all firms agents. We received 14 offers and I instructed my seller to accept one that was for $20k over asking price with a guarantee of any amounts over appraised value.

I could have sold this home to a friend or investor for full price in a day. Say I brought a buyer at our $120,000 asking price, discounted my commission to 4.5% and went to closing. The seller would have paid $5,400 in commissions for a net of $114,600, and could brag like FairfaxMom that they would never pay above 4.5% commission. (Listing firm's total cut is $5,400)

Instead it went like this: Another agent brings the buyer, $140k sales price, no home buyers inspection, no appraisal contingency (or any other for that matter for the seller to worry about) and a closing in 30 days. The seller paid a full 6% ($8,400) for a net of $131,600. (Listing firm's total cut is $4,200)

By the way, this particular seller had the nerve to ask (when seeing the self promoting pen the buyer's agent gave to her buyer as a gift at closing) "where's my gift?". I quickly pointed to the HUD statement's "cash to seller" line item.

But I here I am, a typical greedy real estate agent, and I focus on the seller (my CLIENT's) best interest, instead of my commission. I get no credit, less of a commission check, and a "where's my gift?".

With all the comparisons to car dealers/salespeople I will note: A car dealer will profit even when he/she sells his/her MOM a car. That is how it is and is how it will always be. I am not trying to beat them up. I have a couple friends in the corporate side of the business and they strongly agree.

Any business has good practicioners and bad ones. In real estate the masses usually go with the most visibly successful agent in their immediate market. Or it's a friend or relative they are trying to "help out". 20% annual real estate appreciation for a few years helped distort what truly good agents can do for sellers. In todays market you cannot just pick an agent out of the sky. All commissions, no matter what percentage of sales price, are earned by an agent once the transaction has closed. We only get a check if the seller gets one.

-Mark

Wow Mark... you're bragging about doing the ethical thing for your client, as if this were an exceptional act of kindness by you...

[Mark Sr.]

Originally Posted by mojo_1979

Wow Mark... you're bragging about doing the ethical thing for your client, as if this were an exceptional act of kindness by you...

No Mojo,

Just doing my job.

But when people brag about "sold in one day", "agent discounted commission", etc., etc. as success stories, often they do not see the big picture of what is going on behind the scenes.

There were plenty of sellers in '04-'06 whose agent showed the home once, handled both sides of the transaction - maybe at a discount, and that were delighted with their agent. I would not call that agent unethical. It is my opinion that these sellers did not always get the representation that they paid for, and often unknowingly received less $$$ at closing than if true market forces were allowed to be in play.

Not many people (probably incl. yourself) like to do more work for less money. It is easy to sleep at night knowing I did the right thing for my client. Whether they knew it or not, I don't care. What I lose in short term dollars pays back double in long term dollars.

-Mark