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Granted, 25-50% is a lot... I don't think I would have insisted on that, if I'd known this was evens possibility in the first place. I would say something more like 10-15%?... say, with very clear discussion that the buyer will do all of the searching him/herself, and basically will only need the agent for the bare bones legal stuff at the end, etc.
Maybe more like a pay-per-service model... $1000 to write up the contract, another $1000 if the agent actually drives you around to look at places, $500 if they send you listings, with maybe an opportunity for a bonus from the buyer (like a tip or something) to reward an agent going out of his/her way to serve the customer.
There HAS to be a better system than the current one--I am not saying that I want agents to make less money, IF they are doing 100% of their job, but there has to be a different way of compensating people for what is essentially a service job.
Caravan.. I actually agree with you on this.. I do believe there should be a better model for compensation and pay for service is an interesting idea.
I would also like to know, again, is there any standards for agents giving out "Review" sheets after closing?... for the buyer to fill out, with the agent's strengths and weaknesses, etc? As a teacher, we do these at the end of every term and it's always very helpful to know what the students thought of my teaching style and substance... most professions have some kind of review in this format, especially when service is involved. Do agents do this? And if not, why?
I don't know about "standards", but I do know that every client of our firm gets a feedback sheet to fill out and return, and with some of them (relocation referrals, say), they may get two of them, the one from our office and the one from the relocation company.
Granted, 25-50% is a lot... I don't think I would have insisted on that, if I'd known this was even possibility in the first place. I would say something more like 10-15%?... say, with very clear discussion that the buyer will do all of the searching him/herself, and basically will only need the agent for the bare bones legal stuff at the end, etc.
Maybe more like a pay-per-service model... $1000 to write up the contract, another $1000 if the agent actually drives you around to look at places, $500 if they send you listings, with maybe an opportunity for a bonus from the buyer (like a tip or something) to reward an agent going out of his/her way to serve the customer.
There HAS to be a better system than the current one--I am not saying that I want agents to make less money, IF they are
doing 100% of their job, but there has to be a different way of compensating people for what is essentially a service job. The better the service, the higher the pay, and vice versa. Really, what is so wrong with that?
IS there something wrong with that? No, there's not...but....
An agent works with you for a few weeks. Creates a profile of your needs & wants, helps you to figure out what you want to and can afford to spend, gets you the info you need to pick the right neighborhood, school district, whatever. Weekend one, you drive a neighborhood in his car, see 4 houses, like none of them. Weekend two you go out again in his car, see 3 houses, like one of them. You write, & he presents, an offer that doesn't get accepted, as someone else is willing to pay just a little more than you are. You're ok with that, as you & the agent feel they are overpaying.
On the way home from work that next Tuesday, you drive through one of the neighborhoods your agent showed you. You see a guy putting a FSBO sign on his lawn, so you stop and ask, "Hey, how much are you askin for the house?" He names a price, you start talking a little. The two of you get along immediately, and before you go home that night, you have an agreement to buy his house.
How much do you pay your agent? Under the commission system most of us use, you would owe him nothing. In the commission based system, we take the risk that there will be no transaction, and therefore no paycheck. The reward for that risk is higher pay. If you want to reduce the pay, you also need to reduce the risk, which most buyer agents would not oppose. To this point, however most buyers are not willing to reduce the risk by guaranteeing payment for the work even if it doesn't result in a transaction.
Last edited by Bill Keegan; 02-17-2010 at 08:26 PM..
Reason: fixed typos
Maybe confused but where is the buyer paying the commission? The commission is negotiated between the seller and the listing agent. They can have it set that the listing broker only has to offer 2% if they want to the buyer broker ( taking 4% and offering 2% will not make you many friends in the business but it could be done). The commisson has nothing to do with the buyer. If you are a good buyers agent you will save your client more than whatever rebate they ask for. I don't get it especially as a first time homebuyer. You want and need an agent to assist you in the transaction but from the door you suggest the agent take less pay? A first time buyer requires the buyers agent to spend more time explaining the process and hand holding. This is not a bad thing as that is our jobs as agents and if you are not doing that you will not be in business for long. In PA it is illegal to offer the buyers anything after closing. The next time I go to an expensive restaurant I am going to ask if they can discount my food 30%. Hope they bite!!!
Caravan, there is nothing wrong with it. You just lack knowledge about the real estate world. Fee-for-service agents are in most cities and areas. I am one, in fact. So we exist.
So here is the deal...I have said this about a bazillion times on here as a fee-for-service agent...I do flat rates, hourly rates, and commissions. Right now 60% of my listings are commissions by choice of the seller. With fee-for-service the flat rate is guaranteed because it really costs us that much to run the service. The problem is that sellers often don't want to guarantee payment. Really...it's true.
So that is why commissions are as high as they are. It includes the losses that real estate agents take on other properties that don't sell. It's all about risk vs. reward. If the agent takes no risk, then they can reduce their fees. If the agent takes the whole risk fees are high. It is that simple. If consumers want lower fees they have to pay their bills just like they would with any other service provider.
Your mistake was not taking the time to interview several real estate agents. It is a common first timer mistake and so many of the agents on here constantly stress to consumers the importance of interviewing at least three agents.
It's unfortunate that you didn't have a really good experience, but I hope you pass on everything you learn to your other first time home buyer friends and encourage them to interview at least three agents.
Definitely, I will readily admit that it was my mistake to not interview more agents. However, before choosing our current agent my husband and I went to several open houses (5-7, I think) and talked with each of the agents there, and they all wanted to represent us even if we weren't buying that particular home (they were not the listing agents). So I feel like we did at least check out the field before trying to ask friends about who they would recommend, since most of the open-housers felt slimy to us. It was just our luck that our pool of friends who had bought before us was so small, and in light of that, we could have spent more time picking out random agents from the phone book to interview, I guess. But yes, believe me, I will pass all this on to our friends who will buy in the future!
I honestly had no idea about the alternatives to commission... why is that not more heavily advertised? I feel like I asked my agent about those options and she did not really respond... just said I would not have to pay for anything so it didn't really matter. Which is technically true, but I would have preferred to do fee-for-service and kept some of that 3%.
Byoak--if the restaurant really is high-quality, they put service first and foremost. If the customer is unhappy or has to wait ages for food, etc they compensate with free drinks, discount on the bill, etc. I have worked in restaurants and we have done this, and it keeps customers coming back because they know you aren't going to screw them over.
Bill--in a fee-for-service model, the agent would get paid for driving around, even if he didn't clos on that house. As it was, our agent did not even drive us around or even find a single unique house for us.
...I honestly had no idea about the alternatives to commission... why is that not more heavily advertised? ...
It's not heavily advertised because most agents don't do fee for service, especially if they are doing well on the traditional commission model. And most buyers would rather not pay as they go when they can get the services for "free". Many can barely make a down payment and cover closing costs let alone pay the agent's fee.
Most likely it is not the buyer waiting for food in real estate. The agent is. We can discuss with the buyer their wants and needs and show them every property available that fits their criteria and for one reason or another they do not want the property. This to me is understandable as it is a very important decision and you want to take your time. This is part of a Realtors life. I have shown people houses for 4 months before they bought. If I had agreed to a pay cut in the beginning should they now give me part back since they took 4 months to find a place and I will likely not get paid until another month in a half afterwards? Still comes to the commission has nothing to do with the buyer if the agent is doing their job like they are suppose to they deserve to get paid by the seller/listing broker.
It's not heavily advertised because most agents don't do fee for service, especially if they are doing well on the traditional commission model. And most buyers would rather not pay as they go when they can get the services for "free". Many can barely make a down payment and cover closing costs let alone pay the agent's fee.
But isn't it a bit disingenuous to say that it's "free," when really, the buyer could stand to make some of that 3% back (a la the Redfin model)?... I mean, granted, if agents are doing well with the current model, then I guess everyone is happy. But from the amount of disgruntlement that goes the rounds in this forum, as well as the growing popularity of Redfin, one would think that agents would try to open themselves up to any type of business that comes their way--fee for service, commission, or otherwise. That way, you can offer each buyer what he or she needs most, without that buyer getting resentful later on for not being told upfront what the options were.
Honestly, my husband and I really threw ourselves into this whole process... we knew absolutely zilch coming into it, but almost immediately we started putting a lot of effort into educating ourselves, reading as many real estate forums as we could, understanding every term and strategy along the way (as many of you have surely noticed, with my recent participation here!), etc. But the only alternative to commissions that we heard about was Redfin, which we weren't quite ready for. We really could have used something in the middle.... City-Data has been a fantastic resource, and honestly, if you guys were charging for access to online advice from agents, I could easily see paying for a service like that.
Quote:
Originally Posted by byoak
Most likely it is not the buyer waiting for food in real estate. The agent is. We can discuss with the buyer their wants and needs and show them every property available that fits their criteria and for one reason or another they do not want the property. This to me is understandable as it is a very important decision and you want to take your time. This is part of a Realtors life. I have shown people houses for 4 months before they bought. If I had agreed to a pay cut in the beginning should they now give me part back since they took 4 months to find a place and I will likely not get paid until another month in a half afterwards? Still comes to the commission has nothing to do with the buyer if the agent is doing their job like they are suppose to they deserve to get paid by the seller/listing broker.
byoak, to be fair, I am not one of those people who thinks that all agents go around in nice cars and sell houses every day. Our agent has a 1-year-old baby, no other job, and her husband is a contractor. We took a break from looking at houses after the original tax rebate deadline last fall (separate issue with my in-laws), and came back to our agent two months later. By then, our buyer's agent contract with her had expired from an earlier offer, so technically we could have picked another agent since we were already not satisfied with her service. However, knowing her situation and also due to my own personal ethics, I decided to stay with her till the end so that she could get paid. I don't know if that's what I should have done, but that's what I felt best doing.
I get it that realtors often struggle, I really do--and that is also why I don't understand why you all don't demand a different system of getting paid, too. One where you get paid a solid salary from month to month like most other professionals, or at least paid regularly for services that you offer (even if you don't close on a house--such as, say, lawyers get paid). You owe it to yourselves to demand better compensation conditions if you really are living hand-to-mouth waiting for each house to close. If commission isn't working for you to feed your family, then heavily advertise yourself as fee-for-service in order to get SOME cashflow going between closings, you know?... or am I still not really understanding how things work in real estate?...
Exactly my point to why I created this thread. It's time to breakaway from the norm. Why do you guys/gals think Redfin is as successful as it is? The advent of the internet and all the information on it is a game changer. The big chain brokers need to go away because they are just greedy middlemen....instead of giving your commissions to them, give them to your clients (the clients are the ones that pay your bills, not the brokerage).
And so it comes out.
Redfin is successful? They have had one profitable month in their existence. Successful in business usually means profits. If you want to be a Redfin shill just come out with it.
In regards to education you mentioned in previous posts, I know many people with degrees I would not let wash my car. I have been taken one company's sales up 300% in 2 years as sales manger. I have owned my own business, was profitable almost immediately and sold the business within 8 months for 6 figures after initial start up costs of under $2000. I was in real estate for 6 years and was managing an office within 2 because I was good at what I do. All without any kind of degree.
All I saw was blanket statements from you starting out and then you qualify them when called on it. You have no clue about the markets in most other states but want everyone to give a rebate.
Head on back to the Redfin forum.
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