I received several questions about real estate agents.Â For example, most folks donâ€™t understand the difference between full-service brokers and discount brokers.Â Among the public there are more myths than facts.Â In todayâ€™s column Iâ€™m going to tackle some of the popular myths.
Myth #1:Â Real estate agents make too much money.Â
False.Â Â According to the Bureau of Labor Statistics, the average real estate agent made just over $40,000 in wages, salaries, or commissions in 2008.Â For 2009, the average agentâ€™s income dropped to just over $35,000.Â A commission is split four ways;Â the listing commission is split between the listing agent and the listing broker.Â The selling commission is split between the selling broker and the selling agent.Â Â If agents were valued for their expertise, and charged fees accordingly, there would be fewer agents no doubt.Â Those agents that remain would be paid higher salaries, commensurate with other professional practices.
Half of all agents close fewer than four sales per year.Â Nobody can live on that, especially since agents must pay all of their business expenses including signs, lockboxes, office fees, professional dues, office supplies, errors & omissions insurance, and more.
As a career, real estate is more challenging than most people realize.Â The majority of agents get out of the business in less than two years.
Myth #2:Â The less commission you pay to sell your home, the more you make.
False.Â Discount brokers like to promote this myth.Â They claim to save you money by charging less.Â In fact, the top producing agents do not offer discounted services.Â Why?Â Because they donâ€™t have to.Â They are in demand because they provide extra value to their clients.
Less-than-full-service agents canâ€™t afford all the bells & whistles paid by their full-service counterparts.Â Discount brokers make up for a lower commission by taking on more listings, reducing the level of services they can provide to each client, or charging you from a menu of services.Â It boils down to the old adage, â€˜you get what you pay forâ€™.Â A 2% reduction in commission sounds pretty good until you compare it to a 10% price reduction because your agent couldnâ€™t afford to spend time or money to market your property.
Myth #3:Â Agents get kickbacks from lenders, title companies, and inspectors.
False.Â Since 1974, agents have been prohibited from accepting any kind of kickback or favor from real estate vendors.Â The Real Estate Settlement Procedures Act, or RESPA, is a HUD consumer protection statute designed to help consumers better understand the home buying process.Â RESPA is enforced by HUD.Â
Myth #4:Â Agents will say anything to make a sale.
False.Â Â In nearly 25 years in the real estate industry I have met agents that would say anything to make a sale.Â Itâ€™s unfair to paint all agents with the same broad brush.Â Top-producing agents, who have built a solid reputation in the community and practice real estate with honesty and integrity, are very careful to uphold a clientâ€™s trust.Â Nothing travels faster than bad news and you wonâ€™t survive in the real estate industry if you mislead your clients.
Making misrepresentations or false statements is against the law.Â Agents that violate their fiduciary duties to their client or fail to disclose material facts will be subject to prosecution and the loss of their license to sell real estate in Washington.
There are a number of other real estate â€˜mythsâ€™ that Iâ€™d like to de-bunk and Iâ€™ll save those for a future column.