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I think there are a couple other huge factors that have not been discussed:
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It is my opinion that 90% of the marketing of a property for sale is in the MLS listing and its pictures. No matter how good of an agent you are, the buyer will always seek the best bang for their buck. I agree with Mr. cmg in that agents now are a commodity. It is an outdated business model which is being sustained by the clout of the NAR, legislation and standard protocol.
That brings up another point. The abundance of bad photos on-line---from snap & shoot cameras or cell-phones I assume. I think each broker's office should have a wide-lens camera available for their agents to be able to shoot well-lit pictures that show the whole room and not just sections of it. And I'll never understand listings that just have one exterior shot only---what's going on there?
Plain and simple? Raise the entry barrier and make it more difficult to maintain a license and the quality of agents will increase. If the quality of agents increases the reputation of the industry will increase. Of course you'd have to get those changes made at a state or federal level because there is no way the companies will quit being agent factories on their own.
I see a lot of comments on there that are valid complaints-no/bad photos, poor communication, desperate to close the deal, inexperienced or lacking in knowledge...there were probably some others but the fix is still simple even though I don't see it happening anytime soon. The individual complaints lead back to the big picture which is too many part time and unqualified agents.
You make more education a requirement to obtain a license and 2 things happen, 1-the public will look at agents as a profession like they do a doctor or lawyer 2-It weeds out the ones that aren't qualified or looking at it as a part time gig for a quick buck.
You make requirements to keep a license higher and the ones who are part time or not doing a good enough job will leave. That leaves more business to the full time professionals and the experiences of the consumer get better and the reputation of the average agent improves.
Ultimately either or both would lead to a better consumer experience and make the business easier for agents as well because we are dealing with a higher level of professionalism on the other side.
I see a lot of comments on there that are valid complaints-no/bad photos, poor communication, desperate to close the deal, inexperienced or lacking in knowledge...there were probably some others but the fix is still simple even though I don't see it happening anytime soon. The individual complaints lead back to the big picture which is too many part time and unqualified agents.
You make more education a requirement to obtain a license and 2 things happen, 1-the public will look at agents as a profession like they do a doctor or lawyer 2-It weeds out the ones that aren't qualified or looking at it as a part time gig for a quick buck.
You make requirements to keep a license higher and the ones who are part time or not doing a good enough job will leave. That leaves more business to the full time professionals and the experiences of the consumer get better and the reputation of the average agent improves.
Ultimately either or both would lead to a better consumer experience and make the business easier for agents as well because we are dealing with a higher level of professionalism on the other side.
I agree with this analysis 100%. A person expects a full time, full service experience from someone when they are paying what real estate agents cost...and the cold hard truth is that full time, full service, agents are just as often terrible b/c the bar is too low. The solution is clearly higher requirements, and possibly even higher fixed costs to the agents to stay licensed.
I am a perfect example...the cost to me to get my own license to sell my house was less than $1500, yet the savings by listing my own house and not being met by hostile agents or agents who refuse to deal with the fixed price agents, was over $30,000. Why would I not get licensed? Admittedly the stars aligned for me with my aunt being a broker and Texas relaxing its requirements for attorneys, but - I do plan to keep my license active until I can become a broker. It makes no sense not too. $1500/yr in fees to stay active only requires that I close 1 property year...I can do that with family alone.
Mind you, there is a cadre of true real estate professionals out there, people who really do an excellent job. Sadly, they are outnumbered by the dilettantes and those who are just downright lazy.
Agreed... and far too many beyond greedy, selfish, lying scammers.
It's really a shame.
That brings up another point. The abundance of bad photos on-line---from snap & shoot cameras or cell-phones I assume. I think each broker's office should have a wide-lens camera available for their agents to be able to shoot well-lit pictures that show the whole room and not just sections of it. And I'll never understand listings that just have one exterior shot only---what's going on there?
What's going on is that real estate agents are independent contractors and not employees. Some brokerages function with a sink or swim attitude and throw their agents out there to fend for themselves. Some brokerages train their agents well on contracts and self promotion, but not on marketing for clients.
Pro photos in my area are only $100-$150. Many rookies can't handle the carrying costs of listings, since agents pay for marketing expenses out of pocket, so that is why rookies are often buyer agents. It only costs your time and gas.
I agree with this analysis 100%. A person expects a full time, full service experience from someone when they are paying what real estate agents cost...and the cold hard truth is that full time, full service, agents are just as often terrible b/c the bar is too low. The solution is clearly higher requirements, and possibly even higher fixed costs to the agents to stay licensed.
The fixed costs would automatically go up. If there were 50% fewer real estate agents in the US, which we could easily lose in this industry, then NAR dues would cut in half as well as MLS fees. They would have to double those fees to provide the same level of service to their base. In my area, REALTOR® dues are around $700 a year, I think, so they would go up to $1400 a year and MLS dues would be $90 a month. If the average agent makes $38,000 a year or whatever it is, then they can easily absorb those extra fees if they double their income. They would come out much farther ahead. It would be a win for agents since they would make more money, which helps to keep them from compromising their ethics to put food on the table. Consumers would get agents that do more transactions per year which makes for a more knowledgeable agent, and NAR gets to keep its money to continue to be the lobbying powerhouse that it is. The only downside I see is that it makes it harder for limited representation firms to make a go of it since their fixed costs would go up. They just wouldn't be as cheap as they are now.
As a consumer, my #1 reason for having an unfavorable opinion about real estate agents:
The commission-based remuneration is seriously flawed.
Quote:
Originally Posted by marksmu
I completely understand the problems agents/brokers have with people who waste your time, but you have to understand that the people who dont waste your time are tired of subsidizing those who do...If you have to sell 8 houses at little to no commission to get 1 house that earns you a good commission, that one should not have to pay more just because it sold for more. The amount of work is not directly correlated to the price and that is a BIG problem that the industry as a whole refuses to recognize and adapt to.
Bingo.
And let's do a little comparison. I live in a planned community with "neighborhoods" of different price ranges. My house is $250K, the house across the street is $315K, and the house one mile from here in a different "neighborhood" is $190K.
$190K @ 6% is $11,400
$250K @ 6% is $15,000
$315K @ 6% is $18,900
If we all should expect the same level of service, and all things being equal - houses in similar condition, reasonable sellers - then what, pray tell, did the agent(s) do to earn $3,600 more for my house, or $7,500 for my neighbor's? Take an extra 10 minutes to walk through a few more rooms? An extra half hour to take several more photos?
All things not being equal, if I, as a seller, have already done the pre-listing stuff - decluttering, purging, deep cleaning, fixing and sprucing up - before I hire an agent, but the $190K house is a mess and requires a boatload of agent intervention, then why, in the name of all that is holy, should I pay $3,600 more?
If the consumer is paying for your knowledge and expertise, then charge for that, and charge everyone the same. Figure out what your services are worth and let the consumer decide which services to buy. Have a level playing field.
And please don't justify the commission with a laundry list of fees and costs of doing business. I've been self-employed for 34 years. I've paid for licensing fees, continuing education, gas, phone, equipment, marketing, time spent with no compensation, and still managed to make a good living by charging set fees for my services.
Don't even get me started on the garbage listings I've seen: bad photos, lack of photos, two or three photos of the house with the rest being stock photos of the area (can you say "lazy"?), Agents Who Think Every Word Should Be Capitalized, boilerplate or downright boring descriptions, spelling errors, cliched comments (will you please stop telling me what I "MUST SEE"?). Then add crappy websites, web pages touting how great the agent is with a third of the words misspelled, the agent's glamour photo splashed everywhere (hello, narcissism), and prior bad experiences, and I think the profession is the pits.
And please don't justify the commission with a laundry list of fees and costs of doing business. I've been self-employed for 34 years. I've paid for licensing fees, continuing education, gas, phone, equipment, marketing, time spent with no compensation, and still managed to make a good living by charging set fees for my services.
The commission has nothing to do with fees. It has to do with risk. In your 34 years as a self-employed person how often to you agree to carry the costs for a client with the agreement that you won't get compensated for your time if they don't like the end result? Really it is simple. Real estate is a high risk business, financially, and as such the rewards are high. It's like gambling.
Now before you go off on why it shouldn't be like that, you need to know I am a fee-for-service brokerage that offers hourly rates, flat rates, and commissions. Hourly and flat rates are guaranteed regardless of outcome. Flat rate is 1/2 up front and 1/2 at closing just like other professionals charge for their services. Consumers reject this model very consistently. They want to have the privilege of not paying so they choose the higher cost commission model overwhelmingly. I've been doing this model for 9 years, so I have some experience with it. I do 2-3 hourly rate contracts per year.
What won't happen is for agents to drop their fees and then not have guaranteed payment. That is business suicide and you wouldn't do that as a self-employed person either. Oh and in your sample, the reason the compensation is more for a $315k house vs. a $190k house is that it carries greater risk of not selling. The higher the price the home is the greater the risk is as most people don't make 6 figures.
Now before you go off on why it shouldn't be like that, you need to know I am a fee-for-service brokerage that offers hourly rates, flat rates, and commissions. Hourly and flat rates are guaranteed regardless of outcome. Flat rate is 1/2 up front and 1/2 at closing just like other professionals charge for their services. Consumers reject this model very consistently. They want to have the privilege of not paying so they choose the higher cost commission model overwhelmingly. I've been doing this model for 9 years, so I have some experience with it. I do 2-3 hourly rate contracts per year.
How do the 2-3 hourly rate contracts stack up against the commission based ones? Do these sellers end up saving money or losing money? If they saved, why was it that they saved, and if it cost more, was that because of something they did or was it the market?
I understand the risk/reward - but some markets there really is no risk at all...there can be so little inventory and so many buyers fighting for a particular area that it really does not matter if you drew the house with crayons and magic markers - its going to sell.
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