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To the agents on the board, would you do a model where the buyer (I'm assuming they back out more often) can look up their own property on the MLS and schedule to see houses at a rate of $30/hour (or some other rate) but only be charged 1.5% of the buyers commission? This seems like this would limit the downside risk of not being compensated for your tim as it was said that most of the work comes after you enter escrow.
To the non agents, RE rates are very negotiable in high prices markets (>500K). I don't plan on listing for another year but already have several RE agents lined up to buy and sell for 1%. There are a ton of agents and just not enough inventory to keep everyone happy.
In the last year, I know of at least 6 people who have gotten their RE licenses. Not a single one of them has made a sale.
$30/hr?
No. Not even close. I know you said, "some other rate," but if that means "maybe $40/hr," that also is a "no."
From the article, "These agents waste time competing with each other for the exclusive right to sell each home, sapping productivity. According to Norm Miller of the University of San Diego, an average agent in Britain closes 40-50 deals a year, compared with just seven in America."
The system hasn't become more efficient because consumers haven't clamored hard enough at their state representatives to change licensing laws. If you can spread your business costs over 50 transactions vs. 7 you can lower your fees. Consumers don't seem to understand that there is TOO MUCH competition in the US which causes business costs to be spread across a few clients for most agents, and then there is the high risk of not being paid for your time. Agents in Britain, where this example is used, are generally employees, not independent contractors so they get paid regardless of whether or not someone buys or sells a home. More like the Redfin model. Salaried employees paid on bonuses.
They can't be very good economists if they find basic math baffling.
Economists are confused because in a normal market excessive competition leads to lower costs not higher ones. The market doesn't care how much agents "need" to stay in the game or hedge their risks or cover their expenses. With excessive competition the prices should go down until there are a stable number of agents. If the job can be done for less money using an employee-based model where agents handle more home, economists find it strange that this hasn't happened yet. There's a reason WalMart came and wiped out small businesses. They competed on price with low-paid employees and drove out their less efficient (i.e. smaller) competitors.
Economists are "confused" why this hasn't happened in the real estate industry, although if you ask them off the record they'll say that it's because agents collude to keep their business model viable by excluding those who would significantly reduce costs. There's a lot of talk about how those non-traditional selling methods are frustrating for consumers, just like there was talk about how WalMart shopping isn't nearly as pleasant as at a small local company (both likely true), but WalMart still drove out the little guy. All WalMart really has to compete on is price; if that were suddenly not an avenue open to them I'm pretty sure they would not have succeeded in disrupting retail sales.
I guess the part that is most confusing to me, as a consumer, is that a great agent will generally charge the same rate amount as an OK agent. This is not the case for most other professions. Lots of agents have chimed in on how they are flexible on price, but it's one of the few industries out there that doesn't actively compete on price. I suspect that it is a bit of a percolation problem, so there might not need to be entirely active collusion to keep commission rates high.
Last edited by jayrandom; 07-18-2016 at 06:46 AM..
Reason: Improved answer on real computer instead of stupid phone
If I were the buyer and found this out before hand I would refuse to use the agent or if I found out afterwards I would sue the agent and file a complaint with the real estate board. I can't imagine that this would not have to be disclosed under a number of principles, because that agent, based on what you are describing, would either fall under dual agency or be the buyer's agent. It is crap like this that makes the rest of us have a poor opinion of real estate agents. Do you honestly not see the problem with this?
Added inducements to agents are common.
In NC, the agent is required to disclose any additional inducements, including a co-broke commission higher than in the buyers' agency agreement immediately. Definitely prior to writing an offer.
This requirement only hit the regulations about 6 years ago, and buyers' agents wailed about having to disclose their compensation.
89% of the Residential listings in my county offer me 2.4% as a buyers' agent. My buyers' agency agreement cites 2.4% as the "expected compensation."
It is not uncommon for sellers to offer bonuses, higher co-brokes, etc.
I have seen a builder offer as much as 8%. I have had a builder's onsite agent call me, whispering, "You know we will take care of you and that 6% could be a little sweeter...."
I have a listing right now in a new neighborhood where I am offering 2.7% because the builder is still active and offers 2.5%.
If I was showing that as a buyers' agent, I would disclose the increased commission.
But, we do have stuff like:
Builder offers 2.5%, +$1500 for a second sale, +$2500 for a 3rd sale, etc.
Points towards a cruise. If you make multiple sales, you may win the cruise.
A local agent who offers a $10,000 prize to the agent who sells the most of her listings.
All of those are additional inducements clearly requiring disclosure.
The inducement is not the issue. Abusing a client to gain an inducement is the issue, and I am sure it happens.
If I were the buyer and found this out before hand I would refuse to use the agent or if I found out afterwards I would sue the agent and file a complaint with the real estate board. I can't imagine that this would not have to be disclosed under a number of principles, because that agent, based on what you are describing, would either fall under dual agency or be the buyer's agent. It is crap like this that makes the rest of us have a poor opinion of real estate agents. Do you honestly not see the problem with this?
In fairness, oldtrader may have offered that incentive at a time when all real estate agents were subagents of the Listing Agent--hence, all agents owed their duty to the Seller.
If, however, those incentives were made more recently to Buyer's Agents...then I would agree with you.
EDIT: Incentives could be fine it they were truly fully disclosed before any offers were made. From oldtrader's description, I rather doubt that was the case.
Last edited by jackmichigan; 07-18-2016 at 06:51 AM..
LOL,Real estate does go up and down. When it is down people leave the business. When it is up everyone jumps in. The fictional $200,000 home will provide $12,000 in commission usually split between two brokers and then shared with the listing agent and sales agent. To keep it simple lets say that the $12,000 was split four ways, or $3,000 each. I have no idea is an agent has to spend some of that on marketing or if that is left up to the broker. To keep it simple lets say that they get to keep the $3,000.
What happens when prices double and we have a $400,000 house? Someone realizes that they can make a lot of money selling homes and they join the industry, or they have a license to sell and they jump back into the business. With that you end up with more people trying to sell homes. Instead of the $3,000 the realtor makes $6,000 on the sale. Now though the amount of agents selling homes more than doubles. It becomes a fight to list homes. The realtor ends up spending more on marketing. They work harder to get the $6,000.
LOL,Real estate does go up and down. When it is down people leave the business. When it is up everyone jumps in. The fictional $200,000 home will provide $12,000 in commission usually split between two brokers and then shared with the listing agent and sales agent. To keep it simple lets say that the $12,000 was split four ways, or $3,000 each. I have no idea is an agent has to spend some of that on marketing or if that is left up to the broker. To keep it simple lets say that they get to keep the $3,000.
What happens when prices double and we have a $400,000 house? Someone realizes that they can make a lot of money selling homes and they join the industry, or they have a license to sell and they jump back into the business. With that you end up with more people trying to sell homes. Instead of the $3,000 the realtor makes $6,000 on the sale. Now though the amount of agents selling homes more than doubles. It becomes a fight to list homes. The realtor ends up spending more on marketing. They work harder to get the $6,000.
Every time someone rationalizes commissions by pointing out a brokerage's 50% take, I wonder why anyone would provide a broker they never met a huge portion of the finances.
Every time someone rationalizes commissions by pointing out a brokerage's 50% take, I wonder why anyone would provide a broker they never met a huge portion of the finances.
Mike, I really have no understanding of the particulars of where the money goes. All I wanted to do was paint a picture of how much the realtor might make in a given scenario and then show when prices double how much harder it is to maintain that same level of income with increased competition from new and returning realtors. In my area we have a family that opens their business when things are booming. You will see their signs all over the place. When homes decline in value they pull out of the business. I guess what i meant to do was explain that in good times you have more people playing than when things are not so good. Bigger pizza but more people coming to the table to get fed.
Mike, I really have no understanding of the particulars of where the money goes. All I wanted to do was paint a picture of how much the realtor might make in a given scenario and then show when prices double how much harder it is to maintain that same level of income with increased competition from new and returning realtors. In my area we have a family that opens their business when things are booming. You will see their signs all over the place. When homes decline in value they pull out of the business. I guess what i meant to do was explain that in good times you have more people playing than when things are not so good. Bigger pizza but more people coming to the table to get fed.
The comment on the payola wasn't really aimed at you.
The 4-way split just always registers as such in my mind.
And, yep. Real estate schools open and close, hire and layoff, with ebb and flow of demand.
Since the NAR has such strong lobbying influences, why haven't they lobbied for this to happen and help its members?
Possibly because a great many NAR members would no longer be NAR members.
Quote:
Originally Posted by AndroidAZ
It seems to me almost everyone is a realtor...it's amazing how many there are out there. I'll never understand why so many get into the business, if the payday is so poor.
Real estate and politics have something in common--a lot of people get into them for the wrong reasons. In the case of real estate, a lot of people think it is easy money--that they can make lots of money for very little effort. A lot of the public seems to feel that way, too. Once people get into the business, however, they find out that their perceptions were in error.
I will just add that I disagree with the notion that lots of agents make for too much competition, therefore causing commissions to be higher. The number of real estate agents who are part-time or who only do a few, or no, transactions in a year has little influence on the pricing structure. These agents are not the ones setting the commission rates. The only real way for commissions to come down is for consumers to be fully informed and to shop around for the best fit that works for them. I see it happening gradually. There seem to be a number of options that weren't available before and overall commission rates seem to be trending down somewhat. If I were at a different stage in my life, I would become a Listing Agent and I would definitely speed up the process, because I think I could make a lower commission rate structure work quite successfully in my market.
$30/hr?
No. Not even close. I know you said, "some other rate," but if that means "maybe $40/hr," that also is a "no."
I really don't get this.... How much would it cost to drive someone around and open lock boxes? $40/hour seems very high. My option eliminates some of the "risk" by getting paid for your time in the event the buyer backs out.
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