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It's been in countless threads before so I"ll keep it quick.
First off split that 5% in half, 90% of the time there is a buyer's agent to split everything with.
Expertise and experience alone is enough justification, add on to that the convenience of someone else do the work for you, saving time and money. And it's a simple decision for most.
Touching on what MikeJaquish posted, we are running a business, we are not hourly employee's paid by you to market your home. You don't usually hear Agents say this, but commissions are where they need to be to make up for that other house that we spent $XXXX marketing but never sold (or the seller "changed their mind"), and the $XXXX spent working with those buyers that never bought. We are running a commission only business where we not only don't get paid unless there is a definite result, we actually SPEND a whole lot of money with no promise of getting paid....ever! For the consumer hiring an agent is one of the best insurances/guarantee's out there, let someone else spend money to sell YOUR house, if it doesn't sell, no skin off your back, and if it does, your happy because you obviously agreed to sell the house!
How do you justify having your car professionally detailed? the supplies used for your 1 car are barely a few bucks, and can be done in under an hour by someone with 0 education.
How do you justify buying that computer bundle from the store? You know they only paid a fraction of what you'll be paying to buy it. (think overhead, convenience, store theft, insurance..etc)
How do you justify using an accountant to file your taxes? Heck they can just file things online now so there's not even a supply cost of paper!
How do you justify a $2000 doctor bill for a few stiches?
Last I checked, no one was forced to use an agent to sell their home, nor are they forced to use any of the services exampled, there are always DIY alternatives. People do it because they see value in the service, not because the cost to provide the service is close to what is charged.
If someone asks me to justify why I charge what I charge, I will happily discuss in depth why I'm worth what I'm worth. They actually, are the one's that have to justify my comission.
Split the commission in half, and then half again in some cases, right? Doesn't the agent give the broker/owner/agency some of their commission, too? I know it depends on which agency, but a lot do that, I think.
JBrown- It sounds like maybe getting an agent to sell your home is not the route for you. I am not a broker/agent... I am merely a SELLER that just sold recently.
Our agent was terrific. She had a referral fee on top of everything else too that she had to pay for! She marketed our house and got it under contract within 40 days. In this market-we were thrilled. We didn't even take a loss on the house.
You have to realize that no one can force you to use an agent. We used an agent because of the expertise in real estate. I am sure she was behind the scenes working on selling our house.
Have you ever tried working in real estate? Maybe you should become and agent since you feel that they make a lot of money. I bet you will get lots of tips from agents on here that will help you get your foot in the door. Soon you can be "rolling" in the dough too.
I am surprised more people aren't in the business because it sounds like according to you that they make HUGE amounts of money for doing not a whole lot of work.
It has been mentioned before, but the listing agent does not keep the entire 5%, it is usually spilt between the listing and selling agent, which would be 2.5% commission for each agent, which in your scenario would be $13,750, which depending on your commission split with your brokerage would differ, mine would be $8250, divide that by your 26 week scenario would be $7.93 per hour...anymore questions?
While we are discussing people with basic math challenges from "public" schools, you might want to take a refresher course on english and look up the spelling of the word "opportunity"
I thought about taking the high road on this one as I believe Mike is right and you are just trying to argue for argument's sake and be obnoxious, but my temper flared for a minute with the condescending "math" comment.
Every time I see the title of this thread it irks me. So I'm going to chime in finally. No, I'm not an agent or in the business.
Have no idea about costs or anything else, but right off the bat, it strikes me that being a real esate agent is much like being a professional athlete. If you look at the cost "per" it makes no sense at all. But if you spread it out over years-- including the ones, like now, when many agents aren't making enough to feed their families-- it seems to even out a bit.
My market has homes that have been sitting at the same price for over a year. Or been reduced over and over for over a year. That means for each house that hasn't sold, the agent has gone unpaid for over a year. And what of the sellers that decide to give up? A years worth of work with no commission. Ever.
I'm sure there are arguments to be made for slightly higher or lower commissions. But your math seems simplistic, especially in the face of what an IMPOSSIBLE job "real estate agent" must be right now.
And yes, any one working 40 hours a week digging ditches "deserves" to make more money than those hucking basketballs or sitting behind desks. But it doesn't work that way.
JBrown, agents don't need to justify their commissions to you. Do you ask everyone (plumbers, lawyers, gardners, etc.) for the same justification? It is pretty simple: if you think someone is charging you too much, don't use that person. I am not a realtor, but I am an independent contractor in my field. So I understand what is involved. Obviously you have no clue. But in the end it doesn't matter. The top agents will continue to get the commissions they ask for because enough people realize what it is that they do and are willing to pay for that service, and bad agents will find that they can't make ends meet no matter what they do in this market (and will therefore quit). The person who thinks all agents are equal and doesn't work at finding a good agent, and then gets angry when the agent seems to have overcharged has only himself to blame.
Honestly, I feel bad for all good agents out there, who often are asked to justify their very existence. I just had to let you guys know not everyone is against you.
It is difficult to compare salaried or hourly employees to independent contractors. There are many hidden personnel costs that many W-4 employees do not understand. Almost none of those costs are covered for an agent who is typically an independent contractor.
I think that that difficulty in accurate comparison is indicated by the huge holes in your limited analysis.
To help build the example more accurately, I thought a few considerations might be included, although some may vary by local custom or firm policy.
Who pays the Self-employment tax that the hourly employee dodges?
Or is this 7.65% of net adjusted revenue a disallowed expense in this example?
Who pays the Buyers' Agent?
Is this 50%+/- ($13,750+/-) of the gross commission a disallowed expense in this example?
Who pays for the measurement, floor plan, virtual tour, professional photography?
Or are these costs disallowed expenses in this example?
Who pays the holidays, vacations, sick pay, retirement plan, typical of W-4 work that the independent contractor must pay from revenue?
Or are these items disallowed expenses in this example?
Who pays for workers' compensation, disability insurance, or unemployment compensation insurance (Unemployment insurance ain't gonna happen) for the agent?
Or would these be disallowed expenses in this example?
Who pays cell phone, computer usage, internet access, continuing education, and other costs of doing business for the agent, costs which do not compare to most salary or hourly W-4 employees?
Or would these be disallowed expenses in this example?
Who pays association dues and assessments and desk fees for the agent?
Or would these be disallowed expenses in this example?
I probably missed a few things, because it always seems like there is another hand extended, but these items may help flesh out the question for better analysis.
Jeeze, I just remembered E&O insurance.
Might make that 40 hour week, with premium for overtime or bonuses for extra effort start to compare pretty well.
No BS.
In the houses I have sold over here, the agent took the pics them self or I presented them since many can't make very good pics, the floorplan came from the builder and the measurement were in that too, the virtual tour is $ 200.- that realtors can buy and use it for all their properties so spread out over a couple of properties means not too much costs.
That is the only part I'm making a comment on.
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