'Good agents charge full commissions'
Letters to the Editor
By Inman News, Friday, August 8, 2008.Bookmarking Sites
Re: 'Real estate commissions are negotiable -- if you ask' (Aug. 5)
Dear Editor:
Lower commissions? Not if you want your home to sell. Think it through -- it doesn't make sense.
I agree that a lot of bad agents are starving in a buyer's market and discounting their services, but do you really want a discount agent who can't even stand up to the seller on their commission rates negotiating a contract for you?
Worse yet is most sellers in this down market are willing to pay 3 percent to the buyer's agent but try to get a discount from the listing agent.
THINK ABOUT IT.
If you are starving and you only get paid 1 percent or 2 percent for selling your listing, aren't you going to be tempted to take a buyer from a sign call or your advertising on the home to a different home that is paying 3 percent rather than your listing, which pays 1 percent to 2 percent?
I think we all know the answer. It is sad but true, but it does happen.
I know every good Realtor out there is now mad at me for bringing this up, but someone has to say it.
Good agents charge full commissions and get the job done, (some discount agents may) think it is a numbers game and don't worry about their clients: "just keep listing and something will sell."
The answer is to hire a top listing agent who can show you that he or she is successful even in a buyer's (down) market. Look at the number of listings they carry compared to their sales. You want a good ratio of sales to listings.
A good agent should be charging more in this market because expenses have doubled or tripled and the time on the market is longer, resulting in more advertising and carrying cost. The time to enter a listing has tripled with the advent of the Internet. A good agent should be listing your home on a minimum of four to five different search engines instead of just the local multiple listing service.
Bottom line is that most homes are NOT selling and if you have to sell in this market, you should be hiring the best, not the worst.
Brian Everroad
Associate broker
Realty Executives
Scottsdale, Ariz.
Dear Editor:
At this time, with the high number of homes on the market and obviously not enough buyers, buyers are pure GOLD! As the listing agent, if I bring the buyer why should I reduce my commission at all? Listings are a dime a dozen right now. If we list and sell ... we think we deserve every penny!
Gail Bucker
Associate broker
Sandbridge Realty
Virginia Beach, Va.
***
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Submitted by Ralph M on August 12, 2008 - 6:54am.
Very good point and good article. I will elaborate even more.
Great agents and Brokers earn even "more" (10 - 20%)than the traditional real estate professionals. There is no law that prevents real estate professionals from making money in other ways than listing properties, nor is there a a law preventing real estate professionals from earning 10 - 20% or even more..
Think the above is ludicrous?
It has been done for over 100 yrs, with very little concern from sellers.
Wake up, command respect, and value thy self.
www.aarsteam.com
Submitted by Karim Tahawi on August 12, 2008 - 2:42pm.
Agreed Ralph. Sellers and buyers will pay whatever it takes as long as there is a perceived benefit upon hire and, of course, the delivery of these promised (or implied) benefits.
It is interesting that the industry defends the full 3% commission across the board because it sends a "price signal" to consumers that all REALTORS are the same. If all lawyers were the same price what would we think? Mt view is that we would think there are differences in skills but that on balance their total value is questionable. Is that what we want in the real estate industry?
We know that all Real Estate Agents are not equally skilled so why not offer pricing that rewards skill?
That's why we at ProOffer.com offer clients new commission models that can pay REALTORs or Real Estate Agents more than typical commissions as long as he or she delivers measurable value - like great prices (buying or selling) or quick closes.
Submitted by Ralph M on August 13, 2008 - 9:11am.
Karim,
Geat for you on your new way to earn more money in real estate.
It is always nice to hear there are people looking outside the box.
www.aarsteam.com
Submitted by Commercial Mortgage Loans - Privately Funded - MasterPlan Capital LLC on August 14, 2008 - 11:38am.
“I don’t discount” is a powerful statement from an agent, but only strong, producing agents have the guts to say it.
MasterPlan Capital LLC
Commercial Real Estate Investment Bankers
Commercial Mortgage Loans - Equity Financing - Asset Management
Online: http://www.masterplancapital.com - Quick Answers - Fast Closings - Professional Service.
Submitted by Pacific Bay Group on August 15, 2008 - 11:38am.
While this is true about commissions and market time, why not have sellers pay marketing expenses if:
withdrawn by seller
does not sell during listing period
does not extend for an additional agreed upon period
or if it does not sell with pre-agreed price reductions
I had this clause in a recent contract and the seller would not reduce the price and withdrew the listing after 75 days or so. I billed them and they balked and then I pointed to the clause in the listing agreement. They "forget". The problem initially can be small print and nervousness at the time of signing, so now I am creating a separate agreement page outlining projected marketing expenses and sign off.
I cannot wait for the day ?? when commissions are passe or at least merged with the service fees of the real world e.g lawyers or accountants. Buyers or sellers pay an upfront advance held in escrow which is subtracted if the house or property sells or buyer buys. Otherwise this reserve fund is drawn upon for marketing and time spent on the client up to the amount in the fund. Makes sense, maybe too much sense. Commissions may go down but loss of time and energy will never be an issue anymore.
Jeff Auen Remax Accord Lafayette, CA.
Submitted by Stephen Graham on August 15, 2008 - 11:38am.
If a home seller or buyer is willing to incur some of the work, then a discount agent could make sense.
With that said, some of the arguments that have been presented here cannot be dismissed. The consumer has to interview their agents to get exactly what they are expecting to receive.
Submitted by Sol Sek on August 18, 2008 - 2:48pm.
Karim makes a good point. Let me turn the table a bit.
THINK ABOUT IT.
Buyers can work with multiple agents at a time. They have not one, not two, not three, sometimes four agents sending them listings/showing them houses at any given time. Are they going to want houses that pay the agent 3%?
Real estate agents should be able to earn as little or as much as they want. Who's to say that 6-7% is full commission? Why not 10 or 20%?
Why not $500?
The industry ought to reconsider its commission structure because many agents claim to offer full service at full commission, yet consumers aren't getting full value for the services.
Sooner or later, they'll demand peformance based compensation despite what the agent calls himself. Every business can claim to offer full customer service ( do you know one that doesn't? ) but ONLY performance guarantees delivery.
Sol P. Sek
Forsalebyweb.com, CEO/President
Where You Name Your House Values
Submitted by Marlow Harris on August 18, 2008 - 6:03pm.
Sol P. Sek, your comments underline the importance of having Buyers sign a Buyers Agency Agreement before being shown any properties. As you say "Buyers can work with multiple agents at a time", but in our state we have Buyer Agency, where it behooves agents to get that agreement signed before showing homes.
Submitted by Sol Sek on August 19, 2008 - 6:05am.
Marlow, good point.
There are many things we can do as an industry to clean up. Getting realtors to GET consumers to sign a buyer agency will bring more respect than fighting over what full service means.
How many other industry you know of where multiple professionals provide services to consumers in hope that one will pay? If people could work with five lawyers and pay one, the lawyers would go broke. If 5 denists or 5 doctors were to service the same consumer all five would get paid.
The problem was caused by us. We've got them all confused about what full service means just as we've allowed people to work with 10 buyer agents simultaneously.
THE SIMPLE FACT THAT CONSUMERS FEEL THEY CAN WORK WITH 5 AGENTS AT A TIME SHOULD SCREAM LOUD THAT THEy DON'T KNOW/DON'T CARE/DON'T BELIEVE WHAT FULL SERVICE MEANS. ALL THEY WANT IS RESULT.
Submitted by Denny Bowler on August 19, 2008 - 3:37pm.
I agree with the "pay for performance" approach.
I'm interested in relating the commission % that the Listing Agent earns to the number of days that it takes to get a firm contract on the house. Assume the Seller is okay with a 30-60 closing and the Listing Agent will spend $600-$800 in marketing and related expenses during the first 30 days.Additonally, assume that the initial List Price is reasonable compared to market conditions at the time.
Thoughts on the below:
Days to SP as % Commission
Sell of LP to List. Agent
1-30 100 7%
1-30 97-99 6%
1-30 95-97 5%
30-60 100 7%
30-60 97-99 5.5%
30-60 95-97 4.5%
60-90 100 7.0%
60-90 97-99 5.0%
60-90 95-97 4.5%
This would continue until 90-120 days and 95%-97% would provide a 3.0% commission to the listing Agent. Does anyone use something like this now?
Denny
Submitted by Denny Bowler on August 19, 2008 - 3:39pm.
Sorry...
The column headings are:
Days to Sell
% of Selling Price to List Price
Commission to Listing Agent
Denny
Submitted by Jack Lara on August 20, 2008 - 8:37am.
Dear Editor,
If I understand this article....well then I should be penalized if my listing sells quickly??? So it is okay to be successful as long as it is not too fast!! Following the writer's logic then it would be better for a football team not to score as many points in the first half as possible....... but rather wait till the last quarter to get the offense in gear!!!! Wow....now that makes a lot of sense.
You can always find someone that will discount lower than the next discounter.
Submitted by Sol Sek on August 20, 2008 - 6:37pm.
Regardless of the compensation structure, let's not ignore the diminishing ratio of buyers after the initial 12-15 days.
Sol P. Sek
Forsalebyweb.com, CEO/President
Where You Name Your House Values
Submitted by Steve Simon on August 22, 2008 - 6:03am.
Getting People to commit to representation for a period of time is difficult (the whole world is on the What can you do to excite me for the next 5 minutes trip). This is even more difficult on the Buyer's side. Buyer Agency has been up and down (in Florida) for years without ever gaining a solid foundation in the residential arena.
As an aside, as a licensed real estate license law instructor for well over twenty years I am concerned about how close to the edges of the Sherman-Clayton Anti-trust Act the conversation in this thread is running!
You charge what you want, and I'll charge what I want and good luck to all!
Some of the posters here better actually read their continuing education courses when they take them... Just my thoughts :)
If the answer to a complex problem is very simple, it is usually incomplete...
Steve Simon is the lead instructor at the Steve Simon School of Real Estate www.stevesimon.us
Submitted by Steve Aldrich on August 22, 2008 - 8:30am.
I seem to have missed something, or everyone else is ignoring it.
Brian's letter states:
...If you are starving and you only get paid 1 percent or 2 percent for selling your listing, aren't you going to be tempted to take a buyer from a sign call or your advertising on the home to a different home that is paying 3 percent rather than your listing, which pays 1 percent to 2 percent?...
Aren't there two sides in all transactions?
As the Listing agent, you have a total commission, divided into Buy & Sell sides in the co-broke agreement.
If you have a 1% sell side plus the 3% buy side that equals 4% when you sell your own listing in traditional terms.
4% is more than 3% if you use the old math I learned. So selling your own listing nets more, even if the sell side is at 1%.
All that said, Great service yields Great compensation. The consumer is paying for a service which if articulated well, and actuated equally as well brings them a desired outcome. It is the OUTCOME that they desire, and the value proposition is how a service is priced in their mind.
Steve Aldrich
Submitted by Sol Sek on August 22, 2008 - 5:02pm.
Steve,
You are right on about the listing agent capacity to sell ONLY his listings to increase his own profit.
Per the following statement:
>>>
4% is more than 3% if you use the old math I learned. So selling your own listing nets more, even if the sell side is at 1%.>>>>
Problem is we have something called fiducial representation which means the agent shows all the houses on the market that match what the customer wants.
I don't think everyone else ignored this, only we were talking about "full service" representation, not selective service/listing representation.
Submitted by randy melancon on August 22, 2008 - 10:03pm.
Can't anyone understand "AGENCY & FIDUCIARY DUTIES"? Sol Sek came close but failed to point out human nature of "WHAT'S IN IT FOR ME". FIDUCIARY = BUYER REP'S GET LOWEST PRICE AND SELLER REP'S GET HIGEST PRICE! Having said that, lets address the issue of "COMMISSIONS". Everyone of you are debating commission rates on both sides of a transaction. There are cry babies saying marketing costs and others looking for list low on front and make 3% on sellers next purchsase. Good luck making your next house payment! I don't have one and I will tell you why. I don't charge "commissions". My company and I have professional fees! We are not "a la carte". If your doctor said you need a quadruple by pass and it cost $100,000.00 dollars. You people would say, "Will you do it for $75,000.00?" My answer would be sure; what bad valve that will kill you do you want me to leave in you? Think on that one. Commissions are negotiable but my "Professional Fees" are not! Try the doctor analogy in your next "commission" request! Charge professional fees not commissions; Remember we are professionals and let your clients know it!Randy Melancon-Results Guaranteed Realtywww.resultsguaranteedrealty.com
Submitted by Sol Sek on August 23, 2008 - 9:45pm.
Randy,
Professional fees, admin fees, service charge fees, commissions, flat fee, low fee, whatever stigma you want to call is compensation offered for services provided by the agency.
The problem we face is that there is no standard definition of full service. Additionally, full service from 10 years ago might no longer be effective in today's context.
I see with traditional models ( this includes traditional fixed commission and traditional flat fee companies ) is that there's no incentives for performance. There's absolutely no standardization of quality of service.
Case in point, with traditional "full service" there's really no incentives for agents to work hard/perform because the compensation is contingent on a successful sale. That's great! Problem is, after the initial excitement or upon the diminishing rate of buyers ( after 12-15 days ), many agents give up/become tired and move on to new listings. The only "full service" realized is when a sale actually takes place which is often by chance through mls or web. So the contignent fee/full service/traditional full commission has its inherent weakness.
Similarly traditional flat fee companies on the other hand have no incentives to provide great service. They collect their fees and wait for buyers to come. Only upon buyers finding the property do the agency move on towards closing.
So if full service implies getting a deal closed then I believe all models provide full service.
My concern with both models is that neither is performance based. There's no incentives for the agent to maximize output after the initial excitement phase. Please advise if you see things differently.
There are always exceptions to the assumption but I think we can agree that today's compensation models lack performance drivers.
Sol P. Sek
Forsalebyweb.com, CEO/Founder
Where You Name Your House Values!
Submitted by Sol Sek on August 23, 2008 - 10:12pm.
In theory it makes sense ..the more agents get paid the harder they work. This is the traditional full service/full commission theory.
But in reality, after 12-15 days agents get lazy/tired because they work on contingency. They NEED to focus on getting new listings.
The only thing left in "full service" is waiting for sellers to discount price to align with buyers' expections.
Everything else is unnecessary redundancy which has little/no effect on getting properties sold for the highest price. It just makes the agent look busy so as to support the idea of a full service.
I am open to clarifications of my assumptions.
Sol P. Sek
Forsalebyweb.com, CEO/Founder
Where You Name Your House Values!