Are Realtors Worth The Commission Anymore?
Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
Given that there is such a liquid market of buyers online I was wondering what people's thoughts are on the commission paid to Realtors. A 6% commission has always seemed scandalously high to me given the typical amount of service one receives on a listing.
I would love to hear the opinion of others on the matter...including the Realtor's take.
Here are things we do with every one of our sales (my wife got her license just for this purpose btw) that very few other agents do, in my experience:
- I make sure I'm in touch with the broker/lender within 24 hours of a contract. When I've used other agents or left it up to the buyer's agent, the appraisal(s) generally took 1-2 weeks to get ordered, and if they were to come in low, there's 1-2 weeks wasted. I make sure an appraisal is ordered within 48 of the contract being signed...if it takes longer than that, I know that the broker or the buyers is lying about how qualified they are to buy (and need more time before they want to pay for that appraisal).
- Same as above with the buyer/buyer's agent and their inspection.
- I'm present for the appraisal. In fact, we take the agent lockbox off the door so that if the appraiser shows up without anyone telling us, he needs to call us to get in. We tell him we have the key and we'll run right over. Luckily, we're generally informed beforehand so we can be there with comps in hand, renovation lists, etc. We've never had an appraisal come in low when we've been there during the walk-through.
- I'm present for the inspection (assuming the buyer is okay with it). This way, I know beforehand what the buyer is likely to come back with when requesting repairs. More importantly, if the inspector brings up something that I think may be confusing to the buyer (and that I think might freak the buyer out unnecessarily), I can ask leading questions right then and there to get the inspector to clarify and make the buyer feel more comfortable.
- Here's a BIG ONE: Within 48 hours of the contract, we call the closing attorney and get the closing put on the calendar. While this date may change, when you have something actually scheduled, it makes people focusing on hitting that date. Trust me, you'll get much more cooperation from the lender when you say, "Are we still on-schedule for August 18 at 3:30pm?" then if you say, "Are we still going hit mid-August for this closing?"
- We make sure that the lender keeps us apprised of the situation every step of the way, including sending us the stip sheets for the loan. That way we know where the loan is every step of the way. If we see that the buyer needs to turn in his last paystub to move the process along, we can call the buyer's agent and say, "Hey, lender is still waiting on that paystub...and we need that if we're going to close next Wednesday at 3:30pm."
These are the types of things we do that most agents don't do. Not necessarily because they're not good at their jobs, but more because they don't care as much about the sale of our property as we do.
The agents that do do these sorts of things are easily worth their 6%...and more.
By the way, the other big part of the process where agents don't do as much as I'd like is with showings.
We keep our houses on a portable alarm system. One reason is to protect our investment. But the bigger reason is that we want to ensure that buyer's agents call us and let us know BEFORE they show the property (our listing asks for 30 minutes notice so we can turn off the alarm).
This gives us time to send one of our employees over to the property to turn on the lights, open the blinds, verify the temperature, refill the scented air-fresheners, make sure there are flyers and blank contracts on the counter, make sure there is no trash in the yard, etc.
I would virtually guarantee you that we get many more offers (and higher offers) because of this than any other single thing we do. After buyers have been looking at dark, hot, smelly houses all day (because the listing agent hasn't set foot in there in 2 weeks), when they walk into a nice, bright, cool and fresh house, they are going to notice the difference.
So again, don't settle for an average agent. And if you can't find a great agent, do it yourself (flat-fee listing, get your license, whatever)...
For anyone interested, this thread prompted this post:
http://www.biggerpockets.com/renewsblog/2010/08/11/is-your-agent-a-great-agent/
I see Realtors as real estate secretaries - they do the stuff that you don't want to do. In essence, anything a realtor does can be done by you, EXCEPT they have access to the MLS. This is a cartel created by the Realtors assn to take peoples money and support them!
I am a real estate broker in Illinois. I got my license because I just couldn't take not having full control over my MLS access. I don't like that I have to email my realtor to change my parameters, or that they show special info for agents that doesn't show up on listings for clients. Plus I make money on deals effectively cutting out losses on commissions, and making commissions on sales (my own purchases).
The worst thing is you do not get access to the MLS by being a licensed real estate broker. You must also pay over $1200 to become a member of your local Realtors assn (for me its theChicago Assn. of Reatlors) and then finally get access, not to mention pay for each staff. And they try to sneak you into paying money into their political action committee!!!
Well the Realtors people have created a market and kudos to them. However, like I said, the only true value of a Realtor is the MLS access.
Just want to clarify that I see lawyers in the same light as Realtors - secretaries. Just doing the stuff you don't want to do. Lawyers for some reason get paid so much per hour when honestly they are just glorified secretaries and book keepers.
But come on, real estate agents definitely provide a value to retail buyers...
Now that is funny right there!! :lol:
Thanks for the input! Another thread is promoting participation by more BP members and I have seen an increase in posts. Great!
There is a lot of disagreement on the issue of Realtors and their worth. Some agree with you and as you have seen, others (me included) disagree! I like healthy, productive debates, keep posting!
Bill
Hey, there. I believe lawyers have a skill learned through the trade of law, but in essence they push paper around, just like any office worker. I am not saying a lawyer is not skilled but they have no real intellectual skill that I could not gain for myself. In the same way a VP of a S&P 500 company - they are all well qualified paper pushers. Experience is the only X factor but lawyers are a dime a dozen. I have lawyers applying to work for me to be a receptionist (yes, I advertised on craigslist for $11/hr and I got a resume from a recent law school grad - isn't that sad?). Furthermore, I ask my lawyer to do stuff I don't want to do - like call serious people on my behalf (people I am doing deals with). I could do my own closing and save $500, but I don't because I have my dayjob. I could ask my lawyer to draft a new LLC operation document but I could just take my old one revise it - but I don't because he might have someone worthwhile to tell me, which will in turn cost another $500. My lawyer is actually a Illinois States Attourney (not THE States Attourney but one of the many hundreds of prosecutors on staff). His father is a successful but retired real estate lawyer and has helped me find investors, but has really never really given me legal help which was of any real use. Also, I have a limited legal background as I finished 1st year law school before I left to work at a hedge fund where I still work at today. While I acknowledge that law school actually doesn't teach you anything other than how to read really thick books and memorize things under such threat of death by professorial edict.
Also regarding lawyers, my dayjob firm has so many lawyers working for them and they are all pretty dumb. Unable to work for themselves, seeking the safety of an advanced degree, they have dropped 200K on an U of Chicago law school education and the best they can do is to work for a fund where the people making all the money are 20 and 30 year old traders. These lawyers are just paper pushers. In our investment banking division they are treated like dogs, basically drafting document after document, running numbers on deal viability and putting together merger or mundane legal documents. Yeah they get paid 20k a month for the firm to get make 20 million. Sounds like a gooddeal to me. It takes real brains and creativity to put a deal together. These kinds of deals are built by visionaries not by paper pushers.
I have my own real estate brokers license and broker my own deals. The reason I did this is because I had to deal with many incompetent agents that had scheduling conflicts or wouldn't return phone calls, or would take me to see properties that I specifically asked not to see. I got my brokers license because I want to have free reign on my business, not to be dependent on anytime.
If I knew how to build a house, I wouldn't hire a GC, but instead start my own GC firm. Next year maybe...
I run 3 businesses, and have a day job in finance. I do not believe that for my line of real estate business, any realtor can help me any more than I can help myself. I have had realtors find me deals but it has been rare, since most realtors only know how to find properties on the MLS. Thats why I got my license so that I can cut them out. I value when a Realtor brings me a deal NOT on the MLS but I'll tell you that around here, there are few of those. most Realtors here cater to retail clients. I like sell-side realtors because I buy from them, but buy-side realtors are a waste of my time (unless I'm trying to sell their client something, but I like to let my product speak for itself).
Also, as I may or may not have mentioned I truly dislike "Realtors" compared also to "real estate agents/brokers." The difference is Realtors are part of the national conglomerate to control housing sales and to create a cartel for their members.
The National Assn. of Realtors is essentially a lobbying organization, fighting for things like the 1st time home buyers which is a big stimulating waste. I am a member because I had to join the MLS. But if it weren't for the MLS I wouldn't be a realtor.
Speaking of lawyers and sadness, my girlfriend just reminded me of a good friend of mine who has a law degree from a good but not prestigious law school here in Chicago, but now sells woman shoes at Macys. Lawyers are a dime a dozen and there are probably many who will get their real estate agent license soon (lawyers are exempt from the coursework). Starting out, its probably more profitable nowadays to be an agent rather than a lawyer.
Also, sorry if I sounded arrogant in my posts. My girlfriendn justread it and she said I sounded like an a-hole. I am not trying to look down on real estate agents and lawyers, I'm just answering the initial question.
In my opinion, Realtors are NOT worth the commission. Especially on the buy-side since a lot of banks here are giving buy side realtors better commissions. I recently received back $6000 in commission on a 135,000 purchase (my own purchase). NOw why would I hire a realtor to do that for me when I could do it myself? Thats like almost 4.5%!!!!!!
J Scott Thanks for your reply. I actually do get that a lot that I am unfocused. The truth is I really try to be focused but I am highly stimulated by a variety of things, but because of my obsessive personality I guess I have been able to be successful at many things at the loss of many nights and days of sleeping or entertaining.
I do haves lots of small businesses, including an educational nonprofit, they all grow every year, some are more successful than others, but each of them I put my heart into it. I do it because I love it, and the money is what keeps it viable.
Perhaps you are right, maybe I should find a new real estate attourney. Unforuntately there are too many attourneys involved around my family and I don't really trust any of them professionally.
The problem is that I am highly distrustful of people especially lawyers. I have worked with many many and I just don't like the profession. I know too many lawyers that will do what you want even though its the worst way to go about things, or illegal, but lead to you believe it is both cheap and profitable, and legal, to do them. As you can probably tell I have been screwed by lawyers before.
I don't like finance and especially trading, but its a lucrative day job and I am really learning about how the world works. Its actually really screwed up how the big banks, central banks (sovereign entities) and other funds have really a strong grip on markets and that their constant and open manipulation means that the markets are rigged against us the small players (and when I mean markets, I mean everything from securities and equities, to commodities, to currencies). This is why I decide to make money their and reinvest it into real estate on a personal and private basis. Also, in this job, I also am making the connections with those who will hopefully one day fund the development of my future skyscraper.
Hi All,
I can see my little Doctor comment spiraled off to pin pointing attorneys as well. To clarify, the point I was trying to make is that any professional should not be asked to discount their services. If they are great in their line of work, I believe their fee is worth paying. It all goes back to getting what you pay for.
I want to shed some light on the subject and explain what realtors do and explain my experience first hand.
I pay $250 an hour for my attorney, who i trust with everything. It took me a very long time to find him, but we have monthly appointments to discuss deals and I pay him well for those, because I know paying him now will save me thousands when I need him. Many don't understand this, but its much like paying a lot of money for a CPA. Paying a professional who is great at what they do is worth it in the long run.
I advise any investor who does not work with realtors to please at find a trusted attorney. Its not a matter of if you will get sued, its when. Our society is so sue happy that we really need to protect ourselves and our assets. A realtor can shield you from this, but only if you choose to use them. A successful person knows how to find value and you are doing a diservice and putting yourself in harms way by thinking you know it all.
Personally, I disagree with this statement.
I work with many professionals (CPA, attorney, agents, brokers, doctors, etc), and while I'd probably pay their going rates (for many of them, I'd probably pay more), asking for a discount hardly seems inappropriate.
If I spend 4 hours/week on average with my professional team, and can save $25/hour, that's $100/week or about $5000/yr. Over the course of 30 years, that's a college eduction I've saved for one of my kids. And I don't know any professionals that wouldn't be happy to discount their rates for a good client who refers other clients to him/her.
I have referred about a half-dozen other investors to both my CPA and my attorney...they've made more money because I'm a client (even with my discounted fees) than they would without me. If they felt they weren't earning enough for the time they do work for me, they'd either tell me I have to pay more or drop me as a client.
They've never done that, and as far as I can tell, both sides benefit and both sides are happy.
Likewise, before my wife got her real estate license, I had one agent listing all my houses. Because I listed 1-2 houses a month with her, I was happy to ask for a discount...and she was happy to provide one.
Do you ever pay medical expenses out of pocket? Insurance companies negotiate medical fees all the time...you'd be crazy not to do the same when you're paying out of pocket. A hospital isn't going to offer services at a price where they lose money, so if they agree, you can be sure they're still happy with the agreement.
My point is, accountants, attorneys, doctors, etc are all accustomed to negotiating their prices for big clients...even if you're not a big client, it's smart to act like one when it comes to negotiating. The worst the professional can do is say "no"...best case, you save money...
I'd be willing to bet that he has other clients who pay less than you if you've never asked for a discount. And if you have weekly meetings with him, he probably considers you a good client and would probably be happy to continue providing service at a discounted rate.
Just my perspective...
I agree with J Scott here. Not only do we negotiate with Doctors and Hospitals, we also negotiate payment plans, almost always with no interest. As I was taught growing up, "Never Pay Retail." I bargain whether I am at Best Buy or at a Swap Meet, whether it is a Heart Surgeon or a Property Management Company. In our business, Real Estate Investing, the number one rule is to NEGOTIATE. Why should an attorney, CPA or Realtor get a free ride with whatever price they want to charge? I just listed my personal residence with a Realtor and although I am paying her the full commission, I am also making her pay a referral fee to my father, who is a Licensed Broker (I let my license expire, shame on me). And she will gladly do it. Shoot, sitting down with her, I knew 10 times more about Real Estate than she did, BUT, she has access to the local MLS and access to the other Realtors in the local BoR. Are Realtors worth the commission? Sometimes!
I agree that someone that uses the same Realtor frequently should get a discount.
Do any of you discount with your Realtor and offer the difference to the buyer's Realtor? We have a listing right now where we are offering the buyer's Realtor more to get them to steer traffic our way first.
For the lower-end sales we're doing -- where a typical buyer's agent is only making $3500-4000 in commission -- another $500-1500 makes a big difference to them...
Good question Vikram! I was wondering the same thing. What generates the most buzz for buyer's agents?
The numbers really depend on how long the property has been on the market, how deperate we are to move it, how close we need to come to full-price to make our desired profit, etc.
When we first list a property and every time we do a price reduction, my wife also sends emails to her list of agents that she's worked with in the past, and will mention it the bonus there as well. That's what seems to get us the most feedback and interest in the bonus.
Two of the Realtors we are working with now will be getting a bonus after closing because of the effort they have put forth. One is our listing Realtor and the other is the Realtor for the "C" buyer on a different transaction (our listing Realtor on that one is not too great!). It would have been very, very difficult without the extra effort of these two outstanding Realtors! BTW, neither of them is expecting or knows about the bonus and that will make it that more fun to give it to them!
Bill
'Are Realtors Worth The Commission Anymore?'
Are plumbers worth what they charge?
Are accountants worth what they charge?
Are attorneys worth what they charge?
Doctors?
When I break it down to simple terms......If you have the skills to provide the same level and quality of service and do not have anything better to do with your time that would be of more benefit to you or make more money for you, than No They Are Not! At least not to you!
If you can spend your time doing your business related projects that can make more money for your time spent or if you don't have the skills or desire to perform their functions,
Yes They Are Worth Their Costs! At least to me!
Of course there are exceptions. If you are sitting in prison with lots of time and a law library, you may want to consider an attorney to represent your appeal after representing yourself at your first trial didn't work out so well!
Bill
You are making an unfair allegation. The reality is that you can list your property for any comission. If your co-op is $1 (or the min. amount allowed by the MLS rules), your property won't be boycotted. Instead, the selling agent would either:
- have the buyer sign a written agreement with an understanding that they will be responsible for paying them commission out of their own pocket at closing. Which may cause the buyer to look at a different property instead.
-talk to the listing agent about revising their agreement with their client.
You are contradicting yourself with your response. How is it possible to boycott a property if it appears on realtor.com and any buyer with internet access can see it?
In a nutshell, you are correct. The job or a real estate agent/broker is to bring buyers and sellers together for a fee. However, there is a cost associated with the service. There are licensing fees, MLS dues, etc...
Everyone loves to the ability to access the MLS and wants to make sure that the data on there is accurate, yet, many want this to be for free. But who will maintain the MLS if they are not gettnig paid? Lets' presume that we can get rid of all agents and have everyone use zillow to sell real estate.
question - will zillow be more or less accurate? (i.e will closed properties show up as actively for sale, with accurate dimensions (more or less)? How will the scammers be prevented from accessing the database?
In addition, the biggest task for the REA or a Broker is finding clients. You can be the go to expert in everything else, but if you don't have clients, you will be out of business.
Wrong. There is no collusion in the industry. Prove otherwise. Is there a standard commission? What is it?
How about title company cartels?
baseless accusation. There is no price fixing. But my point is still valid. I'm sure there is someone in India or China who will be able to do exactly what you are doing for a living, do it better, faster, and much cheaper.
Prove to me that an experienced electrical engineer, having 20-25 years experience can design an ipod or something similar. The fact of the matter is, is that the likes of Steve Jobbs and Bill Gates are college dropouts that made it big.
So, don't tell me that a degree and more experience entitles you to more money.
If your logic holds, only PhD's in the Computer Engineering should be able to come up with the coolest tech gadgets. PhD's in Mechanical and Electrical Engineering should design tools, etc... The reality is that many of these are designed by ordinary folks. Many of whom never completed college.
Again, you talk about cartels, price fixing. It's all baseless accusation. Thankfully, we live in a free country. Use craigslist to sell your houses for free. Why even use MLS?
Except when it comes to Real Estate, whom you call cartels?
in my very first reply to you I provided an example of an agent whom I knew personally who would list a house for free provided the seller bought their next property through them. Is this an example of price fixing?
Where is this price fixing?
My guess is that it's easier to type something in a forum then it is to provide evidence in the court of law.
I have been involved with over 5,000 closed transactions as a Broker/Realtor. When I say 'involved', I mean that I reviewed every single contract, disclosure, HUD 1, Loan Document, etc... of each transaction. My record? 42 in one day. Back in the beginning days of DISCLOSURES in California, my company had an additional two page disclosure that we added to the Property Disclosure. The last disclosure I received from CAR earlier this year, I see that CAR added half a dozen of our disclosures to their latest disclosure.
My point is that I am probably as qualified to answer this question as anyone on BP and I still say, some agents are worth their commission and some are not. Sticking a sign in the yard and a listing in the MLS does not qualify a person to get any percentage of the sales price, that should be worth a flat fee of a few hundred bucks. Other agents who really hussle, advertise, hold Open Houses, and work really hard deserve more.
Also, I can tell you that the cheaper houses take a LOT MORE WORK than the expensive houses. If an agent lists a $100,000 house and a $500,000 house, his $100,000 house will require more hours of work than the higher priced one. Yet the higher priced one will pay 500% more commission?!? How is that fair?