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Since property prices have doubled since '98-'99 in most of the country and more in others why didn't/hasn't the commission %age come down? Have broker/agent expenses doubled+ in that time frame? Or is all the extra going to profit/commission?
For example: a $150k house in 1998 now has a value of $300k
Do you/they really need to make $18,000 per transaction plus an administrative fee?
Since inflation has been relatively low during this time frame it is hard to believe that expenses have doubled like commissions. I am all for some deserved raises, but this seems excessive. I think it definitely gets more people thinking FSBO.
The $18,000 gets split by 4 people, so the agent does not get $18K..
$4,500 for the sellers broker
$4,500 for the sellers agent
$4,500 for the buyers broker
$4,500 for the buyers agent.
It is a difficult market right now as we all know and I think the frustration of not being able to sell a home is getting the best of some. There are more than a few posts bashing RE agents/brokers on CD, and if I were one, would choose to defend my profession as well.
Regarding 6% commissions... I do not think it is unreasonable when "full service" is offered and DELIVERED, especially in a slow market. We were promised a virtual tour, to be contacted within a few hours of showings to let us know how it went, regular updates on progress and interest, as well as having our questions/concerns addressed w/in a reasonable time frame. Nothing out of the ordinary, yet not delivered in our case. Our agent hasn't done any advertising, open houses, etc. beyond MLS and the company website.
So, I posted on another thread that I thought it was ridiculous to expect 6% and just wait for buyers to contact her. I hope I did not offend all agents with that remark, as it wasn't directed at all agents... just ours. I simply want to lower the price of our house, sell it, be done with it and will gladly pay the commission when that finally happens. I just wish our agent's side of the agreement was being honored as we have honored ours.
Best of luck to all in this market and I do sincerely appreciate the advise of more than one agent on the forum.
It's unfortunate that you contracted with an agent that is not doing the job. Agents must work hard to deliver what they promise -- and more.
The best policy is to under promise and over deliver.
The truly professional agents understand that and will always give 110% to their clients.
I'm dealing with a sale where the buyer and seller both live out of town. The home inspector was very nit picking and caused some panic with my buyer. I'm a dual agent in this sale and have to tread the middle ground very carefully. To make this a very short story, I told my seller that I would go buy the parts and make some of these corrections myself.
I'm a bit of a handy man and these were simple repairs, but it getting to be a potential deal killer. A couple were not even repairs, but an error on the part of the inspector.
I knew that my seller wanted to close this deal and I knew that my buyer wanted the house. So I went and bought the parts and made the repairs, and now everyone is happy. The seller reimbursed me for the parts, but it wasn't necessary. They were under $100.
There was also a termite issue and I met the termite service technician at the premises. They have a termite trap system in the ground, but it's not 100% effective. During the remodeling of the property, where I acted as the contractor (at no extra fee) I had taken a lot of photos. When we spotted the termite tube, I went back and found that I had a photo of that area and there was no tube at that time.
That gave an approximate date of the tube's construction which means it was recent and most likely not sufficient time for damage.
I took photos of the termite technician treating the area, and signed for the service call (price included in the annual termite service fee). Then I was able to report to the buyer and the seller what the technician reported.
This is full service plus the extra 10% that I give. That's what full service is all about.
It's too bad that all agents don't understand this, and it is service that discounters cannot afford to provide. If I were only getting 5% (which is actially 2% -- or a 33% cut in pay) then I could not take the time to do the things that I was able to do to get this house on the market and get a contract within 30 days of going on market.
When I took the listing it was drastically over priced, and drastically in need of redecorating and general clean up. The yard was over grown and it had smoke filled carpets.
I told the owner what was needed and she approved a $10,000 budget for redecorating. I kept it off the market to do the redecorating so it would go back on fresh with zero days on market. I did a lot of work in hiring vendors to do the work, being there to supervise them and getting them paid.
And it paid off. The owers got it sold, and I "earned" my commission, and both the buyer and the seller will be happy to refer me to anyone.
The $18,000 gets split by 4 people, so the agent does not get $18K..
$4,500 for the sellers broker
$4,500 for the sellers agent
$4,500 for the buyers broker
$4,500 for the buyers agent.
This is the problem with commission discussion on a national forum. Too often local customs are passed off as broad fact.
The illustration above is actually quite inaccurate in a great many circumstances.
Captain Bill...Well if you did business in ME., I would be pleased to have you represent us. That is definitely above and beyond the call of duty and I am sure it makes it all the worse when other agents give the profession a bad name. This is the first home we purchased, in a state where we didn't know anyone, and we made a couple of mistakes... we will not make those mistakes again!
Last edited by tlb71; 12-20-2007 at 06:44 PM..
Reason: add name
Maybe some consider a post from me as "argumentative" or consider me as a "troll." I hope not but I really don't know. What I do know is that holding a difference of opinion and supporting that opinion is discussion and that it may be a reasonable position to hold, even though 180 degrees different than other people. That doesn't make the person who posts a "troll."
So . . . Here's what I know. 6% commissions were the norm in my area when the average home price was only in the 200's (Calif market). Five years later, the average price was approaching the 500's. That's a 150% increase or an increase in pay of 30% per year. Yet, the cost of living or inflation didn't rise 150% over that time and I'd have to assume that the costs of conducting business didn't rise that much, either. At least nobody has shown me that the real costs of doing business has increased that much.
Even when it's considered that the average comission has declined to 5-point-something percent, it still results in a number that far exceeds the inflation rate. Let's look at the broad numbers.
For a 6% total cost of selling a 200K house, the commission equals 12K. For a low number of 5% to sell the same house at 500K house five years later, which is just below the current average, the commission equals 25K. That's a 108% increase in the amount a seller has to pay. It also amounts to a 21% annual increase in commissions to the agent.
So, where's the extra value provided to the seller, this year vs. 5 years ago, or the extra expense born by the industry over that time? I think inflation maybe averaged a high of 5% per year (avg is less but letme figure high), so that would take care of 25% leaving a total increase in net pay to the agent of 83% (108-25) or an annual increase of almost 17% beyond inflation. I just don't see it.
If the answer is that there's been a dramtic increase in the number of agents, without an increase in the volume of sales, then the problem lies with the industry hiring too many people. Yet, the owner/brokers don't bear the burden of their hiring practices. It's born by the sellers in the increased expenses beyond the rate of inflation, just to keep the additional agents employed.
I will be the first to admit that I don't have access to the numbers showing the total number of active agents over that period, and the rate of sales and whether it went up, down, or remained the same. However as a non-industry person who uses the services of the industry, I need to look at the bottom line costs to me. What I see is that the increased costs aren't supported by the cost-of-living indexes or the rate of inflation.
What it comes down to is that I sure would have like to have received 17%, 21%, or 30% raises for each of those years. It didn't work that way for me, but I can still dream.
Anyway, that's my take. It's also why I still hold that standardized 6% commissions are not fair to the consumer . . . today.
I market my homes on a variety of websites, including the "showcase home" feature on realtor.com. I do virtual tours via tourfactory and I advertise on my own site, of course, and in print via the local paper, Homes and Land Magazine, plus I provide brochures for each listing and I use an 800 service for people to call in and receive recorded messages about the home. I pre-qualify every buyer. They call me, not the homeowner. I will meet buyers at a property if the homeowner is not able. After all, not every property works for every buyer. What do you do?
In 200 years Realtors commissions have declined steadily. Inflation and the cost of doing business have increased as have liability. There is and never has been a set fee.
The Real Estate process is a legal process. We stress the importance of the people side of the business, the legal side is even more critical.
The vast majority of the population does not read nor has any wish to read or understand contracts nor financial documents - if they did, they could tell you how the interest on their credit cards statement is calculated, and what the most recent changes are.
All jobs should be commission based - 100% commission.
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That is definitely above and beyond the call of duty and I am sure it makes it all the worse when other agents give the profession a bad name. This is the first home we purchased, in a state where we didn't know anyone, and we made a couple of mistakes... we will not make those mistakes again!
