WHY does everyone think we should work for free?? (bank account, lender, negotiations)
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Sorry for a delayed response - been away from here due to personal issues....
First, I don't disagree - there are options for everyone. BTW, I sold real estate for a (relatively short) while (a number of years ago), so I know all the work - and out-of-pocket costs - it entails.
I sense (incorrectly, or not) that several posters are a bit defensive, but I did not intend my post as an attack. I was responding to a specific post and a specific response to that post - the original poster was commenting on the doubling of a commission due to the doubling of home prices (certainly a realistic occurrence in more than one market). The response specifically mentioned the justification of the commission rate due to the extra work needed to sell a home in current markets. Thus, I was curious what the response was to that specific issue(s) raised re: the doubling factor, and also the reality that in very hot markets much less time and/or professional assistance is needed.
I do want to thank you for the explanation of some offsetting factors, such as increased competition - FSBO was not the factor "way back when" so it didn't cross my mind.
dixiegirl, of course statistically realtors' incomes have dropped recently - as real estate prices and activity drops, so does compensation. Thing is, no one ever mentions just how good they might have it when the markets are booming. It's not easy to make a living at anything that does not have a guaranteed or even a steady, consistent amount. That's why both risk and reward are always relative. This style of career is certainly not for everyone.
IMO, the current model of pure commission basis for home sales is outdated. It is a difficult field both to (properly) enter and succeed in. An outstanding real estate professional generally requires experience to become that outstanding professional - a different style of compensation might open the field to more people that would make good agents but don't have the financial wherewithal to get established. It would also make it less attractive to those that jump in when the market is hot despite a lack of desirable experience/knowledge/ability.
Many forget that there are two different RE markets. The Agents sell houses for commissions. The brokerages recruit agents for desk rent.
The size of the commission has little impact on the average compensation of the Agent. It much more drives how many agents there are. Brokers always increase the population of agents until the per agent compensation is insufficient to attract more.
I would think a great deal of this could be resolved by increasing the capability of the agent. More education. Perhaps a year or two apprenticeship. This Business is best learned hands on...not studying for a silly ass test.
This would also result in a much more efficient market. Most agent working near there capacity rather than spending most all their time looking for a "live one". That might well drive commission down some or allow other business models to flourish.
Note however this is not in the best interest of the Brokerages...and therefore is unlikely to go anywhere.
If you want to get radical you might even do away with the brokerage...or perhaps expand the field so that every agent is, de facto, a brokerage. That would of course severe the tie between agents and large brokerages.
The "whopping 6%" commission.
Hmmm. How long did we have to advertise that pile of crap before it sold? How many long distance phone calls to the seller did we have to make? How many long distance phone calls to customers? How many gallons of gas did I use making trips back and forth to check on that house, show it, maintain my signs, and--yes--even mow the grass because the seller wouldn't spring for a lawn maintenance crew and he'd already moved to Oregon!!!!! Balancing it out, the average agent probably spends more these days than he/she actually earns on commissions for many of their listings (if you count time spent into the equation). Yes, there is occasionally that sweet peach that gets sold almost immediately with no marketing costs, it closes fast because it's a cash deal and the listing agent is also the selling agent. Oh, sweet sweet sweet times! But, that's not the norm.
...Balancing it out, the average agent probably spends more these days than he/she actually earns on commissions for many of their listings (if you count time spent into the equation)....
IMO, if this is the case, unless one has planned properly and reserved some of the revenues from the boom times, it is time to move on to a new profession. Most self-employed and/or sales based individuals will have fluctuating income and need to plan accordingly. However, if an agent gets to a point where "many" times he/she is spending more than the listing is grossing, it is time to change careers. Chances are he/she does not possess the requisite skills, experience and/or financial acumen to make a living selling real estate. For some, it will simply be the misfortune to not have enough time in the field to gain experience and for others they simply never learned the requisite lessons and/or were foolish enough to believe times would never change.
FWIW, I do not have a problem with those that admit the boom times were sweet, and now will endure the bust, figuring it all balances out. I have a problem with those that act as if the boom times were nothing special and now that selling real estate requires some ability and time, they are somehow doing sellers this great favor by listing their properties. JMO, YMMV.
FWIW, I do not have a problem with those that admit the boom times were sweet, and now will endure the bust, figuring it all balances out. I have a problem with those that act as if the boom times were nothing special and now that selling real estate requires some ability and time, they are somehow doing sellers this great favor by listing their properties. JMO, YMMV.
Well said, and reasonable. By the same token, consumers have to look at it that way too. Several years ago it was "You shouldn't charge such a high commission, because selling a house is easy and you don't spend all that much on marketing." Now they cry is "You shouldn't charge such a high commission because it's really tough to sell a house and I'm going to lose so much money compared to the value at the high."
Real estate agents can't have it both ways, but then, neither can the consumer.
Very true, Bill. Consumers think selling real estate is easy - something we do in between tennis or golf games. But why is it then that when times are good and loads of people rush into the business that the average income for these newcomers is still very low and as soon as the economy slows they are the first ones heading for the exit doors?
The "whopping 6%" commission.
Hmmm. How long did we have to advertise that pile of crap before it sold? How many long distance phone calls to the seller did we have to make? How many long distance phone calls to customers? How many gallons of gas did I use making trips back and forth to check on that house, show it, maintain my signs, and--yes--even mow the grass because the seller wouldn't spring for a lawn maintenance crew and he'd already moved to Oregon!!!!! Balancing it out, the average agent probably spends more these days than he/she actually earns on commissions for many of their listings (if you count time spent into the equation).
Why, then, don't you simply charge for your hours spent, at a reasonable hourly rate (I'm thinking $60/hour, but feel free to do the math and figure out whatever you think is appropriate), plus expenses? Then the sellers who make it easy (clean out their homes, keep the lawn maintained, agree to a reasonable price so the home won't sit on the market for a year, etc.) would benefit from lower fees, and those who make it harder would fairly compensate you for the time you spend on their properties? Why is it fair or reasonable to make the "sweet peaches" pay for the ridiculous behavior of the bozos???
The "whopping 6%" commission.
Hmmm. How long did we have to advertise that pile of crap before it sold? How many long distance phone calls to the seller did we have to make? How many long distance phone calls to customers? How many gallons of gas did I use making trips back and forth to check on that house, show it, maintain my signs, and--yes--even mow the grass because the seller wouldn't spring for a lawn maintenance crew and he'd already moved to Oregon!!!!! Balancing it out, the average agent probably spends more these days than he/she actually earns on commissions for many of their listings (if you count time spent into the equation). Yes, there is occasionally that sweet peach that gets sold almost immediately with no marketing costs, it closes fast because it's a cash deal and the listing agent is also the selling agent. Oh, sweet sweet sweet times! But, that's not the norm.
If an agent is spending more advertising than they make then they don't know how to prepare and execute a business plan. If a person cannot prepare and execute a business plan they cant successfully run a business. If a person can't successfully run a business they shouldn't be a business owner. A Realtor is a business owner.
Why, then, don't you simply charge for your hours spent, at a reasonable hourly rate (I'm thinking $60/hour, but feel free to do the math and figure out whatever you think is appropriate), plus expenses? Then the sellers who make it easy (clean out their homes, keep the lawn maintained, agree to a reasonable price so the home won't sit on the market for a year, etc.) would benefit from lower fees, and those who make it harder would fairly compensate you for the time you spend on their properties? Why is it fair or reasonable to make the "sweet peaches" pay for the ridiculous behavior of the bozos???
I am about to hopefully close one for my buyers that's a foreclosure. I've spent probably 70-80 hours on this one. Hourly won't work because we don't know how much time we'll spend. It wouldn't be consumer friendly and I could spend a lot of time being very detailed on a transaction. I could have one property under contract and easily spend 40 hours a week on it until it closed.
Hourly won't work because we don't know how much time we'll spend. It wouldn't be consumer friendly and I could spend a lot of time being very detailed on a transaction.
Somehow lawyers manage it... and believe me, they often don't know how much time they're going to spend on a case. They do contingent work too, but that's usually for someone who can't pay an hourly rate (because they don't have any money). They generally pay WAY more than the work is worth, because they have no choice; also, if they don't win, they pay nothing. I would guess that most real estate agents have very few properties that just never sell (correct me if I'm wrong). And in those cases, an hourly fee would certainly benefit the agent!
A contingent percentage could be an OPTION for selling real estate, just like it's an option for legal work. I would just like to see more options, that's all.
Oh, and 80 hours? If the house sells for $200K, and you get 3%, you're getting $75/hr. That's more than I make as an attorney (OK, many make more, that's my choice of what kind of work to do. Still, I paid $60,000 for my education). If the house sells for $400K, you'd be getting $150/hr. Not bad, I think. How many hours do you think you AVERAGE on a property? How many hours do you think a buyer's agent puts in to sell a property (for their 3%)?
Somehow lawyers manage it... and believe me, they often don't know how much time they're going to spend on a case. They do contingent work too, but that's usually for someone who can't pay an hourly rate (because they don't have any money). They generally pay WAY more than the work is worth, because they have no choice; also, if they don't win, they pay nothing. I would guess that most real estate agents have very few properties that just never sell (correct me if I'm wrong). And in those cases, an hourly fee would certainly benefit the agent!
A contingent percentage could be an OPTION for selling real estate, just like it's an option for legal work. I would just like to see more options, that's all.
Oh, and 80 hours? If the house sells for $200K, and you get 3%, you're getting $75/hr. That's more than I make as an attorney (OK, many make more, that's my choice of what kind of work to do. Still, I paid $60,000 for my education). If the house sells for $400K, you'd be getting $150/hr. Not bad, I think. How many hours do you think you AVERAGE on a property? How many hours do you think a buyer's agent puts in to sell a property (for their 3%)?
Just a little cut and paste for the 3rd time since this keeps coming up.
"I would go for an hourly rate.
If it is a flat rate per listing that is fine also. I will hand them the invoice when the listing contract is signed and get paid before I leave.
Here is how I laid it out in another post for someone who suggested this.
"That is fine by me. You pay me as we go. I will keep track of my hours and bill weekly. At say $60 an hour, just to ballpark a figure, plus ad costs you get an invoice for $1150 the first week.
Subsequent weeks probably will not be as high but for argument sake lets assume 40 more hours over the next 4 months plus ad costs so you get another invoice for $2900.
After 5 months we go to contract. In this time we will be offering, counter offering and following up. We will also be meeting appraisers, inspectors, contractors and others at the house after the contract is finalized. Lets figure about 40 hours for this. Here comes another invoice for $2400.
You are now 5 months in, have paid out $6450, we go to closing and the buyer backs out. Fine by me because I got paid. Not to good for you being out $6450 and facing the prospect of having to go through the same thing again.
Sure a higher priced home may save some money going this route if everything goes smooth but someone with a lower priced home can end up paying alot more if things don't go smooth."
Now keep in mind this is just for me the sellers agent, the buyers agent will be charging the buyer, we will figure around the same amount. So we have what works out to a little over 6% if this was a $200,000 house. If it is a $150,000 it would be over 8%. This all without the guarantee of closing.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
