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Every time I see a thread like this it's a poignant reminder how little most people know about
1-owning and running a business.
2-real estate.
My intent isn't to offend anyone but it's hard, time consuming, and risky to own any sort of business. There is overhead that the public doesn't usually see. If someone owns a business they have to charge enough to make the risk worthwhile or they go do something else. If the public wants lower commissions they need to reduce the risk.
If you want good agents, then interview multiple agents and quit giving business to the bad agents. If the pool of agents is reduced it would be easier to reduce commissions because of volume.
QFT
I think a lot of the whining about realtors is just p3n1s envy.
Choice.
People CHOOSE to pay agents the rates they seek.
There is fee competition in nearly every US market, including capable agents.
Sort of goofy article with minimal insight.
1. Average commission is 5% or 5.4%, but 6% is "standard?"
Goofy.
2. Blabs the old saw about the average agent closing 7 transactions yearly. Without research or insight.
Goofy, to the point of being a lie.
But, pop goofiness may sell magazines and ads.
Notice that this drivel got shared on CD, as if it is meaningful.
ROUND TRIP COSTS HAVE ZERO TO DO WITH AGENT FEES AND YOU KNOW IT.
SHAME SHAME SHAME FOR PRETENDING THEY DO.
VAT is an unrelated tax and is part of nations tax structure.
Legal fees in the UK are in place of the majority of the closing fees they include title escrow services insurances etc.
and in the UK the agents fee is generally about 1%. when you back out the government taxes people pay a hell of a lot less in the UK to buy and sell property.
india, china, most of the EU all charge about 1%. some charge more like 2 some even a total 3% between the two parties. but USA has the high fees.
You started off good but I've never, ever seen an upfront fee for agents in England. They work the same way as in the US in that regard. They do their photos (and even very nice floor plans) and a variety of other things on their own risk. You pay at the end when your home is sold. That is not a factor to explain why agents cost more in the US and it's simply not correct information. I'm not saying that no agent has ever got his client to pay a 'retainer' up front but that's simply not the way it works.
I had two clients from England tell me the exact opposite so I think we will just have to state that some brokerages charge an upfront fee and others don't.
Most people would have a fit if we went to a fee for service model for buyers' agents. I can see it now. 30 min tour of town, $75. 60 min tour, $125. Each house visited for <30 min, $60. Each house visited for 30 to 60 min, $100. Writing of offer, $350. Asking questions of listing agent, $50 per (includes being available to relay the answer to buyer). Looking up data @$60/hr. Office fees, $100 per hour. Etc.
Listing agents? They potentially do a whole lot less work. Photos $200, enter data into MLS, $200, site visit and suggestions, $200. Evaluating offers? $200-500. Setting up and tracking inspectors, appraisals, specialists? $200. Networking? $0 to $5000 to more if they are actually doing this.
These are all minimums, just making a point that folks don't always know where their money is going.
Are you a realtor? Some of these costs seem excessive. My realtor has an expensive camera and takes her own beautiful photos. Doesn’t the agency pay for the listing on the MLS, at least in part? After all, most agencies receive half of the fee paid by the seller. The sales person doesn’t receive the full amount.
Sales people in fields other than real estate make many sales calls that don’t result in sales and/or commissions. That’s the nature of sales, in any field. It’s a numbers game—the more sales calls made, the better the chance to get a sale.
Are you a realtor? Some of these costs seem excessive. My realtor has an expensive camera and takes her own beautiful photos. Doesn’t the agency pay for the listing on the MLS, at least in part? After all, most agencies receive half of the fee paid by the seller. The sales person doesn’t receive the full amount.
No. Agents have a monthly fee they pay to be a member of the MLS. The brokerage is a member and each individual agent pays a membership fee on top of that.
The fees aren't excessive with the current model because taxes have to come out of that. It isn't an employee hourly rate, it is a business owner hourly rate.
The great realtor rip-off | The Economist basically argues that the reason realtors get paid thousands of dollars per hour is because the whole thing is a cartel (duh!).
Opinions?
No one says you have to use a realtor to buy and sell!
When we sold we used a realtor because I didn’t want to deal with the nonsense! Our realtor brought in a stager and good market knowledge of the area. We had a solid offer the first week listed. To me that’s worth paying a commission as most FSBO listings sit on the market for months and then eventually end up listing with a realtor anyway!
The great realtor rip-off | The Economist basically argues that the reason realtors get paid thousands of dollars per hour is because the whole thing is a cartel (duh!).
Opinions?
it is a massive massive rip off and it is very well managed.
there are roughly 800 agency owned cartels. It is a cartel of cartels.
Each cartel strictly controls pricing, and they can do this because there is almost zero competition. Now before folks claim i am crazy just stop and think. the agents compete amongst themselves, not with external competitors. ie it does not matter which agent you pick because they are all part of the same club, the club gets paid on both sides of the transaction no matter which agent wins your business.
From the individual agents point of view it is highly competitive. and for them it is, the fees are often divided 4 ways and sometimes newer agents end up having to split that with their supervising agent
but key here is that the overall marketplace is not at all competitive. all the money stays inside the club and the club sets prices.
so how does the club maintain pricing power.
local monopoly on listings, is the big clue. but the secret sauce is ensuring no one party can negotiate on more than 50% of the fees. As a seller you absolutely need to offer 3% or you won't get access to the full buyer pool. Buyers are not aware they are paying anything and often can get a taste of the "free money" they have no incentive at all to go off the MLS.
as a homeowner who wants to sell, you either go it alone or pay a minimum of 3% if you want access the buyer pool. and if you are going to end up paying 3% for access you may as well go that 1.5%-2% more and go full MLS. And that is the trap.
To bypass the MLS you have to NOT use their service and NOT sell to a buyer who is already bound to an agent, and that is a much smaller group of poeple. and that much smaller group is made up of very price aware value buyers...
remember many buyers dont have a clue they have bound themselves to an agent nor that they will have to pay a fee even if they find a FSBO home themselves. plus they are told it is scary and complex to sell without agents.
There is much more to maintaining this uncompetitive marketplace and LOBBYING together with ensuring massive numbers of agents is key. NAR out spends almost every other lobby group each year, big oil and of course the granddaddy of the all (the chamber of commerce ) are bigger but NAR and RE spend everywhere.
Having roughly 2 million agents evenly spread around the nation, in every town every area make RE about the most powerful group in the USA. and what they do is block any and all outside competition. When banking tried to wedge their way in the RE lobbies worked from the ground up to ensure they could not.
And worse still the RE lobby industry crafts local, state and national legislation. they work ceaselessly to ensure not a single state breaks free from their death grip, because if even one state managed to end this system denizens of other states would find out and demand the same deal.
It is worth noting that about 80%-90% of the time buyers are the ones who found the home they ended up buying. It used to be the other way around, but these days as a home is listed it instantly appears in your inbox or you can just pursue homes online for hours until you find what you like.
Agents do have a function. some are excellent, but 6% is crazy.
for clarity i am not an agent but i have bought and sold many homes FSBO and MLS .
it is a massive massive rip off and it is very well managed.
there are roughly 800 agency owned cartels. It is a cartel of cartels.
Each cartel strictly controls pricing, and they can do this because there is almost zero competition. Now before folks claim i am crazy just stop and think. the agents compete amongst themselves, not with external competitors. ie it does not matter which agent you pick because they are all part of the same club, the club gets paid on both sides of the transaction no matter which agent wins your business.
From the individual agents point of view it is highly competitive. and for them it is, the fees are often divided 4 ways and sometimes newer agents end up having to split that with their supervising agent
but key here is that the overall marketplace is not at all competitive. all the money stays inside the club and the club sets prices.
so how does the club maintain pricing power.
local monopoly on listings, is the big clue. but the secret sauce is ensuring no one party can negotiate on more than 50% of the fees. As a seller you absolutely need to offer 3% or you won't get access to the full buyer pool. Buyers are not aware they are paying anything and often can get a taste of the "free money" they have no incentive at all to go off the MLS.
as a homeowner who wants to sell, you either go it alone or pay a minimum of 3% if you want access the buyer pool. and if you are going to end up paying 3% for access you may as well go that 1.5%-2% more and go full MLS. And that is the trap.
To bypass the MLS you have to NOT use their service and NOT sell to a buyer who is already bound to an agent, and that is a much smaller group of poeple. and that much smaller group is made up of very price aware value buyers...
remember many buyers dont have a clue they have bound themselves to an agent nor that they will have to pay a fee even if they find a FSBO home themselves. plus they are told it is scary and complex to sell without agents.
There is much more to maintaining this uncompetitive marketplace and LOBBYING together with ensuring massive numbers of agents is key. NAR out spends almost every other lobby group each year, big oil and of course the granddaddy of the all (the chamber of commerce ) are bigger but NAR and RE spend everywhere.
Having roughly 2 million agents evenly spread around the nation, in every town every area make RE about the most powerful group in the USA. and what they do is block any and all outside competition. When banking tried to wedge their way in the RE lobbies worked from the ground up to ensure they could not.
And worse still the RE lobby industry crafts local, state and national legislation. they work ceaselessly to ensure not a single state breaks free from their death grip, because if even one state managed to end this system denizens of other states would find out and demand the same deal.
It is worth noting that about 80%-90% of the time buyers are the ones who found the home they ended up buying. It used to be the other way around, but these days as a home is listed it instantly appears in your inbox or you can just pursue homes online for hours until you find what you like.
Agents do have a function. some are excellent, but 6% is crazy.
for clarity i am not an agent
there's some interesting stories in here, but tell me again - what stops individuals from sticking a For Sale by Owner sign in the yard (hey, you can even list on Zillow, or FSBO.com)?
I had two clients from England tell me the exact opposite so I think we will just have to state that some brokerages charge an upfront fee and others don't.
My guess is that it was a long time ago, they just got a bad deal, or it was in an area with very little or no competition. Or maybe it was some kind of fee based service or it was in exchange for a lower than market rate commission. Or, most likely, confusion that certain reports required by the government (the former Home Information Pack or the Energy Performance Certificate) are paid for by the seller at the time that the home is put on the market. Those are fees directly to an engineer rather than upfront fees that reduce the risk of the agent. I bet that this was what they were talking about. There is no equivalent that I'm aware of in the US market so you can't compare or say that the risk for these reports is born by the agent in the US but not in the UK. Simply not the case.
I can assure you that this is not the way it works today. Trust me, I've seen all the games that they try to play and I've never seen the pay ahead one. Anyway, let's step back...the original assertion was that (real) estate agent fees in England were low because agents take no risk as clients pay upfront retainers. This is simply not correct. Typical in the market today is about 1% commission and no retainers or upfront fees to the agent.
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