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Who works harder for you? The person who gets paid regardless (salary), or the person that only gets paid if they keep you happy and find a deal you are happy enough to sign off on and hopes to get future biz from you (commission)? After all, that is the point of this whole thread, is it not?
Think about the typical agent that shows you 20 homes. In this crazy economy, you make offers on 8 of them. How many hours of their time have they spent on you? And at this point, they have earned NOTHING.
Talk about trust. Realtors trust that you won't grow weary of the process and just stop house hunting. Or work hard to find the right neighborhood only to have you jump to another realtor.
You bring up a good point. The solution, however, is not to say Redfin's model is flawed. A good realtor should be compensated at an hourly rate for their time during the search.
Good agents will find people willing to pay for their time and will command higher rates. Unproven or less qualified agents will not.
Buyers will be more careful with their search so nobody's time is wasted.
Redfin has a good model, I think the agents here take it a bit too personal the fact there are still too many agents (many of which suck).
Tricky: If people would pay more for good agents then 77% would not hire the first agent they met. Whether it's 6% commission, buyer representation, whatever, if people don't hire wisely now why do you think that hourly rates would change that?
Buyers would end up with less guidance than they currently get now. Don't know if that's a good or bad thing. How would you bill hourly? If you call me with a question, does that count. If I go really slow on purpose so I can bill you longer...you get the point.
Redfin has a model that works for some buyers but so far has not proven to be a good business plan. Many of the "discounters" end up struggling to stay in business over time.
Gonna paste this for you:Who works harder for you? The person who gets paid regardless (salary), or the person that only gets paid if they keep you happy and find a deal you are happy enough to sign off on and hopes to get future biz from you (commission)? After all, that is the point of this whole thread, is it not?
Reputation is everything. Good realtors will do well on reputation alone, the same way lawyers, accountants, software engineers, mechanics, and countless other service employees do.
It is a not a new phenomenon that people are more careful about a decision when they are personally invested or have to pay for the service. With the internet, there should not be a need to see 20+ homes, and if there is, that is ok the consumer pays for it.
On the issue of salary vs. Commission there is no evidence to suggest for real estate a commissioned agent will work smarter or better than a salaried agent. I will defer to freakanomics on this for their study cited that buyers and sellers end up losing out in the commission model.
In my business (software) commission and quotas for sales people result in serious problems as sales will tell customers what they want to hear to close a sale, resulting in failure as the customer learns over time they bought something which didn't meet their needs. It is such a problem many companies have to implement clawbacks, pay most sales comp in salary, or defer commission for a while.
Reputation is everything. Good realtors will do well on reputation alone, the same way lawyers, accountants, software engineers, mechanics, and countless other service employees do.
It is a not a new phenomenon that people are more careful about a decision when they are personally invested or have to pay for the service. With the internet, there should not be a need to see 20+ homes, and if there is, that is ok the consumer pays for it.
On the issue of salary vs. Commission there is no evidence to suggest for real estate a commissioned agent will work smarter or better than a salaried agent. I will defer to freakanomics on this for their study cited that buyers and sellers end up losing out in the commission model.
In my business (software) commission and quotas for sales people result in serious problems as sales will tell customers what they want to hear to close a sale, resulting in failure as the customer learns over time they bought something which didn't meet their needs. It is such a problem many companies have to implement clawbacks, pay most sales comp in salary, or defer commission for a while.
RE may be special but it is no different.
Real estate practice is much different.
It is not a subtle nuance that a good agent's sales job is completed when their services are formally engaged by the client.
Losers in real estate, those who "suck," often mindlessly push houses.
Winners consult with integrity, after successfully selling their services.
A great agent understands their role as a fiduciary to the client.
It is smart of the client to put the agent into that role, and to elevate themselves from "customer" to "client."
In software sales do you act as a fiduciary for your client, for yourself, or for your employer?
Do you actually have an agent/client relationship, or a salesperson/customer relationship?
Is Freaknomics credible?
How often do you have a software customer say, "I don't know how much you get from this transaction, but you aren't making enough?"
If it doesn't ever happen, where does the shortfall in service occur?
It is not a subtle nuance that a good agent's sales job is completed when their services are formally engaged by the client.
Losers in real estate, those who "suck," often mindlessly push houses.
Winners consult with integrity, after successfully selling their services.
A great agent understands their role as a fiduciary to the client.
It is smart of the client to put the agent into that role, and to elevate themselves from "customer" to "client."
In software sales do you act as a fiduciary for your client, for yourself, or for your employer?
Do you actually have an agent/client relationship, or a salesperson/customer relationship?
Is Freaknomics credible?
How often do you have a software customer say, "I don't know how much you get from this transaction, but you aren't making enough?"
If it doesn't ever happen, where does the shortfall in service occur?
The goal of all sales should be to cultivate a relationship. The comp structure may be slightly different in software sales, but the goal is to build that relationship as sales people tend to change companies and want to be able to call on those clients again. Or if they stay at their org, they want to be able to have a reference for other potential customers.
I think you guys are blinded by your bias. Realtors are the only service industry position which I know of that feel they add some special service which can't be reproduced. This is going to kill your industry. You should be adjusting with the change to the markets and the changes in technology if you want to remain a part of the discussion. You are lucky to have such a powerful and effective lobby, otherwise the eulogy on the full service realtor and 6% commission structure would've been written already.
I happen to think I'm excellent at my job. I command what I feel is a good rate for my job (for my employer, which my clients pay), and I make an excellent salary. But I would be a fool to say I couldn't be replaced tomorrow by someone who costs half as much as I do (like a talented engineer fresh out of college).
Freakanomics just cited studies and research. They are credible. If you don't believe so, here's another study from Feb 2008:
NBER Working Paper No. 13796*
Issued in February 2008
NBER Program(s): PE
Sales commissions for residential real estate brokers historically average nearly six percent of a home's closing price. Do brokers add sufficient value to justify those commissions? We address this question using a unique data set pertaining to sales of faculty and staff homes on the Stanford University campus. We find no evidence that the use of a broker leads to higher average selling prices, or that it significantly alters average initial asking prices. However, those who use brokers sell their houses more quickly.
The goal of all sales should be to cultivate a relationship. The comp structure may be slightly different in software sales, but the goal is to build that relationship as sales people tend to change companies and want to be able to call on those clients again. Or if they stay at their org, they want to be able to have a reference for other potential customers.
I think you guys are blinded by your bias. Realtors are the only service industry position which I know of that feel they add some special service which can't be reproduced. This is going to kill your industry. You should be adjusting with the change to the markets and the changes in technology if you want to remain a part of the discussion. You are lucky to have such a powerful and effective lobby, otherwise the eulogy on the full service realtor and 6% commission structure would've been written already.
I happen to think I'm excellent at my job. I command what I feel is a good rate for my job (for my employer, which my clients pay), and I make an excellent salary. But I would be a fool to say I couldn't be replaced tomorrow by someone who costs half as much as I do (like a talented engineer fresh out of college).
Freakanomics just cited studies and research. They are credible. If you don't believe so, here's another study from Feb 2008:
NBER Working Paper No. 13796*
Issued in February 2008
NBER Program(s): PE
Sales commissions for residential real estate brokers historically average nearly six percent of a home's closing price. Do brokers add sufficient value to justify those commissions? We address this question using a unique data set pertaining to sales of faculty and staff homes on the Stanford University campus. We find no evidence that the use of a broker leads to higher average selling prices, or that it significantly alters average initial asking prices. However, those who use brokers sell their houses more quickly.
Do you need me to break down that study for you or do you already know the flaws in in yet try to use it to prove a point anyway?
What happens when a university loses a professor or other staff member? They generally replace them. So you have a built in flow of buyers for the sellers.
I do like how they say "We address this question using a unique data set..."
Yes, it is very unique and does not give a true perspective of the market as a whole. It is in fact worthless.
As far as the technology killing our market, I was hearing that 6-7 years ago and the one thing all that say that fail to recognize is that we utilize that same technology to further our business model.
Who works harder for you? The person who gets paid regardless (salary), or the person that only gets paid if they keep you happy and find a deal you are happy enough to sign off on and hopes to get future biz from you (commission)? After all, that is the point of this whole thread, is it not?
I am salaried and work hard regardless of a bonus. I frequently work hours where I am not compensated. I want a happy client, a happy boss, and a repeat client. And I really like my job, so I make an effort to keep it!
If a realtor does a good job lining up a home the first time - how much "repeat" business do they really get?
Quote:
Originally Posted by trickymost
You bring up a good point. The solution, however, is not to say Redfin's model is flawed. . . .
Redfin has a good model, I think the agents here take it a bit too personal the fact there are still too many agents (many of which suck).
I agree. And there are many good agents out there too. Buyers/sellers need to do their homework and find a good agent.
NBER Working Paper No. 13796*
Issued in February 2008
NBER Program(s): PE
Sales commissions for residential real estate brokers historically average nearly six percent of a home's closing price. Do brokers add sufficient value to justify those commissions? We address this question using a unique data set pertaining to sales of faculty and staff homes on the Stanford University campus. We find no evidence that the use of a broker leads to higher average selling prices, or that it significantly alters average initial asking prices. However, those who use brokers sell their houses more quickly.
This is not a new article has been discussed here, before. The study was limited to selected homes being sold by selected faculty in the greater San Diego area, in 2007 which was and remains in a declining market enviornment.
It comes as no surprise that similar homes sell in similar areas, at similar timeframes sell for similar amounts. Boats in a harbor rise and fall with the tide.
In declining markets, time is the seller's enemy. The article concludes that properties listed with full service agents sold quicker which means for more money.
Given the overall market in San Diego, that year, a difference of just 6 months time made it more likely that the seller of a property listed/sold with a full service agent put more net proceeds into his pocket than if the property took an additional 6 months to sell.
The buyer rebate model, the topic of this thread, is totally dependent upon sellers offering full service commissions to the buyer's broker. Without it, the rebate model poofs.
The goal of all sales should be to cultivate a relationship. The comp structure may be slightly different in software sales, but the goal is to build that relationship as sales people tend to change companies and want to be able to call on those clients again. Or if they stay at their org, they want to be able to have a reference for other potential customers.
I think you guys are blinded by your bias. Realtors are the only service industry position which I know of that feel they add some special service which can't be reproduced. This is going to kill your industry. You should be adjusting with the change to the markets and the changes in technology if you want to remain a part of the discussion. You are lucky to have such a powerful and effective lobby, otherwise the eulogy on the full service realtor and 6% commission structure would've been written already.
I happen to think I'm excellent at my job. I command what I feel is a good rate for my job (for my employer, which my clients pay), and I make an excellent salary. But I would be a fool to say I couldn't be replaced tomorrow by someone who costs half as much as I do (like a talented engineer fresh out of college).
Freakanomics just cited studies and research. They are credible. If you don't believe so, here's another study from Feb 2008:
NBER Working Paper No. 13796*
Issued in February 2008
NBER Program(s): PE
Sales commissions for residential real estate brokers historically average nearly six percent of a home's closing price. Do brokers add sufficient value to justify those commissions? We address this question using a unique data set pertaining to sales of faculty and staff homes on the Stanford University campus. We find no evidence that the use of a broker leads to higher average selling prices, or that it significantly alters average initial asking prices. However, those who use brokers sell their houses more quickly.
So, as I work my butt off for clients, I should be dismayed that in a limited, nearly closed, local market 2500 miles away NBER was able to determine that agents add little value?
Maybe I won't conclude that.
The need for "researchers" to overstate average commissions and to support a desired point undermines the validity of the point they set out to confirm.
The Brookings Institute also has a study, that is voided immediately by purposely arbitrarily inflating commissions to support a preconceived point. Of course, that is predictable coming from Brookings.
Average commission in the US is about 5.1%, which does not paint as wide a disparity as many "researchers" set out to confirm.
What is it that makes Freakonomics credible?
It isn't very hard to find counter-arguments on line. Of course, unfortunately, that means one has to join with the Paul Krugmans and Washington Posts of the world. Hmmmm that alone may be a vote for Freakonomic credibility.....
It is unfortunate that you devalue your professional experience and track record by thinking it would be easy for a newbie to replace you.
OTOH, Newbies and experienced agents come to me for advice. Regularly. And I go to them when I think I can learn.
I do not devalue the experiences I have had that I tap regularly to help newbies, or to help nervous clients through transactions.
There is a broad discussion over several threads here wherein various agents identify preferred business models. They are easy to find.
But, buyers strongly prefer to use a model that allows them to finance commission fees, without paying retainers and hourly bills for transactions that do not close.
Middle Aged Mom has come across several times as such. Silverfall indicates an alternative business model.
But both of them know that at the end of the transaction, the client has to be satisfied. And in current conditions, that means a contingent on closing fee, buried in the price of the property.
Bottom line... Admitting that a great many agents are lost in the past, what in the world makes you believe that a great many real estate agents are not adapting continually?
Last edited by MikeJaquish; 12-23-2009 at 10:53 AM..
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