Are Realtors Worth The Commission Anymore?

95 Replies

Originally posted by Vlad:
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.

This line made me chuckle out loud. I am a Finance Director for a Non Profit and I would bet that there is not a soul in India or China that can fill out the Federal Grant Applications, the Federal Reporting Requirements, the required CFDA forms or a myriad of other state and federal forms for my job. And the fact I work for a Non Profit, I know they could not do it cheaper as I am working for less than half of what I would make in the For Profit world.

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?

Originally posted by Vlad(IL):
... 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)? ...


One thing I find is that although a property has gone pending or even closed, and as such it no longer appears as active on realtor.com - well, quite frequently the listing agency has their own website where that same pending or sold property is still showing as active. So, some realtors, if left to run things as they see fit, would allow for that to be their practice - no better than zillow would be with respect to taking pending or solds off of active listing.

And the listings from the MLS always seem to have that disclaimer about the dimensions must be verified by the buyer - hence you had to qualify with "more or less".

The MLS may be accurate, but there are constant complaints that I read of it not being timely updated. Some agents don't get the information in. I understand that the MLS in some areas is really bad. This from agents trying to use the MLS to pull market data.

Originally posted by Mike M:
I would bet that there is not a soul in India or China that can fill out the Federal Grant Applications, the Federal Reporting Requirements, the required CFDA forms or a myriad of other state and federal forms for my job.


A couple of miles from my home in Bangalore is the office of Goldman Sachs. They have MBAs who do financial analysis for 6-figure salaries. Their equivalent in NYC make 7-figure salaries.

A friend of mine has an outsourcing firm in Bangalore with only radiologists. They do radiology diagnosis for U.S. hospitals in smaller towns during the night shift. (Small town hospital emergency rooms have a hard time finding radiologists to work at night.) Your images are sent there in real time and the diagnosis comes back in real time so the patient has no idea that the radiologists are in India.

Another firm has only lawyers. The largest law firms in the U.S. outsource a lot of the legal work to the lawyers there because they are cheaper.

The biggest accounting firms outsource their accounting for lage companies to India. Accountants there are generally cheaper and generally much better than here.

If you think people there cannot fill out some paperwork because you think it is complicated, you do not know the extent to which outsourcing is going on.

Vikram
Let me quote one of the smarter men of the last 100 years:
The hardest thing in the world to understand is the income tax. -- Albert Einstein

To elaborate, any federal form is hard to understand.

Here, let me give a simple example. If I add 2.4 plus 2.4, I get 4.8 and round it to 5 (most Federal forms do not have the cents, they round to the dollar) But some Federal Departments add 2.4 and 2.4 and get 4 because they round the 2 starting numbers down to 2. Other Federal Departments let you round the final answer.

Another example, one Federal Department said DO NOT SEND that back up again, but the next month, they asked, WHERE IS THE BACK UP. So them telling me to NOT send it meant "SEND IT." So I send it the next month, and they asked me why I sent it. It reminds my of my days in Computer Tech Support and during a call, I told the caller to "go to the keyboard" to which she replied, "what does it look like?"

So I ask you, would your India or China accountant send the back up or not? Could your India or China accountant work with an inept government employee? I do financial analysis for a low FIVE FIGURE salary. My take home paycheck won't even cover my mortgage payment, which is why I have real estate investments. I work very cheaply and have been told that I am the best Finance Director this Non Profit has had in it's 47 year history.

I was watching "Modern Marvels" the other night and they did a show on Fast Food. Some Fast Food restaurants have a 'call center' instead of an onsite order taker. They were asked specifically if they would ever out source the order taking to India, the Philippines, China, etc... and the answer was there is no way a foreign culture could understand the nuances and culture of fast food or handle it in the few seconds needed between the order given and order filled. So we can out source Radiology, Financial Analysis, Legal work, but we can't out source fast food order taking! Go figure! By the way, there are 217,000 ways to order a Whopper at Burger King.

In addition, how many of us have been frustrated with a foreign person on a Customer Service Call? I had one person in India try to get me to pay off my mortgage with my Chase Credit Card. Lower pay? Maybe! Better Service? Not even close!!

Originally posted by Mike M:
Originally posted by Vlad:
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.

This line made me chuckle out loud. I am a Finance Director for a Non Profit and I would bet that there is not a soul in India or China that can fill out the Federal Grant Applications, the Federal Reporting Requirements, the required CFDA forms or a myriad of other state and federal forms for my job. And the fact I work for a Non Profit, I know they could not do it cheaper as I am working for less than half of what I would make in the For Profit world.

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.

congrats on your success. However, not every state requires their Real Estate Agents to also be licensed as Loan Originators. Good for you for being able to fill out all of the forms in compliance with all regulations.

However, I would submit to you that there are PhD's in Accounting or Finance in India, with a decent understanding of English who would be able to learn these forms and fill them out or check for compliance as well as you.

The fact of the matter is that noone is irreplaceable. And one should not snub the Real Estate Agents and Brokers while considering their own profession as justifying whatever fees that are being charged.

In my experience, there is always a hungrier Agent willing to undercut me, always a hungrier Loan Officer (a friend of mine had a closing a few months ago where the loan officer basically charged them his costs in order to get a high rating on zillow. This loan officer was just starting out)

Originally posted by Mike M:

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.

The reality is that Real Estate is a sales business where you earn a comission. Your knowledge of the market and your negotiating skills play a very big part in the transaction. I'd submit that no advertising, no open house will sell an overpriced listing. You can hussle and you can sit Open Houses, you can spend your potential comission on big newspaper ads or expensive internet sites. That's your call and it's the beauty of this business. But *noone*, in my opinion, deserves to independently decide what Real Estate Agent's comission should be based on the amount value *they* perceive for this Agent.

Originally posted by Mike M:


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?



It's only fair if the compensation was freely decided by both parties, the agent and the seller. The way the free market works, is that if 100K house is harder to sell and 500K houses are easier to sell, then every agent who is able to discern what is happening will move to the 500K house territory and the price of the commission for the 100K will go up because of the increased demand for Agents.

Originally posted by Vlad(IL):
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?

I am? Then why is the Justice Department continuously investing it:

Competition in the Real Estate Brokerage Industry

//Upshot
Our review suggests that although the real estate industry has undergone a number of substantial changes in recent years â€" in particular as a result of technological advances such as the Internet â€" competition in the industry has been hindered as a result of actions taken by some real estate brokers, acting through MLSs and NAR, state legislatures, and real estate commissions. In addition, consumers likely would benefit significantly from additional knowledge about the range of options available in brokerage services and fees. Based on the foregoing, the FTC and DOJ recommend the following to help maintain competition and protect consumers in the real estate brokerage industry.

//End Upshot

Seems pretty clear cut to me…I guess those folks are all wrong too.

Originally posted by Vlad(IL):

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?

Well I guess I am not part of that “everyone�. In virtually every other industry people use blue books, online pricing models, etc. to value assets and the model works just fine.

Originally posted by Vlad(IL):
The reality, at least in the Real Estate Industry, is that the fees are negotiable. If you can find a broker who will list you home for free, more power to you (I know of at least one agent who will sell your home for free, you'll pay only the co-op which will be reduced to zero if the same agent finds a buyer, as long as you buy your next property through them). And that's okay.

No…the reality is that agents collude to maintain fixed prices for the bulk of real estate transactions and they are largely obsolete with new technology. They lobby states to set laws that limit competition and choice for consumers as is described in the article above.

Originally posted by Vlad(IL):
Wrong. There is no collusion in the industry. Prove otherwise. Is there a standard commission? What is it?

I did…see the article above and ask any rookie agent what the standard commission is. I am sure you will get a quick answer.

Originally posted by Vlad(IL):
How about title company cartels?
I don’t like those either, but that is not what this thread is about.

Originally posted by Vlad(IL):
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.

Seems to have plenty of merit to me…if it didn’t why would the article above have been published?

Someone in another country is certainly capable of doing the same work for CERTAIN tasks much more efficiently and there are not large lobbying organizations trying to maintain a cartel in their name to discourage competition and rights of consumers.

Originally posted by Vlad(IL):
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.

Yeah…and for every successful person that didn’t get the training there are tens of thousands of successful people that DID get the training.

I don’t need to prove it to you…I WORK in the engineering industry and witness a large variance in the quality of engineers every day. Experience and training are not perfectly correlated with higher skills and greater efficiency, but it does matter.

Originally posted by Vlad(IL):
So, don't tell me that a degree and more experience entitles you to more money.

Okay…I won’t. I prefer to let the people that consume the engineering services set the price levels for labor. You seem to prefer for a lobbying arm for Realtors to be allowed to fix the price of their services.

Originally posted by Vlad(IL):

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.

How is that logical from what I have written? When did I ever say you need a degree to design anything? All I said is that the output of engineers varies widely based on training and experience. You are the one claiming that any Johnny-come-lately engineer can design something that someone with 20+ years of specialized training can design.

Originally posted by Vlad(IL):
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?

I use discount listings on the MLS for the most part and I DO use Craig’s List, Postlets, etc. to move product. This has worked just fine for us in most cases.

Originally posted by Vlad(IL):
Except when it comes to Real Estate, whom you call cartels?
Real estate, banking, medical doctors, and a large handful of other industries.

Originally posted by Vlad(IL):
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?

Everywhere! In every locality there are restrictions to who can access pricing data because a cartel owns the inputs.

Originally posted by Vlad(IL):
Price fixing is illegal, and I'm sure those who feel that Real Estate Agents and Brokers are cartels would be the first to complain about price fixing. So, why have you not complained?

My guess is that it's easier to type something in a forum then it is to provide evidence in the court of law.

Yup…much easier. I don’t have the resources to fight every cartel in every industry. I do, however, have the ability to post and ask questions and hopefully engage in civil dialogue about things.

Originally posted by Mike M:
...

In addition, how many of us have been frustrated with a foreign person on a Customer Service Call? I had one person in India try to get me to pay off my mortgage with my Chase Credit Card. Lower pay? Maybe! Better Service? Not even close!!

Some have terrible experience with US based personnel as well.

In a free market, you can cancel your Chase Credit Card and use Citi, or Discover, or use cash.

Good for you for agreeing to work for a salary that you are working for. Would you like it if someone made a suggestion that due to improved MS office functionality (or whatever else...) your real salary should be reduced to half or less of what it is now?

I think those who are not Licensed Real Estate Professionals don't understand the hoops we must jump through internally. The forms that need to be filled out, the disclosures, etc.. Not a difficult task, granted. But the fees for our services should remain negotiable. And lets not think that only our salary is justifiable but everyone else should drop their fees.

Mike, certain things are easier to offshore and certain things are harder. In my opinion, things that are very culturally specific or language / accent / idiom related are harder to outsource. So, your fast food order-taker and pretty much most low-paying consumer voice-based jobs are better not to outsource.

But non-voice based work is perfect for offshoring. This is called BPO - business process outsourcing. The strange thing is that offshoring started by farming out the low-wage jobs but now it is focused on the high-wage jobs. The wage differential is greater for higher-wage jobs and so is the ability of the offshore employee to perform the job satisfactorily.

Within voice based work, certain types of highly technical work is more amenable to offshoring. For example, in one of my previous businesses, we had a network operations center with advanced server equipment. Some of the best server support that we got was from the Indian techs. This is because the nature of the call was itself highly technical and my people in the U.S. who were calling for support were also technically proficient. They simply wanted a solution for their particular problem and the support tech was able to speak the same "language" as the caller. But I agree that for most consumer voice-based work, it makes sense to offshore to countries with a culture that is more similar to that of the U.S. than to India.

Finally, regarding your IRS forms, these are already being prepared offshore by the large accounting firms, so there isn't really any question about whether they can be prepared there or not.

Originally posted by Bryan Hancock:

I am? Then why is the Justice Department continuously investing it:

Competition in the Real Estate Brokerage Industry

//Upshot
Our review suggests that although the real estate industry has undergone a number of substantial changes in recent years – in particular as a result of technological advances such as the Internet – competition in the industry has been hindered as a result of actions taken by some real estate brokers, acting through MLSs and NAR, state legislatures, and real estate commissions. In addition, consumers likely would benefit significantly from additional knowledge about the range of options available in brokerage services and fees. Based on the foregoing, the FTC and DOJ recommend the following to help maintain competition and protect consumers in the real estate brokerage industry.

//End Upshot

Seems pretty clear cut to me…I guess those folks are all wrong too.



Thanks for the link. Did you read the report? It talks about the discount brokers as well. I don't understand how you can allege that using a "discount" broker will boycott your property and at the same time arguing that internet makes the role of the Real Estate Agent almost unnecessary.

Which is it?

The article mentions that non-traditional brokers keep pushing the rate down. One of the suggestions in the article is that increased competition results in agents incurring higher marketing costs to get their client.

In other words, why would it make business sense for an Agent to spend $2000 to get a client who will pay them less than that?

In your opinion, what would be the ideal RE sales comission rate? Would you be happy with 1% total comission? 0.5% for the selling broker and 0.5% for the listing broker?

Also, the above discussion got me thinking for the Real Estate Investor profits. Why should a consumer pay MORE money for a wholesaler to flip their property?

Vlad, you must be a realtor. I cannot imagine anyone else thinking that the fairly uniform expectation of a 3% commission is the result of a normal free market competitive system. (Sure, anyone can offer a lower commission and have their home sitting on the market for months if not years.)

I think Bryan was not saying that it is easy to sell a property without a broker. What he was trying to say is that the primary "function" of a broker seems to be mls access and its value is derived from the fact that it is a closed system. It should be easy enough to make the whole thing an online system (not just the realtor.com features) but we still have issues to deal with such as the security of properties, etc. So I do think that we need agents to perform certain functions but I also agree with Bryan that the 3% number would not have arisen in a normal free market competitive environment.

Originally posted by Vikram C.:
Vlad, you must be a realtor. I cannot imagine anyone else thinking that the fairly uniform expectation of a 3% commission is the result of a normal free market competitive system. (Sure, anyone can offer a lower commission and have their home sitting on the market for months if not years.)


I'm an Agent, but very part time. Mostly help family and use MLS to learn the market and spot market trends, rehab opportunities. I have a full time job which keeps me busy.

Question - how do you think boycotting happens? The 'worst' an agent can do, without violating any fiduciary duties, is to have their client, their buyer, sign a buyer brokerage agreement where the compensation would be x% (again, negotiable).

If the buyer refuses, well, the agent keeps looking for another client.

If the buyer signs and wants to see a property that offers $1 co-op fee, the agent should have no problem showing the property. When the buyer wants to make an offer on the property, they'll include the difference between x% and $1 to satisfy their agreement in their total cost.

And instead of all of the comission coming from the seller, most of the buyer broker comission will come from the buyer's funds, no problem.

Originally posted by Vlad(IL):

Thanks for the link. Did you read the report?

I skimmed it, but didn't have the time to read every detail. This week was especially busy for me and I just flew back into Austin from Milwaukee, which is why I am posting so late.

You're welcome for the link. It appears the discussion is coming back to earth now.

Originally posted by Vlad(IL):

It talks about the discount brokers as well. I don't understand how you can allege that using a "discount" broker will boycott your property and at the same time arguing that internet makes the role of the Real Estate Agent almost unnecessary.

The internet CERTAINLY replaces a large part of the functionality that an agent served in the past. Agents boycott properties with lower commissions and most people are too uneducated to know that they don't have to use an agent. Since the custom has been for sellers to pay for the buyer agent's commission in the past the buyers *think* this service is free to them. Consequently, they use the services and are steered to property offering a full commission to that broker. You can't seriously tell me that this doesn't happen...can you? Are you claiming that people will be shown properties with a 2% commission instead of a full commission? Come on!

This problem is compounded by the fact that the buyer doesn't KNOW which properties have which commissions and thus the buyer's agent has a financial incentive to steer them away from what may be their best property because of the commission structure.

Originally posted by Vlad(IL):
Which is it?
Both! There is no inconsistency!

The listing broker isn't the problem...it is with the buyer's agent/broker as is described above.

Originally posted by Vlad(IL):

The article mentions that non-traditional brokers keep pushing the rate down. One of the suggestions in the article is that increased competition results in agents incurring higher marketing costs to get their client.
And the corollary is that the higher marketing costs are necessary because agents are functionally obsolete like buggy whips...hence a thread/discussion on whether or not they are worth the commission anymore.

Originally posted by Vlad(IL):

In other words, why would it make business sense for an Agent to spend $2000 to get a client who will pay them less than that?

It doesn't...and it also no longer makes business sense for people to book travel through expensive agents, people to buy computers retail when they can buy them online, etc. Other industries without the clout and lobbying power transform and transmogrify swiftly. Others with entrenched lobbying power extort fees from consumers and tap dance around free market principles.

Originally posted by Vlad(IL):

In your opinion, what would be the ideal RE sales comission rate? Would you be happy with 1% total comission? 0.5% for the selling broker and 0.5% for the listing broker?

It depends on the situation. It certainly should not be 6% in every case though and there should not be groups lobbying to maintain the status quo when there are obviously better models with today's technology.

Originally posted by Vlad(IL):

Also, the above discussion got me thinking for the Real Estate Investor profits. Why should a consumer pay MORE money for a wholesaler to flip their property?

Because those prices are set in the open market and there isn't a lobbying organization actively trying to sculpt laws to support a system that no longer is sustainable. If the property is priced too high to house won't move. If agent's commission is priced too low the cartel doesn't market the property to buyers who don't know any better.

Apples and oranges...

Please let me interject a few thoughts.....

1. I believe that the majority of buyers preview the internet and other media before directing their buyer's agent to which ones they would like to see. Even the term "buyers agent" suggests other aspects beyond identifying a property. This may counteract “boycotting� by agents.

2. The funds for the commission comes from the buyer. They provide the cash for the deal and as has been pointed out, the buyer can pay his agent whatever is in their contract, even when buying a discount listed property.

3. Many buyers are comfortable working with an agent that they feel represents their best interests (if it happens, is sometimes debatable).

4. It wasn’t that long ago that MLS books were used to market and provide comps for properties. Then agents were more likely to be able to locate properties for buyers. Isn’t the internet great?

5. Both sides of this issue are presenting some good arguments!

Bill

Originally posted by Bill Patterson:
2. The funds for the commission comes from the buyer. They provide the cash for the deal and as has been pointed out, the buyer can pay his agent whatever is in their contract, even when buying a discount listed property.
This is a specious argument and I have never understood how people buy it. The funds for BOTH sides of the transaction come out of the seller's equity, which necessarily affects the pricing for the transaction. Absent this commission the house would sell for less in a frictionless market and the buyer would save the difference on the purchase.

Originally posted by Bryan Hancock:


The internet CERTAINLY replaces a large part of the functionality that an agent served in the past. Agents boycott properties with lower commissions and most people are too uneducated to know that they don't have to use an agent. Since the custom has been for sellers to pay for the buyer agent's commission in the past the buyers *think* this service is free to them. Consequently, they use the services and are steered to property offering a full commission to that broker. You can't seriously tell me that this doesn't happen...can you? Are you claiming that people will be shown properties with a 2% commission instead of a full commission? Come on!

What are you saying Bryan? The poor uneducated public has been known to try to get the Agent out of the loop by trying to negotiate the sale of the property outside of the Agent.

Listen, if the property is Listed on Realtor.com, and the buyer sees it, or the buyer notices it while looking at other properties in the neighborhood, HOW is an Agent able to boycott this property?

If the buyer is refused showing, they can contact the listing agent directly! Listing Broker and Agent info is on Realtor.com! Come on Bryan. Are you suggesting that the Listing broker will boycott their own property?

Originally posted by Bryan Hancock:


This problem is compounded by the fact that the buyer doesn't KNOW which properties have which commissions and thus the buyer's agent has a financial incentive to steer them away from what may be their best property because of the commission structure.

Hmm...and how does that happen? Surely you must know of one instance.

The buyer says... Hey, I want to see this 123 mainstreet (offering very low commission, unknown to buyer but only to their agent) . Are you suggesting that this Agent will lie (that the property is under contract, or that there is something wrong with it?).

This could happen, granted. BUT.. the Agent is likely to loose their license over this. Especially if the buyer drives by a few days later and notes that there is an open house, etc...

If an agent lies, their license and livelihood is in jeopardy (if they are a Full Time agent).

I'd worry about Real Estate Investors lies before I'd worry about ANY Licensed Agent out there.

Originally posted by Bryan Hancock:

Originally posted by Vlad(IL):
Which is it?
Both! There is no inconsistency!

The listing broker isn't the problem...it is with the buyer's agent/broker as is described above.

And the buyer who can access the internet cannot see the Listing broker's contact info? Come on, it's all on realtor.com!

Originally posted by Bryan Hancock:

Originally posted by Vlad(IL):

The article mentions that non-traditional brokers keep pushing the rate down. One of the suggestions in the article is that increased competition results in agents incurring higher marketing costs to get their client.
And the corollary is that the higher marketing costs are necessary because agents are functionally obsolete like buggy whips...hence a thread/discussion on whether or not they are worth the commission anymore.

Which is it? Do we have a largely uneducated public that can be easily steered towards higher paying cc proerties by dishonest Realtors outthere?

Or do we have a situation where the public does not need any Real Estate Agents and they are all on the verge of extinction, just as Travel Agents?

Good thing there are Investors to educate the public and serve in the *public's* best interest!

Originally posted by Bryan Hancock:
Originally posted by Vlad(IL):

In other words, why would it make business sense for an Agent to spend $2000 to get a client who will pay them less than that?

It doesn't...and it also no longer makes business sense for people to book travel through expensive agents, people to buy computers retail when they can buy them online, etc. Other industries without the clout and lobbying power transform and transmogrify swiftly. Others with entrenched lobbying power extort fees from consumers and tap dance around free market principles.

I thought you were using a flat fee broker! What are you complaining about?

Originally posted by Bryan Hancock:

Originally posted by Vlad(IL):

In your opinion, what would be the ideal RE sales comission rate? Would you be happy with 1% total comission? 0.5% for the selling broker and 0.5% for the listing broker?

It depends on the situation. It certainly should not be 6% in every case though and there should not be groups lobbying to maintain the status quo when there are obviously better models with today's technology.

It's not 6% in every case. Unbelievable that you are still saying that it is after YOU admitted to using a flat fee broker.

Originally posted by Bryan Hancock:

Originally posted by Vlad(IL):

Also, the above discussion got me thinking for the Real Estate Investor profits. Why should a consumer pay MORE money for a wholesaler to flip their property?

Because those prices are set in the open market and there isn't a lobbying organization actively trying to sculpt laws to support a system that no longer is sustainable. If the property is priced too high to house won't move. If agent's commission is priced too low the cartel doesn't market the property to buyers who don't know any better.

Apples and oranges...

Very hypocritical answer, Bryan. I thought you just claimed that the public is uneducated. The public can be 'steered' away by the greedy Realtor wanting to make a higher comission.

Yet, the same public giving away a MUCH bigger piece of their equity to a Real Estate Investor-Wholesaler (unlicensed, btw) is fair and just?

Come on Bryan!

Originally posted by Vlad(IL):
What are you saying Bryan? The poor uneducated public has been known to try to get the Agent out of the loop by trying to negotiate the sale of the property outside of the Agent.

Yeap...they sure have, because the agent serves VERY LITTLE utility if a buyer knows what he or she wants and does the research on their own.

In the case where they want the "chauffeur" service they use the same specious argument that was cited above....that the "seller pays the commission." WRONG! The commission is paid by BOTH parties in the form of higher overall prices because of the lobbying arm of NAR strong arming consumers and working to maintain their cartel.

Originally posted by Vlad(IL):
Listen, if the property is Listed on Realtor.com, and the buyer sees it, or the buyer notices it while looking at other properties in the neighborhood, HOW is an Agent able to boycott this property?

They aren't...this process bypasses the cartel altogether and it is what wise consumers are doing all over the country right now. I know the founders of Yigdigs.com and Dwellgo.com and they are working hard to eliminate the cartel's influence.

It is interesting that you bring this up because it is a strong argument for the fact that agents DO NOT provide value. Maybe you should rethink your debate strategy a bit.

Originally posted by Vlad(IL):
If the buyer is refused showing, they can contact the listing agent directly! Listing Broker and Agent info is on Realtor.com! Come on Bryan. Are you suggesting that the Listing broker will boycott their own property?

Nope...Again, I am suggesting that this is very blatant evidence that the buyer's agent provides NO VALUE to the buyer anymore or that the large proportion of the value they once provided no longer exists.

The problem arises because the buyer thinks the agent's commission for their side is "free" and because many are steered to certain MLS listings because of the fees. If this isn't a problem as you claim why don't the agents disclose the commissions for each property shown to the buyer as they show them each property?

Originally posted by Vlad(IL):
Hmm...and how does that happen? Surely you must know of one instance.

? I have no idea what this passage means.

Originally posted by Vlad(IL):
The buyer says... Hey, I want to see this 123 mainstreet (offering very low commission, unknown to buyer but only to their agent) . Are you suggesting that this Agent will lie (that the property is under contract, or that there is something wrong with it?).

No...I am suggesting that what is described above ISN'T the way the average buyer agent works. The average agent steers buyers based on commissions that are not disclosed and run counter to the agent's fiduciary duty. When it is a choice between a supposed fiduciary duty and a larger paycheck the paycheck wins every time.

Originally posted by Vlad(IL):
This could happen, granted. BUT.. the Agent is likely to loose their license over this. Especially if the buyer drives by a few days later and notes that there is an open house, etc...

Nope...the agent isn't likely to "loose" his license over it because the whole system is set up in a manner that pits the agent's commission against what is in the best interest of his/her client as is described above.

Originally posted by Vlad(IL):
If an agent lies, their license and livelihood is in jeopardy (if they are a Full Time agent).

There is no need to lie. The whole system is a closed system that is set up to maintain the cartel's power. Hence there is little risk to losing a license for behavior that runs counter to what is in the best interest of the client.

Originally posted by Vlad(IL):
I'd worry about Real Estate Investors lies before I'd worry about ANY Licensed Agent out there.

Nice to know...it isn't what this thread is about though and is completely off topic.

Originally posted by Vlad(IL):
And the buyer who can access the internet cannot see the Listing broker's contact info? Come on, it's all on realtor.com!

Yeap...sure is...again, this is a strong argument for the agent providing value far lower than their price of commission.

Originally posted by Vlad(IL):
Which is it? Do we have a largely uneducated public that can be easily steered towards higher paying cc proerties by dishonest Realtors outthere?

Or do we have a situation where the public does not need any Real Estate Agents and they are all on the verge of extinction, just as Travel Agents?

Both

Originally posted by Vlad(IL):
Good thing there are Investors to educate the public and serve in the *public's* best interest!
Nice token red herring passage. Saying that Realtors are in the business of protecting the public's best interest is naive at best.

Originally posted by Vlad(IL):
I thought you were using a flat fee broker! What are you complaining about?

I am using a flat fee broker and I'm not complaining. I am responding to your posts as they are presented.

Originally posted by Vlad(IL):
It's not 6% in every case. Unbelievable that you are still saying that it is after YOU admitted to using a flat fee broker.

Nope...just in the VAST majority of the cases where people engage the supposed services of a fiduciary that does not have their best interest in mind because of the way the WHOLE SYSTEM is set up.

Originally posted by Vlad(IL):
Very hypocritical answer, Bryan. I thought you just claimed that the public is uneducated. The public can be 'steered' away by the greedy Realtor wanting to make a higher comission.

Yet, the same public giving away a MUCH bigger piece of their equity to a Real Estate Investor-Wholesaler (unlicensed, btw) is fair and just?

Come on Bryan!

Again, this is not the topic of this thread. If you want to debate this go start a separate thread.

Boy, some good points and some really skewed and mislead opinions, lol,

Good post Bill

The funding comes from a buyer, the source of funds paying any obligation of the seller are paid from those funds. It sounds better to say the seller pays the commission, but that is not true, it is paid from the loan or purse of the buyer. The seller is responsible for the debt created by his contract, just as a plumbing bill might be out of closing...it's necessary to provide clear title. You can create an obligation or a lien on a property and not be the one who pays for it.

A buyer's agent does alot more in a deal than the listing agent, IMO. For those simple minded in the real estate buying process, a listing aget can skin a buyer and it is the buyer's agent that guides them. In the event there is a problem after closing the buyer's agent takes the first hit from the liability of the deal if his client has a problem.

I agree that the system is stacked and is controlled business to a large extent.

Any agent that steers a buyer from or to another property can be looking for trouble. An agent that refuses to show a property that is listed on the MLS is most likely in violation of state law. If a proposed buyer who is willing and able to purchase any property listed for sale is denied access or "steered" away from the property requested, and that buyer files a report, that agent can be out of business.

It has even gotten to the point, under ADA, that if someone with special needs calls a Realtor and wants to see a property, that Realtor will need to make accomodations. That can mean going and picking that person up at thier residence!

Sometimes a Realtor earns more than they are paid, sometimes, IMO. Usually? Probably not.

IMO! I'll let you all back to it.....later,

Originally posted by Bryan Hancock:
Originally posted by Bill Patterson:
2. The funds for the commission comes from the buyer. They provide the cash for the deal and as has been pointed out, the buyer can pay his agent whatever is in their contract, even when buying a discount listed property.
This is a specious argument and I have never understood how people buy it. The funds for BOTH sides of the transaction come out of the seller's equity, which necessarily affects the pricing for the transaction. Absent this commission the house would sell for less in a frictionless market and the buyer would save the difference on the purchase.


Hey Bryan...think about it a minute. Equity is just paper at best and maybe a dream at worst until a buyer comes along and changes it to cash (or note, or another property, etc.)! Back in the old days when I first started doing buyer brokering (as we used to call it), the buyer did pay per contract with his agent and we would negotiate the listing commission down to compensate for it. This was before all of the agency disclosure that makes things a lot simpler now. I still think that the bottom line is that the buyer supplies the cash for all of the commissions, other costs of sale, as well as turning the seller's paper equity into a true asset.
Bill

I agree that there is a lot of hoped-for equity in the seller's mind. One of the reasons that the hoped-for equity ends up being light is because the seller is duty bound to pay for the "free" services of the buyer's agent by a system that has been promulgated for years by NAR.

If the buyer agent's primary function in days past was to locate the property for the buyer and that was what consumed a large portion of their effort why should they still be compensated the same for that effort when the same function can be accomplished with a few clicks of a mouse? If the true intent of the buyer agent is to be a fiduciary why should it not be a REQUIREMENT for them to disclose their commission on each property shown AS IT IS SHOWN? That would eliminate the moral hazard that is implicit to the whole process.

The truth is that the whole system is set up to protect the interests of THE AGENT. All of this hogwash about fiduciary duties, protecting buyers/sellers, etc. sounds great and keeps people employed at the expense of the consumer. That is the definition of cartel-based pricing models IMO.

I am sure others disagree, especially those enabled by the current system. The whole point of this thread was for people to take a stand on why the commission structure and model hasn't changed under a system that obviously consumes less time with all of the new technology available. Why should it cost 6% of a sale in agency fees when that same pricing model supported all of the effort when things were MUCH less efficient than they are today?

Bryan, just as a point of reference, in some of the larger Asian economies, agents make between 0.5% and 2% depending on the value of the property and the price that they obtain. The higher the price (relative to FMV), the higher the commission the seller is willing to pay.

Interestingly, in most countries, both the buyer and the seller pay a commission for agency services and the rate can vary depending on what is negotiated.

The total cost of agent services (including both buyer and seller commissions) typically ranges between 1% and 3%.

Agents who obtain a tenant typically get paid 2 to 4 weeks worth of rent for a one year lease.

The market is highly competitive and the rates are not fixed so it pretty much is what you negotiate. In the absence of the NAR, I suspect that we would have rates similar to that in the U.S.

One other point of difference is that agents do not have exclusive rights. Buyers can engage the services of multiple agents in trying to sell the property and whichever agent finds them the property gets the commissions. There is no MLS and sellers also sometimes engage multiple agents to try to sell the property, although usually there will be just two or three agents trying to sell a property while there may be a dozen agents engaged by the buyer.

The funny thing is this. The lack of the MLS is actually a big impediment to a sale because having a single database for listing is actually a pretty big advantage. And yet the typical property in the larger markets of Asia goes under contract within days after it is listed. I think agents are just hypermotivated to get a deal under contract (because another agent will get the commission otherwise) and work really hard and that more than offsets the inefficiency caused by the lack of a database.

I guess it is a different world today, Bryan. Where Realtors spend less time locating a property, buyers have identified more properties that may meet their needs, so amount of time showing properties may be greater. Also, there are so many more disclosures (agency, lead paint, etc.) and requirements for closings which eat up the agent's time. Transactions are full of pitfalls that the average seller or buyer may not understand. A hand shake is not all that is needed, today.

Our Buy / Sell agreements here in Michigan do state the percentage of the commission that goes to the selling agent and the buyer's agent. The services of the buyer's agent is not "free" and who pays for it, who cares? I still say it comes out of the buyer’s source of funds. It makes no difference to the seller's bottom line if the buyer pays his agent a $5,000 commission for his services, since he will negotiate the listing agent's commission down as we did in the old days. Notice that I said "Negotiate The Listing Agent's Commission"! At the same time, the buyer's offer will take into consideration, the buyer's costs of purchasing the property (the commission paid to his agent, etc.), so his offer should be less than if the commission was all on the seller's side. You can shuffle the expenses back and forth on the closing statements, but in the end, the net value of the property is what the buyer will spend including his costs and what the seller will accept, net of his costs.

If you don't think Realtors are worth their commission anymore, then don't pay them! Do it yourself, hire a discount broker, whatever! There are probably a lot of services that you can do for yourself rather than hire a professional to do. It's your time and you are the best one to decide how to spend it.

Bill

We rarely use agents to move our property Bill.

If the system was just opened up to require the sales information to be in the public domain we could eliminate a bunch of fees and move on with life.

Sales information is in the public domain, now. It is public record at your treasurer’s office or assessor’s office. Realtors and their MLS system is a private system and the information that they have compiled is theirs to do with as they see fit. I'm glad that you can save the costs of using Realtors in selling your properties! $$$is good!
Bill

Wow ! this topic is CRAPTASTIC ! LOL

Man the views some of you have are crazy.

Some not posting but reading this venom will NEVER want to work with you on a deal because of your views of brokers/agents.

Really,really think about that for a minute.

I think in this topic there are many problems.

1.You ARE NOT required to be a REALTOR to conduct real estate as a licensed broker/agent.Now your local state MLS might be owned by a REALTOR organization or not and require it.

Also if they don't require it your Broker might require it in their Independant Contractor agreement.

In my state Georgia you ARE NOT required to be a REALTOR for mls access.I am the broker owner and have 24 agents.

2.There is collusion from investors just as much as NAR.Many people will do illegal or unethical things for money.I don't know how many times investors will play with fire only to be burned when HUD comes back and says the scheme that an investor ran is now illegal and they will be prosecuted for it.

3.If a broker/agent can't defend their commission do you really want them helping you with your buying or selling??

My answer would be NO.They are simply going to roll over and cost you money and are WEAK.

I don't negotiate my fee period.It's my business model and I create the rules.I have had sellers say agent XX only charge blank percent but I want you.

I say my fee stays the same and have a good day.Some call back and some don't but I keep on making money and having the life I want.

As far as bonuses those are CRAP as well.Especially when they are tied into certain conditions that must be met.Do you think most brokers/agents trust investors??Really??

I am in investor myself and have long term relationships with other investors I work with.I am not looking for some huckster trying to get cheap service one time and then use someone else the next time.

Many know bonuses tied into conditions are a waste and the sellers will look for any out to screw the buyers broker.This is why to just pay a higher buyers co-op is better.

The TRUTH is you will get more showings with a higher commission that is guaranteed IF the property is priced correctly for it's condition and location.

The statistics are about 86 percent of new agents won't last a year in the business.Knowing that they will likely only do a few deals before burning out they are looking at 2 things.

1.The broker will have them on a fat split where the agent is on a 50/50 or 60/40 split their first few transactions.

2.With only making a few sales they want them to count (big co-ops).Why do you think builders are always paying higher co-ops??

Many experienced brokers/agents are listers as you can handle multiple sellers but not as many buyers at once.So that tells you a ton of buyers agents are NEW AGENTS hungry for money.

As far as selling off of list price it depends on what you are priced at.

Is the market trending downward,flat,or upward and at what percent each week,month?????

What are the absorption rates for your area??

In a buyers market which is most of the country right now buyers will look for the best product in the bottom 50% of pricing of RECENT SOLDS.

I thought this whole topic was pretty funny and I knew there would be strong opinions on both sides.

Anyways off to list more properties.Have a 1.5 billion dollar fund company setting up for acquisitions starting October 5th I am working with.

bye bye

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