Are Realtors Worth The Commission Anymore?
Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
Are Realtors Worth The Commission Anymore?
Most Popular Reply
Originally posted by Kristian Peter:
The next part of the equation is the ability to Close the transaction, and this is the part of the sale that sellers never seem to understand or appreciate.
This is actually the part of the equation where most agents I've encountered are really bad (not all, but most)...
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)...
96 Replies
- Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes16y
Real estate agents are in commissioned sales. Many people who work in commissioned sales "work for free" when they try to sell but aren't successful. For example, my daughter, a hair stylist, just started at a new salon that is commission only. Being new at this salon, she doesn't yet have an established client base. Yesterday she had no clients. So, she worked all day without pocketing a penny.
- Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes16y
Originally posted by Joel Owens:
Wow ! this topic is CRAPTASTIC ! LOL
I'm glad you liked it Joel.Your rambling response didn't really have a thesis so it is difficult to respond to. I guess it was too craptastic for you to understand.
- Involved In Real Estate · Anderson, SC · Member since 2008 · 350 posts · 70 votes16y
Originally posted by Bryan Hancock:
Originally posted by Joel Owens:
Wow ! this topic is CRAPTASTIC ! LOL
I'm glad you liked it Joel.
Your rambling response didn't really have a thesis so it is difficult to respond to. I guess it was too craptastic for you to understand.
I think you quoted the very point Joel was making :wink:
- Residential Real Estate Agent · Long Beach, CA · Member since 2008 · 432 posts · 63 votes16y
Wow, I've let this post get away from me and I just scanned over all the posts!
A couple of points I'd like to make:
--Vikram: Ocwen bank does provide quite a few listing agent responsibilities via India and it's a total mess! I was the buyer's agent on a deal with Ocwen and it took 3 times longer and 100 times more stress getting that deal done than it should have taken. I've heard the same experience from other agents dealing with Ocwen India.
--The post that said it is "typical" for agents in southern California to negotiate 1.5% listing and buying commissions...well, I haven't seen hardly any of that in my area unless it's a listing for a relative. And here's why...
--Commission for the buyer's agent...I sold a condo conversion a few years ago and the investor didn't want to coop with buyer agents (selling agents). I told him it was a mistake because next door was another conversion offering 3%. I literally heard an agent in our units at an open house pointing out all the negative aspects suggesting they look next door at the nicer units; they all got excited about what was next door. After that my investor offered 2.5% but there's no telling how many potential buyers he lost.
--Regarding the worth of a buyer's agents...my average length of time working with a buyer is between 3-6 months. The market has just slowed down but in the past I've written dozens of offers for a single client. In our market the low-priced/hot properties get multiple offers (sometimes dozens of offers). I have earned every penny!
Like I said before, some sales are easy and some are horrible, so in the end it evens out. (If it were so easy then everyone would be a successful millionaire agent!)
I think you should try it yourself just like doing your own tax return on Turbo Tax; if it's easy then keep doing it yourself but if you think you can make or save more with a professional then go that direction.
Originally posted by Shari Posey:
--Vikram: Ocwen bank does provide quite a few listing agent responsibilities via India and it's a total mess!
Shari, who or what is Ocwen? I suspect you were responding to something I did not state. I am not suggesting using people in India as listing agents for U.S. properties. I was describing the way the RE market works in a place withour the NAR just for purposes of comparison of an organized system to one that is not organized.I do agree with your main points, though. If it is not worth paying an agent for a service, do not pay. If it is worth it, do pay.
I do believe, though, that all these posts are missing Bryan's main point, which is that the internet may have changed the underlying value provided by agents. And it may continue to do so in the future. While agents will continue to have a role to play in transactions, certain aspects of their service become unnecessary because of the internet.
I believe another of his main points was that in a truly free and competitive market, you will see a wider variety of prices (commission rates) than we see in the RE agent market.
Having said that, I am sure good agents are worth their 3% or even more and bad agents are probably not worth much. Like in any other industry, there will be some great ones, some lousy ones and a bunch in the middle.
- Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes16y
Ocwen is a loan servicing company. It would not be a stretch to think they have outsourced many tasks, as Shari indicates.
- Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes16y
For the record I agree with what Vikram wrote and those are most of the main thesis points. If anyone would like to debate these points please do so. People who come on the post and call it craptastic and/or whine without any substance to their post need not reply.
- Real Estate Investor · Portage, MI · Member since 2010 · 470 posts · 315 votes16y
Originally posted by Bryan Hancock:
For the record I agree with what Vikram wrote and those are most of the main thesis points. If anyone would like to debate these points please do so. People who come on the post and call it craptastic and/or whine without any substance to their post need not reply.
"How Do We Get More People To Engage In BP Discussions?" I'm sure that this will help a lot! You need to realize that people communicate their ideas in many ways. Encourage them to do it! I've said my two cents worth on this post. A debate is no longer a debate when the points and counter points are simply re-hashed.
Bill
- Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes16y
Agreed...and I like it when people contribute...I should just be done constructively.
Does anyone have counter arguments to Vikram's response?
- Residential Real Estate Agent · Long Beach, CA · Member since 2008 · 432 posts · 63 votes16y
Regarding the premise that the internet is rendering real estate agents less important...I just don't see it. In fact, I just closed a deal last week with a couple who I met at one of my open houses. They were using the internet to find open houses and to contact the listing agent on particular houses. They said they were frustrated it was so hard to coordinate a listing agent to show them the property and some don't even return the calls. They were thrilled when I offered to work with them. What I see is that the internet is how a buyer starts to get familiar with an area and the price ranges but I estimate more than 90% end up with an agent who works with them to get a house. On the listing side, the internet has been a great way to drive interest and traffic to a house but unless a seller is going to sit at home all day or leave a combo lockbox on the house for anyone who wants to see it, I can't imagine how you would get enough buyers to view it. Additionally, I think the agent provides a valuable seperation between emotions on both sides of the deal--I'm probably talking about residential homeowners not investors although I've seen some emotional investors, too. As others have said, agents handling paperwork and our E&O insurance are other benefits for both parties.
Actually, there have been ways the internet has actually hurt the process: scams particularly on renters, Zillow inaccurate values, Refin's out dated listings, etc.
This argument about real estate agents' worth is an old one and the internet has been around as a way of life for more than a decade. Entrepreneurs are constantly trying new models (online auctions, ebay, HelpUSell, Buy-Side, etc.) but nothing so far has really caught on. That's not to say something won't in the future (We sent a man to the moon!) but until you have been a real estate agent, I just don't think you have a grasp for the amount of work and stress we go through...remember, we are selling dozens of properties, not just one every couple of years.
One last point: regarding commissions and NAR's "strong hold"... commissions are ALWAYS negotiable. If you interview multiple agents you will get multiple commissions. You should pick the one who is willing to get the job done for the commission you are willing to pay. Some agents will work for 1% and some won't work for less than 7%. Maybe the problem you have run into is nobody is willing to work for you for the price you want to pay. As someone who is often in commission negotiations, trust me--there is no price fixing. Shari, I do agree with what you have said. But I think my post may not have been clear enough so let me clarify.
When I said the internet has replaced some of the functions of an agent, I did not mean that agents are no longer needed. I sell lots of houses and I would not feel particularly comfortable with anybody having the lockbox code to walk into the house and steal stuff. I would prefer access to be limited to buyers' agents and to people who enter when I or my listing agent is present.
But I think some of the functions that used to be performed by agents are becoming redundant. I also think that different buyers may have different needs and some may be more DIY people and some may need more haand-holding. So some may wish to use an agent in the traditional manner while others may wish to use a more limited-service agent.
Regarding commissions, I think you missed my point. Listing agent commissions are, indeed, highly negotiable. But try listing a property with the buyer's agent getting less than 3% (or 2.5%) and see for how long your property sits on the market. (To be honest, I have no problem paying the 3% and am merely commenting on the fact that the fee seems fairly uniform regardless of quality of service. I am quite happy to pay the commission and get rid of my properties.)
- Residential Real Estate Agent · Long Beach, CA · Member since 2008 · 432 posts · 63 votes16y
Vikram, I think we agree to disagree. I get your points; I just don't agree with them.
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes16y
Bryan,
I have read your points and I certainly don't agree with them.No WHINING here I just set some things straight in my post on issues that people were mis-informed on.
If you believe brokers/agents have no to little value because of the internet then you will find discounters for your business.
That's fine you want to operate that way.
There is plenty of free trade in the market.There are companies that will list your property for 500 bucks.Just picked up that expired listing and sold it.
Assist-to sell,C-21 click-it,etc. is all the same stuff.
Many buyers brokers/agents AVOID these listings because the companies offer limited service.Then your left dealing with a seller where you could have implied fiduciary duty which can be a legal mess because the listing company is non-responsive.
Brokers and agents that are licensed are trained in contracts and held to a higher standard than investors.
I read all of your posts in this discussion and to me those were ramblings of all the reasons brokers/agents are overpaid etc.
I hear and understand Vikram's point of view and also do not agree with it.There are agents in my market that list for say 2 percent or 1.5 when the investor gives them many properties to sell.That is a choice they make.
I turn listings down all the time as there are certain people you don't want to work with.
I just think this is a dead topic.You will have many investors say brokers/agents are overpaid and you will have very few brokers/agents agree with that statement.
It all depends on the side of the fence you are on.Everyone has a different perspective when it benefits them and their interests.
- Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes16y
Agents aren't, "Trained in contracts." That is what lawyers are trained in. Agents are trained to fill in boxes in contracts that buyers and sellers can easily do by themselves with a little research.
When you come on and immediately call something craptastic you can expect snide comments back buddy. Let's try to keep things civil. If you think the topic/thread is dead feel free to stay out of it. I am sure nobody will be crying in their beer over it.
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes16y
Bryan,
I don't think you see the value brokers/agents have as you do many things yourself which is fine.
You said it yourself as all we do "is fill in boxes".
Nothing wrong with that thinking but expecting a majority to agree with that thinking is not realistic.
If all brokers/agents did was "fill in boxes" then FSBO would handle all business in real estate and my industry wouldn't exist.
87% of For Sale By Owners end up listing and selling with a broker/agent.On average a FSBO sells for 16% less than a listed property does.So if you take out a 6% commission you are still 10% ahead of the game and are not doing the work.
These are actual statistics and data.
Nothing personal we just agree to disagree.
All the best and moving on to more topics elsewhere. :)
- Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes16y
70% of statistics are completely made up...see I can do it too. Without verifiable links from reputable sources I don't buy it.
And yeah...agents AREN'T trained in contracts...they fill in boxes. Lawyers are trained in contracts.
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes16y
Bryan,
The point I am making is sometimes people think since they can do it all then EVERYONE can do it all.
The source for the statistics is data collected for NAR each year from an independent third party.Of course you will most likely say the data isn't worth anything.
You can take numbers and data and position them to bolster your position of course. Last time I checked NAR didn't invent that and every corporation in America massages data for their benefit.
No matter which argument you make one thing rings true.
The BOTTOM LINE is FSBO has been around forever. If it worked that well and there was no need for brokers/agents the industry wouldn't exist.
Attorneys some are good but some will rob you blind.They lure you in with a per hour rate and then try to drag the process out to make more income for themselves.
I have seen attorneys absolutely sink deals for clients and make mistakes.An attorney is a contract negotiator and many know nothing about real estate values or the art of the deal.
If you have time to do everything yourself that is great.Many of my clients don't have time.I handle problems for them and get paid very well for it.
As I was posting this to you I had to remember something. Real estate practices vary by state.In GA we are unusual in that we use a closing attorney instead of a title company to handle documents.
All the attorneys do here is prep documents for closing and be there for the lender. In GA the brokers/agents negotiate real estate contracts.
I know in New York and probably other states they hand over negotiations to attorneys.So my state is different in that respect. I could see maybe if a broker/agent had a much more limited capacity than I do in another state it might be different.
Remember also that unless they are a principal broker/owner like I am that they have to split the money with the head broker.
If you want a sobering statistic about the real estate industry the average income is about 35,000.That averages high producers to the ones that maybe do one sale a year.
Basically if you drew a pie chart and pulled out cost for brokers/agents there would be very little left in some cases.
There are some brokers and other investors that have been saying for the last 10 years that the sky is falling and that brokers/agents will be hourly paid employees.
Hasn't happened. I am one of the types that doesn't get mad at the system.I just look at the current system and use it to maximize returns to my advantage.
- Residential Real Estate Agent · Corona, CA · Member since 2008 · 21 posts · 3 votes16y
I think you should save the 6% and stand out front of your home with a cardboard sign. Who needs a Realtor anyway.
Full Disclosure: I just told a friend who needed bypass surgery to fire his surgeon and take care of it himself. After all, there is a ton of liquid information on the internet regarding the topic.
- Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes16y
Absolutely ridiculous!
Why do Realtors insist on comparing themselves to surgeons? Insane!
- Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes16y
Fuller Disclosure:
Cameron just posted in another thread that the "bank isn't interested" if an investor submits an offer "below market price." Josh asked him if he presented the offer to the bank as he is supposed to do and we have not received an answer for over a day.
I guess brain surgeons aren't required to be too smart today. I hope I never get a tumor!
As a seller I would rather have a bum with a cardboard sign in front of my house than someone that won't present offers that are made to me. You know...it is MY house after all...not the Realtor's.
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