Is The Realtor Commission Model Still Unfair to Consumers?

November 14, 2009
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flatfee 300x300 Is The Realtor Commission Model Still Unfair to Consumers?

The Infamous SIX Percent Realtor Commission

So after several years of disruption within the real estate industry, a heated bubble, and now a flaccid economy, we’re wondering if agents are actually doing less work? If it’s a fact that agents are doing less work, have commissions also gotten smaller?

We ask this question not because we have the answer but because it appears that not much has changed since the Realtor’s Six Percent 60 Minutes article except that what was once disruptive is now Traditional, and what was then a traditional model seems more accepting of alternative of pricing models, and unbundled services- is this capitulation from the full service guard?

Are consumers really doing more work? Are consumers really getting better information from the internet today than five years ago? Are online forums doing a better job of servicing the consumer than Realtors? Better yet, are consumers actually getting better service because agents use social media and have nicer marketing?



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We have to wonder, because even in a down cycle, things are looking up for Redfin, as they just landed another $10 Million in funding, and Flat Fee Realty reports they’ve listed 649 units this year (2009).

With a pitch like this, it’s no wonder

(from Flat Fee Realty…)
“Now you can list your property on the local MLS for as low as $299* or try listing your home only on Realtor.com for just $199 – You Choose! Either way you’ll save the typical 3% listing commission. Why hire a 6% agent when you can do some of the work “By Owner” and save your hard earned equity.”

Is the paradigm eroding? Are traditional full service agents overpaid? Can anyone defend a Six Percent commission anymore? Is full service real estate truly negotiable?

As AG's Founder, Director & Publisher: I've dedicated the past two decades to focusing small, medium and large businesses on consumerism, consumer needs, trends, and what consumers find valuable within the user experience. I founded AG in hopes of furthering your business growth. I hope you enjoy AG, and that you will reach out if I can help your company or association communicate it's value.


  • http://BuyinginToronto.ca David Pylyp

    You are absolutely right! Real Estate has become a commodity.
    We should have order takers at store front corners owned by nbanks to list and sell house between 9:30 Am and 4:30 PM Monday to Friday.

    OH Tried that DIdn’t work huh.

    I guess experience and expanations and more government intervention for loans, appraisals, inspections, title issues, pernmits, zoning, liability on disclosures, allows me to work party time while I service my bus driving career.

    just because you don’t use the tools in my toolbox doesn’t mean that I don’t have them.

    We are seeing what is happening to small business when we focus only on the fional price of the service or product.

    Who would have predicted just two years ago that Chrysler and GM would be in trouble because I could buy it cheaper elsewhere.

    FSBO and Flat fee companies fit a certain market segment; that is tolerant when showing, not time sensitive, knowledgeable about the market and skilled to handle a negotiation.

    Radio has not died because we have TV. Yes it has changed, So has the MLS

    How will you find me?
    youtube.com/watch?v=P3axY-Mk8GI

    David Pylyp
    Live Laugh Play in Toronto

    • http://www.forsalebylinda.com Linda Miller

      I loved your video on Youtube! I have forwarded it to a few realtors that I know as I thought it was so good!

      Have a wonderful week!
      Linda

  • http://www.erichempler.com Eric Hempler

    I don’t think the Realtor used on 60 Minutes to argue for the 6% was a good pick. I would have turned around and asked the reporter a few questions. What if an agent only had one sale the entire year? Is that a fair wage? What if the agent had about one sale a month, but only made about $30,000 in commissions. Is that fair? Let’s see how much is actually made off of one house. Income 6% Commission = X, The expenses and labor put into getting that commission is Y + Y + Y + Y = Total Y. X – Y – Taxes = Z. How much money is actually made off of one sale? A Realtor is essentially a business. Isn’t it fair for that business to continue to build more business? What about the experience the Realtor has dealing with contracts and offers. Do you really feel the average consumer is comfortable and understands the offers being made or even how to make an offer? Do both parties involved truly understand the outcome when running the numbers? How do we know for sure the consumer isn’t being taken for a ride? A Realtor can help with all of this.

    It’s tough to say if consumers are doing more work, but I would like to think if you’re going to go it alone they do their research. Any information online is questionable. Look at Zillow. All you have to do is look at the prices around the neighborhood and realize…this can’t be right. I’ve been on several different forums and have rarely been able to get an answer to the question I’m asking. So no, I don’t think consumers are getting all the answers they need on forums. People have a tendency to read into things and answer something unrelated. Social Media and Marketing can’t provide service. Interacting with your customer or client is what provides service. Whether that is through E-mail or phone.

    As for people that use Listing Services I hope you do your home work. You could run into a lot of problems or even be taken for a ride if you don’t.

  • http://flatfeepro.com Fred Romano

    @Eric If an agent is only doing one deal a year, they should find another career, and if they only do one a month, that’s their problem. When I was doing full service, I did about 2-4 deals a month. Don’t cry “poor me” now to the seller – go get more business.

    Many of my clients have done their homework, and many have already gone through time with a traditional broker with no luck selling. They saw what they did in the way of marketing and decided to go with us and save money, since we give them the same online exposure for a small fraction of the cost.

    • http://www.erichempler.com erichempler

      Was just an example to try to prove a point. If the broker can’t get it sold then it’s priced wrong. In the end it’s price that sells the home.

    • http://www.panamaflatfeerealty.com Sammy Wolcovinsky

      Hello!

      You are 100% right.

      I am the owner of a flat fee realty in the republic of panama. We only sell condos in panama city.

      Peolple love ou business models and we turned positive in 1 year.

      Of course like any other company you have to be careful with the expenses of the company but its a proven model (look at redfin).

      Best,

      Sammy Wolcovinsky
      panamaflatfeerealty.com
      Panama Real Estate for a fee!

  • http://www.erichempler.com Eric Hempler

    Fred,
    Was just an example to try to prove a point. If the broker can’t get it sold then it’s priced wrong. In the end it’s price that sells the home.

  • http://flatfeepro.com Fred Romano

    Eric – How can you “prove a point” with that example? Seriously now if all agents simply lowered the typical commission structure they might get more business. Since that is not likely to happen anytime in the near future, my business model with thrive.

    And yes it’s all about the price, condition, location… and online exposure. That’s exactly why folks use us and skip the 6%er’s.

    • http://www.erichempler.com erichempler

      You’re reading to much in to it.

  • http://mikebowler.com Mike Bowler Sr.

    You get what you pay for, will win out in the end. Sellers need to understand that paying a flat fee to have their property displayed on the MLS is no where near the service that is needed to give their house full exposure to the market. Screening buyers, negotiating, protecting the seller of future liabilities, syndication, handling details of sale, and looking out for the best interest of the seller, will assure a smoother transaction. Every listing and sale is unique and requires expert detailed advice to protect the seller from getting into a transaction that could go south because of financing and or contingencies that are generally included in most offers to purchase.

    Bad showings, bad representation, and a large percentage of these listings going unsold come as a result of only using a professional for 10% of the services you would receive from a full service broker.

    If a seller has the time, money, experience, and resources to get the highest possible price with the least inconvenience, then go for it. (9 out 10 won’t) The other 9 will end up hiring a full service broker, in my opinion.

  • http://flatfeepro.com Fred Romano

    Mike I disagree, and this is why…

    If a broker brings the buyer, they should have already screened their buyer. You must think Realtors are the only humans that can “negotiate”, that’s just ludicrous and insulting. And as for protecting the seller, that’s why god made attorneys, and gave them the legal expertise to do what they do best! Realtors are mostly protecting their commission.

    Most sellers are simply better at selling their home, since they have detailed knowledge and history that the listing agent would never know. Smart sellers choose to cut out the “listing” middleman and save 1/2 the commission. The revolution has begun.

    • http://www.erichempler.com erichempler

      The Listing Agents should be asking about the history of the home. It’s not important to get the home sold, but it’s fun information for those that are looking and can be used in their presentation pamphlets. If the Realtor isn’t sharing either they didn’t ask or the owner didn’t share. I guess I’m one of the few people that like to know the background of a home. Such as knowing a home was a carriage house at one time and the structure was later moved and turned into a home.

      • http://flatfeepro.com Fred Romano

        Congrats at being one of the few. I am sure you are an outstanding agent. My point is that consumers should always have options.

        • http://www.erichempler.com erichempler

          And that’s fine. I have no problem with someone trying to go at it alone. I always ask them are you comfortable with this, this and this. If they are then go for it. If not then maybe I can help in the areas they’re not comfortable with.

    • http://mikebowler.com Mike Bowler Sr.

      Fred, you have a right to disagree, if I didn’t believe in my full service, I wouldn’t be providing it. As I said in my post, if a seller, feels they can handle the job, then go for it. My point is: there is more to marketing a home than putting it on the MLS and hoping someone is going to come along with a buyer. I agree with you that a menu of services will become more common. I also agree that we have to offer more choices.

  • http://www.tomslupske.com Thomas Slupske

    Consumers have more information than ever. Yet, with all that information it seems consumers are more and more confused. Someone who only occasionally needs specific information or services has difficultly correctly interrupting available information. Most often that information only confirms already held basis. Whereas, full-time, experienced and knowledgeable Realtors who are detached from emotional basis will more often than not correctly interrupt.

    Consumers also have more choices than ever. They can choose between the so-called traditional brokerages and limited-services brokerages. If services are less, fees should be less.

    Yet, should services alone justify fees? Realtor A and Realtor B might offer similar services. Should not experience and knowledge also be considered? What if Realtor A is part-time or inexperienced? Experience, expertise and knowledge do command higher fees in most every other professional career. Why not Realtors?

    The opening dialogue of ‘60 Minutes’ once again reminds me why I stopped watching that program.

  • http://www.HOTLAHOMES.com Jose R. Reyes

    Consumers should and do have the right to choose. Consumers are not forced into having to list with a 6% agent. But….

    Consumers selling their own homes is probably only an option to less then 1% of all sellers. Mostly because of time and education. I don’t know many Realtors, let alone consumers that really even know how to read a contract and every clause in it, which could lead to serious lawsuits. And yes (Fred) that is why god made lawyers? Attorneys cost money, a lot more money then Realtors do last time I checked. All it takes is one thing to be in hot water and liable for lots of money (far beyond 6%)

    Peace of mind is priceless and a persons time is precious. And not all Realtors can justify they are worth 6%, because some are morons. But letting someone use the MLS and and some generic signs is useless if you don’t know what you are doing. A seller can easily be taken for a ride.

    As I always state, you always get what you pay for….

    • http://flatfeepro.com Fred Romano

      Wish I had a $1 for every time a Realtor said “you get what you pay for”, I’d be living on a private island drinking pina coladas.

      Last I checked attorneys make about 600-1000 for a closing, add the extra help… still a LOT less than a commission side.

  • http://www.sanmateorealestateblog.com Vicki Moore

    You do get what you pay for. If I go to Nordstrom’s I get superior service – which I pay for. If I go to Ross I get cheap product and no service. Every service is that way. I don’t understand your point.

    In California attorneys are not required for real estate transactions. Perhaps if a seller has already located a buyer that may work here. Maybe your point is all realtors should be doing is finding the buyer. But lawyers certainly are not going to market the property. There’s more to marketing than the MLS. A lawyer’s viewpoint on a transaction is different than a realtor – it’s all from the legal aspect. There are a lot of other issues to consider – like emotions – both the buyer and seller are at a peak emotional state.

    “Most sellers are simply better at selling their home.” I have to completely disagree with this point. They are in no way better – generally speaking they’re worse. They talk way too much – giving away all of their negotiating power. They don’t want to disclose anything – making them susceptible to lawsuits. They often have the misconception that their house is the best – making them inflexible.

    Okay. I’m done. I’m starting to ramble.

  • http://www.realty4atlanta.com Dan Connolly

    There is a lot wrong with this post! First of all commissions are negotiable, they always have been, it’s not only a good idea, it is the law. To imply otherwise (as in the 6% commission model) leads us into the arena of price fixing which is also illegal.

    The title “Is the 6% commission model still unfair to consumers” implies that somehow it has been accepted as unfair in the past. It’s not unfair now and never has been. No one is required to list for any commission. The public has always had plenty of choices and still does.

    The idea that the flat fee revolution has just begun is also wrong. There have been flat fee real estate companies the entire 25 years that I have been in the business. There is plenty of room for any model and there is not anything wrong with any of the approaches. If the seller decides to list with a 6%, 7% or 10% broker, or a $199, $299 or $499 flat fee broker, they have the freedom to do that. With the internet, the choices have never been more transparent. No one is required to list for any set fee.

    As for defense of the 6%, 7% or 10% commissions, what other industry has a person doing all the work with no guarantee of compensation? When Realtors work their asses off for sellers who never sell, spend the money on advertising, staging, agent caravan lunches, flyers, and all of the misc. stuff we do, and the home never sells, is that fair? When you show a prospective buyer 50 or 80 houses and make multiple offers, get a couple under contract that fall apart in inspection and have the buyer tell you that they have decided to rent for a year or two more, is that fair? Yeah, I could charge a retainer fee if I choose, but what I do is insist on a certain commission when I do make it to closing, and am willing to accept the possibility that the prospect will go elsewhere for a better deal. The client has free will. There is no requirement and the chips fall where they do. That is a free market.

    • http://agentgenius.com Benn Rosales

      Dan, if you’re going to quote an article and say it is wrong, then you must quote it exactly: “Is The Realtor Commission Model Still Unfair to Consumers?”

      The rest is your opinion and you’re entitled to it- thanks, Dan.

      • http://www.realty4atlanta.com Dan Connolly

        Wow! Sorry about that, Ben! I thought I went back and checked to be sure I quoted it right. I need to slow down and read a little more carefully!

        • http://agentgenius.com Benn Rosales

          heh no worries Dan, it’s a sticky subject no matter how it’s worded!

  • Mike

    If FSBOing is so simple, why, (according to NAR) do 70% of them inevitably sell through a Broker? Also, if you do succeed in selling your own home, how much did you really save? You most likely paid the 3% to the BA, so is 3% worth not having all of the services that a GOOD agent can provide, available to you? At the end of the day, you don’t really know if you were taken advantage of or not. Did you get the best price for the house? Was it properly exposed? Were all of the unforeseen obstacles and agravations palatable? If so, good for you.

  • http://www.allphoenixrealestate.com Jonathan Dalton

    Paraphrased or directly quoted, the headline prejudices the article by use of the word “still” when the idea the model ever was unfair is opinion and not hard fact.

    Yes, there’s more information available. And much of it is useless. Had a client in town this week with a list of homes they had selected online. Seven of the eight had been under contract for more than a month but appeared active because of the local MLS status of Active with Contingencies.

    Another buyer has sent me several properties in the area she wants, and to date not one has been active. Two of them were sold four months ago but wherever she pulled them from still showed them as active.

    The idea this additional, oft useless information will supplant a real estate professional remains almost laughable.

    • http://agentgenius.com Benn Rosales

      It’s in the eye of the beholder, J. If it wasn’t there, the implication would be that the charge is new, which it isn’t.

      The problem with hard cold facts is they’re also open to the eye of the beholder. The last time I checked those were verified redfin consumers in that cbs video making the claim that their experience saved them enough money to pay for their wedding and they were quite clear in the fact that redfin was a win/win- those are hard cold facts. I’ve also seen statistics that show a 95% satisfaction rate with Redfin consumers, that’s a pretty high number imo, but even if it were half that number, I have to say, it seems to me to be a pretty competitive model against a commissioned full [service] agent.

      (For anyone that doesn’t get the variable here, it is that the model in comparison that is said to be fair is the one with salaried agents that are not influenced by the ultimate sales price that increase commissions.)

  • http://agentgenius.com Benn Rosales

    A couple of general thoughts:

    I really thought I would see some defense of the hands on agent coming from the perspective of a down market and really insane lending and appraisal issues, not to mention problematic short sale or reo purchase or sales, but some of the reactions are really reminiscent of three years ago, folks who had never really had to defend experience before.

    Does anyone think that maybe the problem with full service agency is that the commission has to be sold and purchased before you ever get to the point of actually buying or selling a house? Doesn’t this practice put us at odds with clients from the get go?

    Troubling really to hear attacks on the messenger, or even alternative models, and not really a whole lot of real value description here.

  • http://www.senasellsvegas.com Tony Sena

    “we’re wondering if agents are actually doing less work?”

    Guess you have never done or have been involved with a short sale.

    Lets discuss flatfeepro.com. This site has no page rank, has less than 150 back links (according to Yahoo) and a poor alexa rating. I also couldn’t find them in any competitive search phrases that buyers or sellers would search. So I really don’t see them as credible competition just because they listed 649 properties nationwide in 2009. Actually for their lack of a web presence, 649 properties is pretty darn good.

    Fred you stated, “The revolution has begun.”

    I have been in business since 2001 and every year I hear the same story, real estate agents are over paid and every year there is a new business model that is supposed to put real estate agents out of business or at least cut their “supposedly” over priced commissions. Here we are almost 9 years later and I am still hearing it. Your model is nothing new and is being offered by much bigger sites like FSBO.com.

    At the end of the day, what a real estate agent is paid is between them and their client.

    • http://flatfeepro.com Fred Romano

      In my own defense, flatfeepro.com is a new site branched off my main site http://ctflatfee.com which has excellent PR and organically ranks in the 1st or top pages of relevant search terms.

      I have been in business since 2003 and doing strictly flat fee service for the past 2 years. The business model is getting more popular, so while it’s nothing new, it is being used more and more. Look at some states like FL where it’s extremely popular.

  • http://www.brandcandid.com Ken Brand

    For me the proposition is straight forward.

    Nobody likes to waste money, or look like a fool. Everyone is interested in value. There’s always someone who will charge less and do more or less, there’s always someone who will charge more and less or more. The model/ price point don’t necessarily determine the quality, quantity, excellence or expertise of the provider.

    For a prospective client: Here’s the deal, you share what’s most important to you. I share what I do, how I do it, why I do it and what it costs. You decide if what I do solves your problems and if my value proposition is worth your money. If the answer is yes, cool, we’ll work together. If the answer is no, you’ll hire someone else, I respect that, good luck.

    I am confident that my value proposition will win often enough to succeed. Choice, options and contrast are expected and appreciated, competition is fine. What I focus on is creating enough opportunities to share my story. If I don’t, I’m screwed, flailing in the shallow end of deep blue ocean.

    Cheers.

  • http://www.brandcandid.com Ken Brand

    Ooops, moving to fast. Should be: There’s always someone who will charge less and do more or less, there’s always someone who will charge more and do less or more. The model/ price point don’t necessarily determine the quality, quantity excellence or expertise of the provider.

    PS. Value is subjective. Some people thinks it’s insane and irresponsible to buy a $350 dress shirt and Neiman Marcus, it’s just a stupid shirt, some people think is lame to buy a $12 shirt at Walmart, the shirt is as uninteresting as the people who shop there are frugal.

    With real estate, we’re talking services, not products.

  • http://www.dougfrancis.com/category/blog/ Doug Francis

    As I sat in Johnny’s Pizza in Vienna, VA last night with a table full of friends, my trusty phone rang and I picked it up. It was a call from a Weichert Realtors agent asking about a listing of mine.

    “I want to show your listing, but will the owner raise the commission?” she asked.

    I was stunned… so I told her “to have your broker call me.”

    True story.

    • http://flatfeepro.com Fred Romano

      Wow Doug… that is very sad, again goes to show how greedy some agents can be.

  • http://AnnArborRealEstateTalk.com MIssy Caulk

    Benn, I am working more hours, longer marketing time on my listings, more promotion on each listing at a lower sales price.

    We had an increase in sales from Oct 08 to Oct 09 by 11%.
    A decrease in price point by 5% just in October.
    Our market has adjusted aprox – 23% since 06.

  • http://www.allphoenixrealestate.com Jonathan Dalton

    The charge isn’t new, Ben. I’m fairly certain we’ll be seeing the usual “examination” of this from online real estate news organizations this winter, as always. The underlying assumption there, and to my eyes here, is that everything has to change. I respectfully disagree.

    My opinion on Redfin hasn’t changed since the beginning … when they arrive in a market where the median price is significantly lower than where they are now and the margins by extension are razor thin, then I’ll admit I was incorrect. There’s a real cost to doing business and what I charge allows me to operate that business. I continue to maintain their model isn’t going to work nearly as well in a market with a $125,000 median price and multiple transactions under $100,000.

    I do not feel what I charge needs to be defended any more than the good folks at Fry’s have to defend the price of milk. There are alternatives available if someone doesn’t like my pricing structure. It’s just that simple.

    For the five-plus years I’ve been doing this I, like Tony, have been listening to the talk of the real estate revolution that’s underway. Please, someone, wake me when it finally arrives.

  • Bob

    Its a tired discussion and weak argument.

    Everyone has a choice. Nothing unfair about that.

  • http://www.atlantarealestateinfo.com/ Rob McCance

    Seems to me the discussion is if it’s 3.x% or 6% since even if you “list” for $299 you have to pay the buy side or nobody shows the property.

    So like Bob said, it’s a choice that’s available. Do you want to go 6% and just clean your home and get out of the way, i.e., FULL service, or do you want to pay 3.x% and try to turn yourself into a listing agent.

    All things are possible. Heck, before I was a Realtor, I even FSBO’s one of my own homes and refused to co-op and got my home sold! The 0% home sale.

    The choice is still there for consumers. They don’t have to hire realtors.

    • http://flatfeepro.com Fred Romano

      Rob – The rate offered as co-broke is determined by the listing broker, or in my case, the owner. It’s not pre-set at 3%, it’s negotiable from $1 to whatever they want.

      So you sold FSBO? good for you! Almost anyone can do it with the proper exposure and right price.

      • http://www.atlantarealestateinfo.com/ Rob McCance

        Fred:

        Yes sir, you are correct. But in reality, offering less than the norm to a busy buy side Agent is less than ideal.

        I’ll leave it all that fuzzy.

        Gotta run, son’s baseball game.

        Enjoy your Sunday

  • http://www.gregcooper.com Greg Cooper

    To me this is pretty simple. I tell people what our comission is and then say flat out:

    ‘There’s Walmart and there’s Nordstrom. We’re Nordstrom. We have no interest in being the cheapest, just the best (and by the way we absolutly own that postion in the market). Mr. Seller would you go to court over a matter involving hundreds of thousands of dollars by hiring an attorney who is a discount service provider? Would you negotiate price with a heart surgeon? If price is your primary concern, we’re not the brokerage for you but we wish you the best.’

    • http://flatfeepro.com Fred Romano

      Greg, with all due respect, you can not compare heart surgery with selling a piece of real estate. They are a million miles apart!. When a Realtor needs 10+ years of schooling and years of apprentice work, then it could be a fair comparison.

      Typical response from a Realtor… Cheaper is NOT always better. I often find the same product at Walmart for less than Best Buy… same – but less. Nordstrom pricing is pathetic, you can get the same stuff at JC Penny’s for less. You are paying for the NAME. Go ahead and keep defending the rate, I am sure many sellers will buy it. The smart one’s will pass and save.

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  • http://www.brandcandid.com Ken Brand

    Commme Ooon Maaaan….Fred, did you really say, “The smart ones will pass and save.”?

    Are you saying that people that don’t choose your model or the least expensive option are stupid? Really?

    Next.

    • http://flatfeepro.com Fred Romano

      OK maybe “smart” was a bad choice… how about the sellers that are educated about and comfortable with the selling process. Better?

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  • http://www.gregcooper.com Greg Cooper

    Fred,

    I did not compare Realtors with heart surgeons. I compared an inexpensive heart surgeon to an expensive one. I was stating why you don’t buy on price when the stakes are at their highest. Time after time after time with discont brokerages I have to do BOTH SIDES of the transaction because of the total lack of experience, expertise or effort from the other agent. Sellers that are educated and comfortable with the selling process understand who can solve problems and who’s marketing their services based on PRICE first. The truth is there is a place in the market for an ala carte broker….but they’re not the ones who are going to get called to be the trusted resource when tens of thousands of dollar decisions are at hand. Sellers don’t want to be making $100,000 price reductions based on the advice of someone who’s readily willing to make 30% of the commission of the buyer’s representative. You charge anything you like and more power to you I say. This year when things were at their most challenging, I didn’t lose ONE listing to an agent who charged less than me. In 2006 when anyone could sell a house, price did play a role but not today….not in my market.

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  • http://www.TheAgentTrainer.com/ Matthew Rathbun

    How is this not an Sherman Anti-Trust issue?

    “Either way you’ll save the typical 3% listing commission. Why hire a 6% agent when you can do some of the work “By Owner” and save your hard earned equity.”

    Aren’t we taught that representing that there is a “standard” or “normal” commission charged by competitors a violation?

    • http://flatfeepro.com Fred Romano

      Oh please now, give us a break… typical is just that. I am not going there Matthew

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  • http://www.realty4atlanta.com Dan Connolly

    Fred, You may not think you are going there but you are there. If you talk in public forums about standard commissions (or typical commissions) you are in violation of the law. Plain and simple. Price fixing is illegal.

    Commissions really are negotiable. Its a free market and a free world. People who opt for more fees aren’t stupid or uninformed or gullible.

    You are welcome to work for any fee you choose. I respect your business model and think there is room for all approaches.

    • http://flatfeepro.com Fred Romano

      Dan, did you read the title and first paragraph of this post? “The Infamous SIX Percent Realtor Commission”… I didn’t write it, and I am making comments based on this post… half of six is what?

      I am not saying that everyone charges a certain amount, or that number is fixed, but from what I read here, it seems “typical” of most “full service” agents to split the commission in half for a co-broke… Again half of six is?????

      • http://www.realty4atlanta.com Dan Connolly

        Of course I saw it, and told Ben that it was wrong to be specific about it around comment #15. We can’t say that the average commission is any specific number. We can talk about it in general terms (splitting X% 50/50) but we aren’t supposed to put a number to it!

  • http://www.HomeBuysBlog.com Ted Mackel

    I have to laugh when I see these articles. 6% is a myth and false advertising on the part of 60 mins and the Flat Fee guys. Look at the stats from NAR. 6% does not exist. It has not for a while even when the market was moving earlier this decade.

  • http://www.forsalebylinda.com Linda Miller

    I charge 6% and so do many in my market. Commission is always negotiable. Are we working less or are we working all the time? Do clients expect that you answer them within minutes? Absolutely they do. What is that worth? I am worth what I charge and have no problems putting my head on my pillow at night. We have one cut rate broker in town, I think she has two listings. What does that tell you? I think that people are looking for service, not a discount.

  • http://www.massrealestateguy.com Jim Gatos

    I have a VERY simple way of looking at things.. the way I heard “Uncle Floyd” Wickman once describe it as..

    The ONLY REAL REASON the “Full Service” commission model’s been around for pretty much OVER 150 years, is ONLY and ONLY one reason…

    IT WORKS!

    Period….

    Any questions?

    Still, I have a variable rate commission program, however, when it comes down to the nitty gritty, the FULL SERVICE, FULL COMMISSION MODEL WORKS!

    Nothing would last THAT long if it didn’t, wouldn’t you say?

  • Bob Wilson

    I have just one question Fred. What market share % do you have?

    • http://flatfeepro.com Fred Romano

      Who cares about the %, I am an independent broker with no agents.

      • Bob Wilson

        Just trying to get a feel for how smart, educated and enlightened the sellers are in your market.

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  • http://www.ocalarealestatetalk.com Joe Dallorso

    Two Points

    1. 6% of what is too much? Real estate is local. Maybe in certain areas where the average sale is $500K it is too much. In October 09 here in Ocala FL 337 houses sold on the MLS and 199 were below $100K!!!

    2. In another life I was a commercial landscape contractor and bid on maintenance contracts in the $30,000- to $100,000- range. Contracts were won or lost by 5-10%. Was it price fixing? No, it was that companies large enough to do multiple jobs like that all had similar over head.

  • http://miamybylandandsea.com Janie Coffey

    “we’re wondering if agents are actually doing less work? If it’s a fact that agents are doing less work, have commissions also gotten smaller?”

    are you serious? you work and interact with agents all day long, do you see any of them doing “less work”? or was this just to bait us for a lively conversation?

    with inventory levels at ridiculous highs, listing agents have to work like monsters to make their listings stand out (less work?)… with buyers wanting “a deal”, buyer agents are going nuts (less work?)… with short sales being the story of the day, everyone is working for months on end (and often at a reduced commission in the end) (less work?)… with banks only wanting to lend to the Queen of England and appraisers running a-muck (less work?)…

    A question like that could have possibly been timely and valid in 2007 or before, but 2009? I felt like I entered a time-warp when I read that. (yes I know the “fact” was questioned in the blog post, but come on..)

    I don’t know a single agent who is still a full time agent who has done “less work” for several years now. I see dedicated, educated, hardworking, passionate and professional agents and brokers still making a full time living in real estate, but “less work” is not what I see.

    If you know of someone who is, let me know, I’ll go copy them.

  • http://miamybylandandsea.com Janie Coffey

    Greg and Vicki have it right, there is Wallmart and there is Nordstrom. Can they sometimes get the same things at Wallmart that you get at Nordstrom? Yes, but can you sometimes get the stuff you get at Wallmart at Nordstrom? Uh, not always. There is a difference and price is not the only part of the equation.

    Shopping at Nordstrom is a treat, an event, you are pampered, your hand is held and customer service is outstanding. Some, many, go to Nordstrom for the full experience. Some will avoid Wallmart to AVOID the experience, but some will go there to get the best deal.

    There are solutions for every single person out there, from the ones who want to 100% FSBO (without even using a flat fee service at all) and there are some who prefer the Nordstorm’s experience (especially if they have lunch at the cafe).

    This is not a one size fits all business and we don’t need to try and make it one. What we can do is make sure WHATEVER service we provide and whatever model we select to use is provide the best service to our clients for that model. We don’t need to defend which model we select, we work with one that resonates most with our own desires, plans and client base.

    • http://flatfeepro.com Fred Romano

      Well said Janie! I agree… I am always focused on service, and even though my business model is flat fee, I strive to make it the BEST flat fee service around.

  • http://www.phoenixrealestateguy.com Jay Thompson

    Why is it that real estate seems to be the only profession where people are obsessed with what the workers make?

    What I charge is my clients business, and absolutely no one elses. Whether I charge 3%, 6%, $299 or a six pack doesn’t matter.

    There is a place for multiple business models. Honestly I don’t give a rat’s ass if flat fee, discount, or full service models survive. I care about my model surviving.

    • http://flatfeepro.com Fred Romano

      Jay, it’s because the public may see the “infamous six percent” as too much money. I agree with you though…

      Whats interesting is that in some areas, where homes avg are 500k or more, six can seem like too much, but in other areas, it’s fine. I think the problem lies in the % model, and sellers may feel it’s unfair. After all there is not much difference between selling a 200k home and 500k home, so why is it so much more expensive to sell?

      An attorney wouldn’t charge more for a closing, right?

      • http://www.atlantarealestateinfo.com/ Rob McCance

        Fred:

        In my neck of the woods, I don’t see closing attys varying their fees. But I DO see home inspectors and some other service providers charging more, based on a scale that takes into account the purchae price.

        • http://www.HomeBuysBlog.com Ted Mackel

          Fred,

          Attorney’s don’t have a system set up to let anyone in either. A real estate license is simple to obtain. Membership to the associations and MLS is dirt cheap. There is no “bar” in the real estate industry to help raise the level of standard.

          It costs more to open a subway sandwhich franchise and more financial credentials to sell subway sandwiches than it takes to get in the Real Estate biz.

          Subway requires, good credit, a financial statement with substantial networth and in California a $250k investment just to open the doors. All that to probably net $150k annually for a huge commitment in payroll, leases etc.

          A real estate license and membership to the MLS – your in under $1500 and your income is unlimited.

          A real estate agent can ruin a person’s largest investment (their home), where the subway franchise guy might make someone sick on a sandwich.

          Our industry has a long way to go before it can be put in a category near attorneys

          • http://flatfeepro.com Fred Romano

            I agree completely! I was using them to compare how they charge a standard fee vs. a percentage.

          • http://miamybylandandsea.com Janie Coffey

            interesting paradigm isn’t it? Our entry level is set so low, yet the stakes for our clients is so high. We are very often dealing with one of the most important facets of their lives (legally, financially, etc.) yet our entry bar level to be involved in this is so low.

            The industry is not going to change anytime soon, but how we conduct ourselves and the service we provide our clients is something that each one of us can change.

    • http://mikebowler.com Mike Bowler Sr.

      Amen Jay.

  • http://www.HomeBuysBlog.com Ted Mackel

    6% is not a standard and it is not even close to the national average, so the whole argument is stupid to start with. The false advertising by the discount brokers using the 6% model is a lie, the 60 mins piece is a joke.

    As for Nordstroms …. Many of the agents I know that claim they deserve some higher commission because they are better or offer a “Nordstroms” experience don’t do anything different than the rest of the herd.

    Commission is what you negotiate, it is what you are willing to do the job for and nothing else. I offer all kinds of extras like full motion video …. does that mean I magically deserve 7%? No, I negotiate what I want to work for and what I am comfortable with – if the seller sees my value proposition then I get the job.

    • http://flatfeepro.com Fred Romano

      So then it’s all about what you can “convince” the seller you are worth? Start high and see if they take the bait? negotiate down if you have to? That is all most agents do anyway right?

      I don’t negotiate my fees. They are what they are, signup or move on.

      • http://www.HomeBuysBlog.com Ted Mackel

        If that is working for you …. perfect. The reason why my fee is fluid is that I have a wider skill set than my competition.

        For example: One instance I had a senior that had a house full of junk and it all needed to go in the dumpster, he had no extra money and the house needed to be cleaned out. We negotiated a different commission schedule, I ran the job on two Saturdays – a work crew or 4 and two 40 yard roll off containers later we were clean an ready to market the property.

        Second example: Short Sales – the lender will ultimately determine what the agents are going to get paid 5%-4%, the listing agent then can make the decision if that is worthwhile to take on.

  • http://www.503prop.com/ Greg

    Funny stuff guys…

    Since the Seller is the one who negotiates the commissions; and for the most part (and in most parts) these are Short Sales &/or REO’s. Shouldn’t we ask one of our 3 remaining banks what they think?…

    Personally, when working as a buyer’s agent – I love dealing with “educated” sellers who list with a discount fee agency or FSBO type site – Limited Rep etc… It’s almost as fun as a “moron” with a license. Trust me they would be better served with a competent realtor, 6% is nothing compared to what they are availing themselves to.

    At the end of the day this is a business unlike a Subway shop… At Subway, even if you fork out fecal bacteria on every sandwich you will still have another sucker waiting in line. On the other hand, a realtor is a stand alone business system on their own. That person either sinks or swims… (unless you do everything for nothing) Market forces will determine, just like the final sales price.

    In the end 6% is a lot for a moron. The next 60 minute’s article should be on how to detect one. If you hire the right person it might be the best 6% you ever spent.

    • http://flatfeepro.com Fred Romano

      Geez Greg, you really think all sellers are morons then, and that they NEED you to negotiate for them? OMG without spending 6% for your service they won’t net as much! That’s a bunch of crap…

      You should wake up, respect, and not discount how smart today’s sellers are. Selling a home is not rocket science, nor does it require a license. Most folks that use our service are educated on the selling process (or have already been listed with an agent – didn’t sell) and they can negotiate a decent price on their own.

      As you stated above, it’s the market [buyers market] that determine the sales price, so agent or no agent… it’s all about pricing and exposure.

  • http://www.503prop.com/ Greg

    Mornin,

    I see someone’s had their wheaties today… For the record I’m still waking up over here on the left coast – thought I’d roll around in my bed full of 6% listings… ha, are you kidding me?

    Just so you know, I got into this biz because I too thought that Realtors weren’t worth 6% or even 1%… At the time, and as an investor, all I wanted was a “Supra key” and access to the local MLS so that I could bypass which ever side of the transaction I was planning to work on. In fact I even thought the commission splits within the Brokerage were such bull that I started my own company.

    It wasn’t until I actually started doing the work, day in and out that I really appreciated the trade. In the course of my experience, I have been humbled by many a great realtor – and come to have quite the appreciation for the value of a good agent.

    I like to think of our “debated” options as the equivalent of an oil change. Sure I could get under the hood and dirty; but for the same fractional price of taking your car to Jiffy Lube and getting the 110 inspection… I’d opt keep my hands clean and let someone else do it. Sure I’d still try to “cut a coupon” or drive in during a special – ie negotiate… Unless, you’re in it that skinny – to which you need a Short Sale expert.

    Time is money – and sure you can educate yourself ad nauseam on the internet, but that isn’t like taking the training wheel’s off in the real world. Fortunately there are enough simple deals to make people feel good about their home depoe’ness – and to your stance, yes,.. A legitimate way to go when you’re surrounded by morons. lol

    I’m just saying that there are many cases where the sales price is determined by the market – the final sales price is determined by the person running the deal. 6% is half courtesy to the other side, the ability to play poker lies in the cards you were delt. Look well at your cards before you deal… and take your intention out of the game if you can re: Seller’s & Brokers alike.

    All the best to you – I know your gig works… So does mine and it’s not always 6. Doing things on your own is typical of our culture (I’ll leave it there)… Let’s not be hateful on people making money, it’s simply un-American :)

    Peace… I gotta run to another 6% listing now.

  • http://www.brandcandid.com Ken Brand

    Then of course, in addition to all the “Here’s why’s”, you have the sociological premise that there are simply 2 kinds of buyers/sellers/people, “Transitional” and “Relational’. I’d rather work with the “relational”, but I don’t want to bump my head on the “Glass Ceiling” so I keep an open mind.

    Here’s what I”m talking about: http://www.beneaththecover.com/2009/11/13/the-glass-ceiling/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+BeneathTheCover+(Beneath+the+Cover)&utm_content=Google+Reader

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