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1. Why would it depend on price point, if #2 was observed?
And, one should observe the incentives built into either option in #2.
If I spend 100 hours on your transaction at $100/hour, that is a $10,000 bill. Probably starting with a $2000 retainer, and then routine account billing.
You have incentive to close a deal just to keep from paying me more.
If you never buy or sell, that is still a $10,000 bill, out of pocket and no deal for you.
And, of course, there is the quibbling about what is billable.
And then, a buyer has no way to roll that $10,000 bill into a loan. Most of it will be invoiced and paid before closing, i.e., POC on the CD.
If you go flat fee, your agent has incentive to close you on a house with minimal effort.
The last deal I closed with a flat fee listing agent sold at $555,000 contract price, and with a $5,000 concession from their seller to my buyer.
Appraisal came in at $575,000.
It was easy. For me.
The buyer's agent commission funneled through a listing agent is the only means a buyer has to finance the fee.
That is important, as many buyers have adequate cash flow to meet their loan requirements, but cannot afford to pay fees out of pocket.
Burning $10,000 cash out of pocket without even closing on a home would be financially disastrous for a great many people.
Additionally, the percentage model moves the risk from client to agent. Yup. I can pick up a nice check, but only if the client closes. If they don't, I have lost time, and money invested.
That working on a contingency comes at a higher price than a flat fee that doesn't recognize costs of doing business or even an hourly fee where the meter runs continually.
I like that it puts no pressure on the client to buy or sell. They can bring all the urgency separate from commission.
1. Because a lower end home will require less work and hustle to get sold. Limited ads if any, etc. A $10m home would be a vastly different story. Same goes for those in commercial real estate.
2. Flat fee to sell my house or help me buy one. If I'm wanting to use an agent as advice only I would pay hourly. I would consider them a consultant.
3. Everyone I've ever known has bought a home under appraisal. Not really brag worthy, sorry.
4. You may get a $10k commission check and that is wonderful for you but that is why OD and Redfin and flat fee realtors are gaining in popularity - there is a lot of wiggle room in that transaction and it comes out of the buyer and sellers pockets.
5. If someone doesn't have a couple thousand to pay an agent to help them buy a home, they shouldn't be buying a home. I'd like to see a system where buyers pay their agents directly (half up front and half after the close) and the sellers list their home with flat fee listings as well. As it is now, buyers don't really see the amount paid as if they are paying it. It's a great scam. Kinda how our medical system works - since you have insurance you don't really care about the cost of something.
6. Working on contingency is not fair to the Realtor as they are not getting anything for their time invested and the buyer can simply walk. Not cool.
1. Because a lower end home will require less work and hustle to get sold. Limited ads if any, etc. A $10m home would be a vastly different story. Same goes for those in commercial real estate.
2. Flat fee to sell my house or help me buy one. If I'm wanting to use an agent as advice only I would pay hourly. I would consider them a consultant.
3. Everyone I've ever known has bought a home under appraisal. Not really brag worthy, sorry.
4. You may get a $10k commission check and that is wonderful for you but that is why OD and Redfin and flat fee realtors are gaining in popularity - there is a lot of wiggle room in that transaction and it comes out of the buyer and sellers pockets.
5. If someone doesn't have a couple thousand to pay an agent to help them buy a home, they shouldn't be buying a home. I'd like to see a system where buyers pay their agents directly (half up front and half after the close) and the sellers list their home with flat fee listings as well. As it is now, buyers don't really see the amount paid as if they are paying it. It's a great scam. Kinda how our medical system works - since you have insurance you don't really care about the cost of something.
6. Working on contingency is not fair to the Realtor as they are not getting anything for their time invested and the buyer can simply walk. Not cool.
1. Not really always true, and on topic to the thread, will be even less accurate if the market swings to buyers market.
And, no one in the Triangle sells $10,000,000 homes.
You focus on YOUR skills and wants, and throughout the rest of the post ignore that it is a diverse pool of buyers and sellers.
The brokerage models available have to serve all of them. And, people prefer to shift the risk of compensation to the agent, rather than expose themselves to paying with no guarantee of closing a transaction.
2. Flat fee for buyers?
It would have to be many thousands of dollars, paid up front. Buyers easily absorb tons of time, which is willingly given by good agents on contingency to help the buyer reach their goal.
Hourly? I helped a young couple last year. They made offers on 6 properties before getting their home. I would have to guess that by closing, they had 200 hours of my time. At $100/hour, that would have been a $20,000 bill, and as a "Pay as you go," would have tapped out their working money.
As it was, I got $6000 and was satisfied that I served them well.
3. It would appear that you don't know very many people who have bought property, and particularly in a rising sellers market.
With a little experience you would note that most deals appraise at contract price. It is a common source of buyer bewonderment, often expressed on CD.
Ergo, no brag that that flat fee listing agent just wasn't highly motivated to do a very good negotiating job.
That was just one recent example. It is generally easy to walk all over flat fee, overworked listing agents who function mostly as funnels while assuming minimal fiduciary roles.
When you hear an agent say, "I'm already not making any money on this deal," you know their client is already halfway under the bus.
4. OD has been discussed ad infinitum and is not yet showing organic sustainability. Redfin has never had a profitable year.
Actually, those points matter when people want to talk about disruptive business models, commoditizing real estate, and long term business models and trends.
I do like that Redfin gives my clients SMS alerts on listing revisions via IDX, so they are up to date and can call me. I refer them to Redfin's IDX routinely. Nice IDX.
5. I am not so cavalier about my clients' $2,000 as you are. But, I work in real estate, with real people with real situations, real goals, and real families.
That $2,000 represents a huge portion of many borrowers' ability to put skin in the game, and I don't judge them unworthy for not being able to throw it away carelessly and repetitively.
Your desire to social engineer and to judge others as worthy or unworthy is sad. Many people would appear to buy on a shoestring, and then live happily in their home for years. I am pleased to help them achieve that.
I get that you like vendors to work for very little. You have often made that clear. It is easy to spend 100 hours on a transaction with a buyer, and you would have an agent do that for $10/hour if the buyer didn't close? Golly. I need a tip jar under your philosophy...
Buyers know their agency tab, to the dollar on their Offer. It is 90% of the time 2.4% of contract price for a resale in Wake County. Of course, the buyer needs to READ the buyer agency agreement they sign. In NC, it is clear in that regard.
Good agents easily discuss commission openly, set expectations, and notify clients if a cobroke commission varies from the expected amount.
It is nothing like the medical system. Sheesh. LOL
Yeah, any agent who says, "Buyers agency is free" should lose their license for lying, and NAR really needs to rip support for that lie out of the Code of Ethics, but any buyer who doesn't know their tab likely chose their agent poorly and/or needs a financial guardian for more than real estate.
6. I have been working on contingency for 13+ years. It is very cool. Seems very fair to the agent.
A good agent doesn't worry about buyers walking, because that good agent is willing to earn their business every day.
In my Buyers Agency Agreement template, every time: "Either party may terminate this transaction at any time prior to location of a suitable property."
I.e., if my client is unhappy, I want them to get happy, including getting another agent if that is what it takes. It really is that simple. And, I think very fair to both parties.
I never want an unhappy buyer or seller feeling tied to me because they have given me a retainer or other funds, or because they signed that agreement.
Never. It is my responsibility to earn their business.
Yeah, if the agent is unmotivated, is a bum, is broke and cannot afford to be in business, buyers walking may be a concern.
I just don't worry about it.
Hasentree started as an exclusive community with expensive fully-custom home options from local custom builders. and they were going to build some empty-nester townhomes.
the development went bankrupt. Many of those custom builders were left holding a loss. Many of the people who DID buy were execs in RTP, and their job got shuffled and they had to move. In 2009, only 8 homes sold in Hasentree, 3 of these were already under contract when Sept '08 came. They took 8 months on average to sell.
Then Toll Brothers stepped in Feb 2010 and bought the whole development. The median price went from 800K+ to $600K just like that. today, it's $650K.
Ouch. I would agree that would be less than ideal if you were an early entrant.
I will add that I’ve had a few clients this year that were using discount agents, though I can’t speak directly to how the fees are structured or what they are, they are firms that advertise as discount agents. Things are just more of a pain.
Those agents never come to the inspection. When there was a difficulty with the seller (pretty much all reasonable times were not available or the seller rejected my scheduled time repeatedly), they were not available to help get the inspection scheduled so I’m having to call the listing agent directly. Items come up on the inspection report and the clients are heavily leaning on me for answers, interpretation, etc. Now, I am happy to explain anything in the report, but I am not a Licenced agent and would not be their agent if I were, so when they ask me what they should do about item X or Y, I can’t really give them advice on that.
I will add that I’ve had a few clients this year that were using discount agents, though I can’t speak directly to how the fees are structured or what they are, they are firms that advertise as discount agents. Things are just more of a pain.
Those agents never come to the inspection. When there was a difficulty with the seller (pretty much all reasonable times were not available or the seller rejected my scheduled time repeatedly), they were not available to help get the inspection scheduled so I’m having to call the listing agent directly. Items come up on the inspection report and the clients are heavily leaning on me for answers, interpretation, etc. Now, I am happy to explain anything in the report, but I am not a Licenced agent and would not be their agent if I were, so when they ask me what they should do about item X or Y, I can’t really give them advice on that.
So, in my opinion you do get what you pay for.
It is unimaginable that a fiduciary could justify not attending inspections for their buyers.
Sure, there can be a random legit emergency, but as a routine business model? Yuck.
Unfortunately, you cannot count on "getting what you pay for" as business guidance.
Crummy agents often charge a lot and get away with it because of personality, and quite often their clients take a real financial hit for dealing with them.
Sad, but true.
Once an exclusive agency agreement is signed, the agent is bound as a fiduciary regardless of fee, as long as it is in effect. Some agents are just more mindful of that fact than others.
Last edited by MikeJaquish; 12-23-2018 at 06:57 AM..
Ouch. I would agree that would be less than ideal if you were an early entrant.
and as a Buyer, you'd probably want an agent that knew all that - right? If you were looking in that area, you'd want that invaluable knowledge to help guide your purchase. Or at least, I think you would.
Should you be paid less now, though? I think that’s actually what we’re discussing.
Inflation adjusted, wages are down quite a bit in my industry. "Should" vs "am", it really doesn't matter, the end result is the same.
Yes, as workload decreases real wages *should* go down. I'm not sure one could logically make an argument any other way.
The RE industry has started to change with a normal 6% commission now being replaced with a sub 4% in many cases, and the new flat fee service coming of age as federal law got involved in their black balling schemes. Just look how technology has changed the appraisal industry with many banks not even doing in person reviews for homes under 250k, also the mortgage industry has been made more competitive with the advent of online quotes.
and as a Buyer, you'd probably want an agent that knew all that - right? If you were looking in that area, you'd want that invaluable knowledge to help guide your purchase. Or at least, I think you would.
Absolutely. I would think anyone would. Not that RE Agents are fortune tellers but they certainly have a knowledge base that should be leveraged (at least IMHO)
That isn’t to say one should completely rely on their agent and not do your own due diligence; i work with data for a living and did my own analysis when we sold our place in MA. When we met with our agent to figure out what price we would put it on the market for, I argued for a number that was 10K higher than where she thought the house should be priced. I stood down, only to have the house sell for 1K more than I originally argued for.
As for Hasentree, my buddy who lives there has an awesome house, but as I said before, if I was in the market for 700K + homes we probably wouldn’t have left MA or if we had still left, would have stuck with the original plan of Castle Rock CO
Look, you're approaching this emotionally, ethically and attempting to predict future sustainability. I'm not. I'm simply stating that the real estate business is, in my opinion (and many others), an inefficient industry ripe to be disrupted. Thats all. I'm making no predictions about whether thats good or bad for the consumer, or profitable for the disruptor. if its produces a poor consumer experience, or isn't profitable long term, then the market will force it to change again. Thats life. <shrug>
Same can be said for many professions. Look at cars. Carvana and vroom are taking a piece of the pie but definitely not changing the entire market.
Knock and open door will get their piece of the pie. A small one but enough to sustain them. Their business model has been around for a very long time, they are just the first to use technology and marketing to their advantage.
Real estate agents still control the data going to MLS. MLS boards across the country could eliminate the websites out there by cutting off the data if they really wanted to. Real estate has been disrupted in the last decade with the internet. You still need professionals to facilitate the transaction in most situations so they are not going anywhere. Sorry to those folks that are against paying commission
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