Tman - it's clear that you don't care about anything other than your own point of view. Don't use the "we" when you are really talking just about yourself. Your "solution" apparently is to tell people to get out of the business if they don't like it. Are you now career counselor as well? There's no question that nobody cares whether I make a commission, but that does not mean that I will not get paid a commission and it's up to me to conduct my business in a way that ensures that I will get compensated for the work I do. I am not attached to the commission based compensation model. I am open to anything that's fair for everybody and when you look around and see how others deal with the compensation issue, you might just come up with a solution that could also work here in this country. I know you don't care about how other countries do it, but that's just you. Those who are interested in a solution rather than just agent bashing will look at everything.

There is no question that savvy buyers have the tools to look for houses on their own and they can reduce the # of showings a buyer's agent may have to do. What's your point about that? Just because the buyer now can thift through hundreds of homes online does not mean that all buyers no longer expect their agents to also look for the right house for them too. However, let's assume that I work with a buyer who takes the home search completely off my to-do-list. That still does not entitle him/her to a portion of my commission. If you want a commission, get your real estate license and earn your own. The only way you can pass on a rebate is by continuing to charge the seller a high enough commission so that you can give a rebate. Well, the seller also wants the commission cut because the seller does not want to pay the buyer's full commission now that it has become so easy for the buyer's agent (I don't think it has become easier, but I am just going along with this for the sake of argument). Soon enough, there's no money left to rebate to the buyers. The whole idea that the seller should pay the full buyer's commission so that the buyer's agent can pay a rebate to the buyer is simply ridiculous. If a seller wants to give the buyer a buyer's incentive, let them do it directly, not through the buyer's agent. It would be much cleaner if everybody just paid for the services that they use instead of making the seller pay for the buyer's services and then the buyer's agent gives part of that money to the buyer because he/she really did not deserve all the money. What a bunch of nonsense. Just because rebates are more common now than they were 5 years ago does not mean that they are making sense and that they'll be the way of the future.

In closing, I am in favor of a compensation model that is fair to everybody and I am open to a healthy discussion. I am not interested in comments from those who don't care about finding a workable solution. Stop complaining and running amok with rebates. Become part of the solution that benefits everybody.

Gary,

You're not a MD .. you're not a OBGYN or lawyer, not even close ... so please refrain from using those examples -- you're a commissioned salesperson.

->>>Car sales people work for the house-->>>

Bingo.! .. as does the agent.


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Vinicius,

-->>>If you ever called a plumber off the front page of a phone book ->>>

You can charge anything you like ... you can charge 6%, 16% or 26% - it matters not ... it's the American way, that's why you are here...

Savvy consumers just don't start calling a plumber (or anybody for that matter) unless they're in immediate and dire need .. flooding due to hurricanes might be one good reason.

Just like anything else, savvy consumers will take their time and get bids on a plumbing job .... would you pay $5,000 for plumbing work that can be completed for $3,000 with the same exact equipment and with the same exact experience and the same quality, if not more.? --- of course not..

Then, why would a savvy consumer want to accept a 6% commission when there is many quality agents out there that will do a quality full service job for a flat fee and/or greatly discounted rate...?
http://www.msnbc.msn.com/id/26014600/



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Commissions are negotiable. My listing clients pay a 6% commission and my buyers don't ask for kick backs because they have seen and know what value I bring to the table. They understand that I am devoted to them, and give them honest feedback and straight talk, and have seen my results. They also know that I know the area and understand what I am talking about, and their confidence in my abilities is high. They could go with a discount agency and save and possibly get a good result, but they choose not to. The reason they work with me and recommend their friends, is they see the value in working with a professional.

Let's face it the requirements to get a real estate license are not the most challenging and thats why there are alot of chauffer realtors out there that don't bring any real value to the table, and are more of a liability to their clients.

If your business, be it real estate or plumbing, is based on the discount model than chances are you are not the top service provider in your field and you are just providing bare bones services to get the job done.

A true professional plumber understands local city and building codes, gets updated training, has been in the business for many years, understands the science regarding water and metalic and chemical bonding, knows new technologies in his field, and is efficient and knows the right way to get things fixed, he is licensed and bonded, will check his work thoroughly and will make sure the job is done right because if it isn't he understands the liability and the cost to his business. If you think all plumbers do the same job then you have not been exposed to many homes and bad plumbing work that is out there be it new construction or remodels. And if you think city inspectors catch these things then you don't understand the job of a city inspector.

If you ever called a plumber off the front page of a phone book you know what I'm talking about. Intelligent and careful individuals don't hire professionals based on coupons or adds in the yellow pages, they get referrals from people they trust that are like them. Reason being is they understand that quality is a human derived event and is not something left to chance. They will pay for quality because they don't have the time to waste dealing with poor workmanship and understand the true costs of discounts.

If you want to work with a discounter that is your right and I'm sure you will feel comfortable knowing you will get some money back, but understand that you paying for an inferior service that may cost you more than you think.

Amir,

Lawyers go to school for 7 or 8 years and it costs thousands upon thousands of dollars and then some ... then hopefully, they'll pass the bar exam the first time out ...

In California, you must be 18 and have 135 credit-hours of courses required to sit for the state license exam, and most of those can be done online for under $200 ... most states it's 60 hours or less, a GED and a $100 check ...

Plumbers, painters, carpenters, landscapers, electricians, mechanics and car salesman don't get paid unless they get a positive result ... it seems you're on equal footing.


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Shouldibuy,


Commissions have always been negotiable ... in todays market, they are very negotiable.

There is many full time full service quality agents that will be more than happy to to sell a home at a very discounted rate ...

We sold our condo last month in Florida for $419,000 ... the original agent wanted 5% or $21,000 to market it and sell it .. instead, we found a bevy of hungry quality agents that were more than happy to take it on for a $10,000 flat fee or 2.4% total --- we saved $11,000

It doesn't cost anymore to sell a $250,000 vs a $850,000 home ... hungry savvy agents are abundant in todays market ... they would rather get some of the pie than none of the pie, don't be bullied into thinking anything else.


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Many good answers here already. As is pointed out, it does take more time and effort (and money), in general, to sell a $1 million house compared to a $200,000 house. But, does it take 5 times as much effort, time, and money? Hmmm... Valid question.

I do disagree with an assumption you're making that, because agents generally are paid on a commission basis, that there's no incentive to help negotiate the price down. Leaving aside ethics and the agent's fiduciary duty to his/her client (major considerations), recognize that the agent's major incentive is to have a successful transaction.

Let's say, hypothetically, that a seller has a $500,000 million home. And that a "real" negotiator would fight vigorously to get the price down, whereas a real estate agent wouldn't. Just making numbers up here, but let's say the "real" negotiator would get the price down 8%, saving $40,000. And that the agent, intent on as high a priced transaction as possible, only gets the price down 5%, saving $25,000. Assuming a 6% commission (it's all negotiable), then the difference in the commission on that $15,000 savings is $900. And if the agent is in a situation where the commission is split 4 ways (pretty typical), then the actual cash-in-pocket difference to the agent is all of $225. That's not a big number.

Meanwhile, the agent has an incentive to make the deal work, and to keep his/her clients satisfied. So the agent does have an incentive to help the buyers bargain actively. And finally, keep in mind that while Realtors certainly provide advice and guidance to their buyers (and to their sellers, too), it's ultimately up to the buyers to decide on an offer. And it's up to the Realtor to best represent his/her clients once that decision is made. So I really don't see the presumed lack of a financial incentive to bargain strongly to be an argument against a percentage commission.

One thing that might make some sense (and maybe it's already being done somewhere) is a sliding scale of commissions, so that the commission might become lower as the price point climbs.

Good question.

hello.. interesting question ... I am also a considering to buy a new home in Sunnyvale (close to Mountain View) and may have had similar concerns. However, I think the particular question can be phrased better.

I think the real issue is not if realtors deserve a commission but if this scheme makes most sense from a buyers point of view. From a sellers point of view, yes it does sound like it may (would?) be harder to sell a 1M house compared to 100K -- there are definitely more risks and one may argue you are looking at different price points however not to digress.

As a new home buyer today who does most of his research and identifies opportunities etc on the web I often question if the buyers agent plays has the same role as the sellers? So, I'm not surprised when one questions if they should be compensated in the same way. The way the model is set up ... other than good faith, I don't see why the buyer's agent may want to negotiate down. However, one of the postings in this thread (inadvertently) got me thinking: if the buyers agent has two clients looking at the two houses simultaneously? As a human being, wouldn't he be tempted to focus on the 1M sale rather than the 200K.

PS: I am working with an agent whose company gives 2% back.

Tman. Here's another rant for you. Don't get used to it. I'll go back to ignoring you after this post. Enjoy it while it lasts.

You said:
"consumers looking for and getting discounts on commissions when buying or selling their next home is not my point of view, it's the transformation of an entire industry that is happening - but I thank you for the compliment."

I did not say it was your point of view. I said you only care about your point of view, whatever that may be. You are the one who said "we really don't care what they do in other countries..."

The way I see it, your point of view is that you think you are the only one who sees the change. You are just repeatedly stating the obvious. Yes, for crying out loud, the market has changed. There's nothing new about that. If you had read my post carefully, you'd understand that it's no longer about seeing the transformation. It's about finding a better solution. Shuffling commission money back and forth is not it. It's just a patch. I am not worried about the change. As a matter of fact, I wish there were a real reform, instead of the gradual change.

You said:
"no one mentioned your career and no one hinted, suggested or implied "tell people to get out of the business if they don't like it", that seems to be your translation ... "
~~~~~~~~~~~
You stated in your earlier post: "And your point is..? .. then you need to be in another line of work - simple. " Seems pretty clear to me what you are saying. Since it's all English, there's no need for translation.

You said:
" you've missed the point, profit isn't a 4 letter word ... "
~~~~~~~~~~~
Here we go again. You are hinting that somebody missed the point. Only Tman gets it. Not sure who missed the point this time. I just know that you must be talking about someone else because none of my posts mentioned the word "profit." I guess this was just another opportunity to go on about how the market has changed and how people are looking to pay less and how we better all wake up. Too bad Trulia Voices does not have a sound tool. You'd hear me snoring. I can take only so much of the same thing.

You said:
"realtors, like car dealers are already changing their business model .."
~~~~~~~~~~~~~
Just in case there's still somebody out there who has not heard it yet. Let's state the obvious just one more time. It sounds so much better when you put in different words and fill more space.

You said:
"Lawyers go to school for 7 or 8 years and it costs thousands upon thousands of dollars and then some ... then hopefully, they'll pass the bar exam the first time out ... "
~~~~~~~~~~~
I know you don't like it when we bring up the compensation of lawyers, doctors and other professions that require a post-graduate degree. There are only so many service professions/jobs to which we can refer. If you prefer comparing us to plumbers, electricians and so forth, it does not matter to me. The bottom line is that nobody works for free. A plumber might give you a free estimate, but will not come to your house and do a diagnostic for free. They either charge a flat fee or time plus material.
By the way, which law school offers a 7-8 year J.D. program? I am just curious. Just kidding. The one thing you are right about. It can be expensive to go to law school (even if it only takes 3-4 years to graduate). I guess if we made it just more expensive for real estate agents to get into the business, it would be alright to charge those high commissions.

Ute,

I'll try to answer your rant ...

a.) consumers looking for and getting discounts on commissions when buying or selling their next home is not my point of view, it's the transformation of an entire industry that is happening - but I thank you for the compliment.

b.) "we", used to refer to people in general, including the speaker or writer: “How can we enter the professions and yet remain civilized human beings?” (Virginia Woolf).

c.) no one mentioned your career and no one hinted, suggested or implied "tell people to get out of the business if they don't like it", that seems to be your translation ...

d.) you've missed the point, profit isn't a 4 letter word ... consumers don't mind if you make a commission, they just don't want you to retire on them ... remember, they've had the opportunity in the last 7 years to actually watch a counterfeit market suck their savings away (on both fronts) the smart shoppers just aren't paying 4 or 6 or 7% in commission anymore .. In todays market, paying an agent $12,000 to sell a $200,000 home is traveling down the same path as paying the local car dealer $22,000 for an SUV that's only worth $12,000...

read on: http://www.msnbc.msn.com/id/26014600/

e.) realtors, like car dealers are already changing their business model .. some will do flat fee's, some are doing full service listings at $5,000 and 2% to the buyers agent, some markets prefer rebates it's all varied ... the savvy brokers are looking at cash flow, it's better to have 8 agents with $6,000 in contracts than 2 agents with $15,000 ... one thing is for sure, it will be a whole new market in 30 months ... the smart savvy ones will make it, the greedy ones can sublease their offices as a Deli...

-- **Home sellers can haggle over commissions**
Consumer Reports study showed 71 percent who bargained got lower rates.!
http://www.msnbc.msn.com/id/26014600/



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Jared: J.R. You just can't get the point that you make a comission. I don't care what you do to earn it, you charge a comission. That is the topic here. You don't have to charge one, and buyers don't have to pay you one, but largely, you charge a comission.

JR: Jared, I have not heard a convincing argument from you why we should NOT be paid by commission, other than that you think it adds to much money to your purchase. I have a news flash for you: I've probably had more experience with FSBOs than you have, and I have never met a FSBO who didn't want to NET what you want to SAVE.

Jared: That being said, why are you using examples of your hard work on this thread to contrast yourself with car salesmen. "They don't have car open houses to show the product to all the other car salespeople because they have customers who might be interested in that car." You regularly tell people that open houses don't work and shouldn't be expected from a full service agent who makes a full service comission.
Why the change of heart?

JR: I was referring to broker's open houses. If you read what you quoted from me you will comprehend that (I said they don't have open houses to show the product to ALL THE OTHER CAR SALESPEOPLE who might have customers). I doubt you will find an agent who thinks broker's open houses are not worth while.IMO they are one of the most important things an agent does to sell a home: sell it to the other agents, the people who have all the buyers. I have not had a change of heart regarding consumer open houses.

I would prefer to pay a fee for services renderd. I acknowledge that I would pay for some of these services regardless of a successful transaction and I can live with that. If I could pick a battle to change RE agents pay scale it woluld be to get rid of the exclusive agent contracts that you are expected to sign so early in the process. A fee based system would do away with the need for these.
~~~~~~~~~~~~~~~
When would these fees be paid, Jared? In advance of service? Or would the agent bill you afterwards?
In my experience, buyers do not want to pay for what they have always gotten for free. That includes their reluctance to sign a buyer's agency contract, which you yourself want to get rid of.

Ute, all due respect - we really don't care what they do in other countries.

->>>The problem with the strictly commission pay is that you can spend many hours and never get paid->>>

And your point is..? .. then you need to be in another line of work - simple.
http://www.msnbc.msn.com/id/26014600/

What you're missing here, is the market is changing - and it's changing fast .

Savvy consumers today can shop houses on their own, the days of showing 5 houses on a Sunday and expecting a contract by Wednesday are over ... buyers can look at 50, 150 or 350+ homes in a glance, some on a visual tour or perhaps great shots by staging companies that will have 30 great pictures+ .. and buyers can reach out worldwide today ...

No one cares if you make a commission Ute, you can charge anything you like ... but the market has already shifted and consumers are not only shopping prices for their homes for buying and selling - but they're shopping commissions ... many realtors have gone to flat fee's or discounted rates just to stay in business, they also find out quickly that some of the pie is better than no pie at all.
http://www.msnbc.msn.com/id/26014600/

This is September 2nd 2008, the kids are going back to school ... many agents will lose 70/80% of their business (as always) and most families will wait until next spring for a big move .. . right now your biggest competition is other quality agents that will be more than happy to do full service work for a much discounted rate ... cash is King, but cash flow is more important.

We sold our condo last month in Florida for $419,000 ... the original agent wanted 5% or $21,000 to market it and sell it .. instead, we easily found a bevy of hungry quality agents that were more than happy to take it on for a $10,000 flat fee or 2.4% total ---- we saved $11,000... i

You mentioned car dealers ... you might do a little research and look at the history of car dealers between 1999 and 2004, simply because the real estate industry is becoming the mirrored image of it -- the echo.
http://www.marketwatch.com/news/story/consumer-reports-surve…

When making 6%, this is what car dealers said 10 years ago .. "If a car dealer has to cut commissions to 3%, he is already out of the car business. He just doesn't know it yet!"

-- then came the internet.

Guess what..? ... the ones that survived successfully, they stepped up the pace ... these are the ones that sold *more cars* at 3% or less, they discounted heavily and sold more product. - simple.

The rest.? they're like tumbleweeds blowing in the wind, briefly seen and surely forgotten .. much like you as realtors will try to avoid in the 25/35 months to survive.




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J.R. You just can't get the point that you make a comission. I don't care what you do to earn it, you charge a comission. That is the topic here. You don't have to charge one, and buyers don't have to pay you one, but largely, you charge a comission.
That being said, why are you using examples of your hard work on this thread to contrast yourself with car salesmen. "They don't have car open houses to show the product to all the other car salespeople because they have customers who might be interested in that car." You regularly tell people that open houses don't work and shouldn't be expected from a full service agent who makes a full service comission.
Why the change of heart?

Don't buy suggests looking at a website which contains this bon mot: "To prevent a justified foreclosure is also to prevent a deserving family from buying that house at a reasonable price. "

Is this a communist country all of a sudden? A "deserving family" at a "reasonable price?" I am as against bailing out buyers who bought more than they could afford as much as the next person, and I am glad to see home prices find their own level, but really.

Jared, when a car salesman sells a car they are basically demonstrating a product and showing it's features. They don't have car open houses to show the product to all the other car salespeople because they have customers who might be interested in that car. They don't have to network with the other car salepeople in order to let everyone know this car is new to the market and might fit one of the other salepeoples buyer's needs. They don't have to advertise the car out of their own pocket or make and/or update websites. They don't produce marketing materials for that particular car to promote it. They don't go walk the neighborhood and knock on doors to invite people to the dealership to see the new car they are trying to sell, and do mass mailings in order to find buyers or to find owners who want to sell their cars so that they will have inventory. Other than the fact that each receive a commission based on the sales price, I don't see the correlation between real estate agents and car dealers. Most real estate agents also do no sell 4 or 5 houses a week, as most car salesmen are required to do to stay at the dealership. Do car salesmen even need a license?

The funny thing is, reading these comments on Trulia, on the one hand we get paid too much and should charge less or rebate some of our salary back to the buyer, and on the other hand we are going the way of the dinosaurs, we make no money and should find jobs at WalMart.

I was the first to reply to this and since then, I've received some forty emails on this one question. This is a free market system, anyone can charge any amount for any goods or service. Lets just leave it at this and move on. I'm sure we can do better with our time than to get bugged down on a silly conversation with no end.

Buyers and sellers: hire whoever you want to hire and pay whatever you are comfortable with.

Realtors/agents: work with whoever who is willing to pay what you demand.

Lets put an end to this and get on with enjoying our lives :)

Boy Oh Boy!!! Another thread gone bad. Why is it that any time someone asks a question about commissions and/or compensation for real estate agents, there's so much hostility coming out in the thread? I think there's room for improvement and I would certainly welcome a healthy discussion of the topic without all the venum. It's one thing to criticize the current compensation model, but it's yet another to come up with something that's better and fair to everybody. Comparing real estate sales people to car sales people, doctors, lawyers and the like really does not add a whole lot to the solution of the problem. The tasks that a real estate agent performs are not comparable to what a car sales person does, nor do they compare to what a doctor or lawyer does and we are governed by different rules and laws.

Whether the compensation is based on commission or an hourly rate, there's always the argument that the agent either had no motivation to negotiate a lower price or artificially inflated the hours worked on a transaction to make more money. Perhaps a flat rate service would be fairer, but it would have to be paid independent of success. The fee would be significantly lower per transaction, but it would be charged for every listing and paid up front. This way, those sellers that actually close no longer have to pay for all those that don't close. Furthermore, if buyers also pay for their agent's services, it's possible to charge sellers a lower flat rate fee because they no longer pay the buyer's agent. I am not sure what the best and fairest compensation model would be. I just know that calling real estate agents every name in the book and putting them down every chance you get does nothing to come up with a better compensation model that works for everybody.

To Shouldibuy. I am wondering whether you feel that you received a helpful answer to your question. I would also like to ask you a question. What kind of compensation would you consider fair for a buyer's agent and who should pay for it? Since buyers typically do not pay their agents, I am really curious to hear what solution you'd consider fair. This is a serious question, not an attack on your original post.

Brokers only charge what you are willing to pay. RE agents like to talk about the ways they dole out the comission. Hey NAR! I pay taxes too.
My doctor, lawyer, and the kid who mows my lawn all work for a fee. (They tort lawyers refrenced are the ones I refrenced in my previous post as "slimeballs" and "ambulance chasers.") The people who generally make comission are called, "salesmen." You can call yourself professionals, but that doesn't mean you can play professional ball, or professionally walk my dog. You are professional salesmen. Travel agents sell travel, sports agents sell athletes, real estate agents sell real estate.
If you want to tie the reputation or RE agents to ambulance chasing scumbags (who should be held liable for all the lives they destroy in the process of trying to get that 40% fee), go ahead. All you Realtor buddies will thank you for it.
As to the fiduciary duty (bonus for the extra syllables), it's completely useless. It's an obligation enforced by no one. How many people broke their fiduciary duties in the boom? 20% ? 50% ? 70% ? Almost no one was diciplined for it. The NAR and their code of ethics is a good ad slogan, but the only ethics they seem interested in is if you pay you fees (to them).
Honest agents are honest people. Beingt a paying member of a club or passing a test doesn't make you honest. A NAR agent just pays to play with an agency that isn't that elite.

Quite frankly, the effort to buy a Million dollar house can sometimes be less effort in most cases as the buyer is probably these days not a first time buyer, and has money (usually a substantial amount) to put as a down payment, making the purchasae slightly easier. The appraisal will most likely (these days) skew things up, although the appraisal is part of the loan process...
What you have to unbderstand, is that Realtors (or agents who are not Realtors--there is a difference!) run all the risk. They could show you as a buyer 1 house or 100 houses, whether the house cost $200K or $999K.
The Constitution outlawed slavery a long time ago, but we take on all the risk none-the-less, with a chance of not being paid at all for past performance. We use a percentage as a measure of staying in business,. because over a long period of time, this is what it seems
to take to stay in business. All commissions are negotiable. The seller is the one one taking the hit on the commission, because he pays his agent the GROSS commission, who then splits it with the Buyer's agent, so in essence, it is factored into the sales price. What if you, as a buyer had to pay the commission out of pocket to your agent. Better to finance it via sales price. Once it is on the MLS, the Seller (and his agent) basically open the door to a sales force of about 10,000 agents, who perhaps have a buyer for that property.
The MLS has evolved over years and years, and is the most efficient way to let the world know your property is for sale.
Lawyers, have spend 3 years in Law School, (or 4, if they go at night), take 30-40% of a tort case. They do not know if they are going to win. It is a matter for the judge or jury. They will however, most likely NOT take a case if the chances of winning are slim to none. In Contract law, they bill you up front to fight it, and then ask for reasonable attorney fees upon victory,( just for the record responding to a previous post).

Plumbers, painters, carpenters, landscapers, electricians, mechanics and car salesman don't get paid unless they get a positive result ... it seems you're on equal footing.
~~~~~~~~~~~~~

Correct, if the house doesn't sell, we don't get paid. Was that the point you were making? That we are equal to plumbers or electricians? Have you ever had to pay a plumber or electrician, LOL? They get pretty good money. For spending a few minutes in your house. Why are they paid so well? Because they can do something you can't.

"Realtors are one of the only professionals that do not work unless they get a postive result. Try finding a lawyer that would not charge you unless they win." -Amir Shahkarami

In my area these are often referred to as "slimeballs" or "ambulance chasers." If you turn on the TV or radio for 30 minutes you will probably find a (or 10) legal ad with "we don't get paid unless you win." or something to that effect.
If you feel you are worth more than 3%, charge it. Nothing is stopping you except your own value. Comissions are negotiable.

Comissions (Buyers agent) are unfortunate in that they survive based on Ideal, and work because they don't adhere to it. The ideal is that the buyers agent will show the house best suited to the buyer no matter the comission (as many here have stated). The problem is that in reality big comissions move homes. Otherwise they wouldn't be offered.

I can't resist the opportunity to stir the pot up a little bit.

When I seek medical assistance, I want to know that my medical provider has the credentials and experience to provide the optimal service that is required. The same is true of my attorney, chiropractor, dentist, and every other professional who's expertize I seek. I want to know that their major in college pertains to their profession and area of specialty, and the same is true of the professional who tends to my real estate needs. At my firm, each of us has a four-year degree in either law or real estate. I certainly wouldn't go to a brain surgeon who's degree was in art or horticulture, why would I settle for anything less in any of the other professions. As a result, the professionals at my firm have the credentials and qualifications that is deserving of the income they earn. This should stir the pot up a bit!

But then again, we work in a specialized field in corporate real estate and don't sell homes. However, I do believe in raising the bar in the real estate profession and its specialized markets. Historically, real estate was sold on a commission basis and many who where the least qualified went from rags to riches and in many instances the public suffered greatly; hence licensing requirements were instituted. In the spirit of American excellence and based upon the complexities of today's culture, its time to expect more from those in the real estate field to met the same equivalent standards their counterparts in other professional fields must possess.

What relationship does this opinion have to the question on deserving a percentage commission? If I were to employ a residential real estate licensee to sell my home or represent me as a home buyer, they have the right to earn the big bucks if they have done everything that well-qualifies them to earn the big bucks based upon their related academic achievements, professional and specialized trainings, and the personal expertize to represent me in one of my biggest financial and legal transactions. Just like my doctor and lawyer, who jumped through the hoops to qualify themselves to earn the big bucks that they do. Perhaps we should pay them on a percentage commission basis?

This is an ongoing debate within the real estate community and with the public in general.

I don't think it's helpful to frame the question in terms of what someone "deserves" - there are a lot of things that go on in this world that aren't "deserved", good and bad. I don't know how you make your money or how much you make, but it's possible that if the details of your business or employment were the focus of public debate, you might find people willing to say that you don't "deserve" to be paid what and how you are paid. Chances are, this would not change your ideas about how much you should be paid.

You sound like you might like Redfin's approach to real estate.

I disagree with your suggestion that the amount of work involved in a $200K transaction is the same as the amount of work involved in a $1M transaction. Even if the amount of work involved were the same, the risk exposure for the agent and the broker involved is very different - if a $200K transaction blows up, chances are the liability exposure for a participant won't be more than $200K. If a $1M transaction blows up, the participants might be looking at $1M in potential liability. The agent and the broker working on the $1M transaction with the increased risk need to be compensated for taking that risk - or they won't do it. (Which means that, even in a hypothetical world with flat fees for transactions, participants would need to offer a "bonus" to the agents to do big risky deals, which means fees aren't so flat any more.)

The buyer's agent is motivated to negotiate the price down because they want to get it to a level where it's acceptable to the buyer - if no transaction takes place, the buyer gets nothing. An agent may also work hard to do a good job without a financial motive because they see themselves as a professional, or because they don't want the other participants in the transaction to view them as idiots.

Granted, the last $5K or $10K of space between the buyer and the seller is worth a lot more to them than it is to the agents involved - if the gross commission is 6%, split 50/50, and the agents then split that 50/50 with their brokers, adding or subtracting $5K to the sales price means a difference of $75 in the agent's bottom line, which isn't especially motivational.

On the other hand, I have seen agents on either or both sides agree to make concessions from their commissions where necessary to close a small financial gap between buyer and seller, or where the deal looks like it's about to disappear because nobody wants "give in" and pay some miscellaneous closing or repair cost. Most agents would prefer to take a $1000 hit against their commission versus see the whole deal fall apart and lose a much bigger commission entirely.

On the other hand, expecting an agent to do that - or trying to force them to - is a good way to get fired as a client.

My best advice to you is to focus on getting what you want out of a transaction - a fair net buying price or a fair net selling price, and don't worry about how much other people involved in the transaction are making.

If it's a good deal for you, it's a good deal for you. If it's not a good deal for both sides, it probably won't happen. If you insist on bringing your counterparty to the point where the deal is only marginally helpful to them, don't be surprised if they walk when (not if) they get an opportunity.

The other thing you should understand if you're trying to negotiate commissions with buyer's agents is that the buyer's agent's commission is typically fixed by the listing agreement that was signed between the seller and the seller's agent. This means that the seller is still going to pay the same commission amount, and the seller's agent will still get the same split - but the buyer's agent might have to share their part with you. You won't be able to write an offer that says "I'll buy your $500,000 house for $485,000 and I'll pay my agent separately" because that's not how the contracts are written.

You ask a legitimate question and will i think get a wide range of justifications for the status quo. There are pro's and con's but I would suggest you choose a full service Buyers Agent who will represent only you, and negotiate the fee to be paid directly by you. This eliminates the question you ask and re percentage.
This I usually define as a facilitation fee for a specific and well defined service.
Good luck,
Bill

Jared,

you can contact me...
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Yes, take your kvetching to email, LOL.

d.) you've missed the point, profit isn't a 4 letter word ... consumers don't mind if you make a commission, they just don't want you to retire on them ... remember, they've had the opportunity in the last 7 years to actually watch a counterfeit market suck their savings away (on both fronts) the smart shoppers just aren't paying 4 or 6 or 7% in commission anymore .. In todays market, paying an agent $12,000 to sell a $200,000 home is traveling down the same path as paying the local car dealer $22,000 for an SUV that's only worth $12,000...
~~~~~~~~~~~~~~~~~

Retire on them? Heck, back to the government employees in my area. . . did you know that tier one employees pay nothing towards their pensions which are not taxed by the state and they get free health benefits for life? Those pesky teachers where I live, they make up to and over $100,000 for working 180 days a year. They make 80% of their salary in their pension. Boy am I annoyed that not only have I paid for their retirement and their free health benefits, but I am STILL paying form them while I have to pay for my own health care and fund my own pension.

It’s unfortunate that you hate realtors so much…oh wait, only the ones who aren’t “savvy”, which to Tman means work for free practically. I'm so sorry that I would like to be able to retire also, my plan is not to do it by cutting my pay.

Oh and Jared, thank you for a well thought out answer.

I think most agents will agree however, that the buyer is ultimately RESPONSIBLE to making sure the buyers agent gets paid. This would be just like paying your agent if they help you purchase a FSBO.

~~~~~~~~~~~~~~~~

Sure, just like the buyer is responsible for my kid’s college education, my car payments, and my property taxes. Paying your agent if they help you purchase a FSBO is not the same because the buyer is then a CLIENT, or the FSBO has agreed to pay the commission.

Jared,

you can contact me...

-

"Let me address your concerns again. This time take a moment to read them before you get crazy on me.Jared, I have not heard a convincing argument from you why we should NOT be paid by commission, other than that you think it adds to much money to your purchase. I have a news flash for you: I've probably had more experience with FSBOs than you have, and I have never met a FSBO who didn't want to NET what you want to SAVE." -J.R.
My reason for not wanting a (percentage) commission is that it provides an incentive to do things not in line with the buyers best interest. Flat rate fees would help reduce this.


"When would these fees be paid, Jared? In advance of service? Or would the agent bill you afterwards?
In my experience, buyers do not want to pay for what they have always gotten for free. That includes their reluctance to sign a buyer's agency contract, which you yourself want to get rid of." -J.R.
They would be paid at the time services are provided. "Here's a check, would you do a CMA and throw me on the MLS? Here's the first 2 months servicing/phone answering fee." "Wow, a good offer already, heres a few bucks to draft a response and negotiate with that buyer." "We've decided not to purchase that home, I think I will keep looking. Here's the payment for putting the offer in. Thanks"
As to paying for services the buyer gets for free, we can continue that in the other 200 threads responding to who gets paid by whom. I think most agents will agree however, that the buyer is ultimately RESPONSIBLE to making sure the buyers agent gets paid. This would be just like paying your agent if they help you purchase a FSBO.
FSBO of course want to net the commission that agents are paid, however, many of them acknowledge that they won't net all of it. If both parties use a fee based agent, the costs that will be added to to total spent in the transaction should be substantially lower. A net gain for all involved.

As much as I appreciate everyones input, when speaking about fees it is important to remember Anti-Trust laws and the appearance of price fixing, in any forum. Although I work in a totally different market sector of the real estate industry and which is not commission based, as a real estate licensee I must demure from further contributions to this forum.

I have to respond to "Bad ttime to buy" yet again. Listen...I'm not interested in entering a bitterness contest with you--What I'm doing is suggesting that you stop pointing fingers at others and start looking at yourself. You haven't even really read what I wrote. Instead of learning from the posts on here you choose to make inflammatory statements about others (like me) while hiding behind your shield of anonymity. It's easy to judge others when you don't have to idenify yourself. Thank you for the publicity, but I don't need it. I come to Trulia, because, unlike you, I find a lot of people with great advice and great questions. I actually read what people write and try to learn from it. The exception is when someone begins blurting out utter stupidity, as you have done repeatedly. To set the record straight--I have never claimed to be anything I'm not, nor have I suggested that I only work in certain price points. Your inability to comprehend my earlier posts suggests that you stop trying to respond to them. You should stick to bubble blogs, where your ill-informed viewpoints will be appreciated.

And for the record--Your prior advice that a previous Trulia poster should just "walk away" from her mortgage because "the realtors want her to do a short sale" and it's "the bank's fault" speaks volumes about your credibility.

Jared. Thanks for the reply post. It looks like you'd be willing to pay for services you use in exchange for not being locked into a contract. I believe if everybody were willing to pay on a per use basis, there would not be a need to have a term contract. The problem with the strictly commission pay is that you can spend many hours and never get paid because the client decides to have someone else write up the offer. This does not only happen when the client is dissatisfied with the agent. It would be interesting to find out how real estate agents get paid in other countries. I know in my home country, real estate agents get paid even more and you also have to pay an attorney to write up the contract and handle the recording, similar to how things are done in non-escrow states. How do real estate settlement attorneys get paid (by the hour, flat fee, percentage???).

Ute, I apologize for getting lazy in my post. You can assume I mean percentage or percentage of profit anytime I use comission. A few times I use "fee" you could probably substitute not percent comission (but most of the time I meant fee).
The base of this arguement only hold up for percentage comissions. The issue with them is that they incentivise actions that are not always in the best interest of the client. This is especially true when they arel cloaked in secrecy like the MLS. Simply getting paid a non percent comission is just a perfomance based pay system. Again, I don't oppose any pay scale, but when you use one that rewards dishonest behaviour you have to expect some people (expecially potential victims) to be critical.
I would prefer to pay a fee for services renderd. I acknowledge that I would pay for some of these services regardless of a successful transaction and I can live with that. If I could pick a battle to change RE agents pay scale it woluld be to get rid of the exclusive agent contracts that you are expected to sign so early in the process. A fee based system would do away with the need for these.

Jared. Sorry, I beg to differ. The topic here is whether Realtors should charge a percentage commission. That's different from just charging a commission. I have yet to see a constructive post that actually suggests a better solution. Everybody seems to be really eager to criticize the current compensation structure, but nobody has bothered to suggest a viable alternative. It seems like all the consumers are very happy when we work for free. What kind of compensation do you suggest. If it's not commission based, how do you propose real estate agents should be paid? Any constructive comments will be appreciated.

Vinicius, Giving a percentage rebate to a customer doesn't change the fact that you are still woriking for a percentage commission. If you took my last post to mean I think agents should charge less, that was not how it should have been read. I agree, but that wasn't the point of the post. The heart of the arguement is that RE agents are commisioned sales people. In this way, they are the same as car sales people. They help me decide which car I need, handle the paperwork, cover the legal and liability issues, sell me a warranty and help with finding financing (they don't however pretend to get me a better price). They don't do this because they want to go have a beer with me afterwards, they do this so I will buy the car. They aren't trying to be "full service." They are trying to sell a car. That is my point. That is the only thing I was suggesting. I don't care if they shake your left hand and RE agents give you a hug. You both do what you need to do to move a product.
If you want to charge a commision, fee, surcharge, or even just work out of the goodness of your charitable heart, go ahead. It's a free market and I'll go use the person who will accomplish my goals for a price I'm willing to pay. Do not, however, try to pass off that just because you charge 3x more to sell something that you are really that good. Especially when you (in general, not personally) say that it's free to your client in the previous sentence.
Don't hide behind the "I pay a fee making me elite enough to see the compensation field in the MLS" attitude. If agents played to the buyers best interest all the time this would be right under the field with if it has a pool. Fiduciary duty is great, but buyers do have some cause not to trust you (again, general not personal).
A person who charges 1/3 less, has to work 3x harder? Yeah, I agree with that. That's the point. A person who sells homes that are 1/3 the cost has to work 3x harder to. If you don't like commisioned sales, don't charge a comission. At the end of the day, people either think that your worth 3x more, or they don't and you go out of business. If more people understood rebates and the politics didn't get in the way making it so hard to do them, we'd have gone this route long ago.

Honest agents are honest people.
Dishonest agents are dishonest people.

I want to respond to "a bad time to buy." Instead of inflammatory rhetoric, why don't you provide us with proof of why this is a "bad time to buy." Why don't you explain exactly why, in your opinion, realtors are "unneccesary middlemen?" As a Realtor, I save my clients a tremendous amount of money, and to be honest, I LOVE it when the other party in a transaction is someone like you. It's very easy to make you think you're getting a great deal because you tend to care about only a few factors in a transaction. Sadly--If you would just adjust your thinking a bit, you'd benefit greatly by working with a good agent, as opposed to a mediocre agent. Instead of emulating people who are negative, bitter or just can't afford to buy right now, follow the example of people who are currently making real money--When they have legal needs they hire a lawyer. When they buy or sell real estate they hire a Realtor. Simple.

I have a client who's on a professional sports team. He has an agent to negotiate his contract. This agent is very well compensated. Why do you think that is?

The short answer to this question is that you get what you pay for--But just because you're paying doesn't guarantee you're getting everything you should. Some agents are useless no matter what the price is. And some are worth much more than they earn.

My job as an agent is to represent your interest, whether you're buyer or seller. I am not only going to get you the best price AND terms possible, I am also going to work to keep the transaction alive. I am going to cover your ass with regard to a myriad of potential liabilities. I am going to ensure that you got the best deal you could. I am going to work to protect you throughout the entire process, which is much more important than simply negotiating the intial price for the purpose of mutual acceptance.

All too often I find that I'm doing the work of both parties in order to keep the transaction alive and to ensure my client gets what he/she wants. There are a lot of incredibly obtuse agents (and their clients) out there and while I wish the market slowdown would weed them out, it isn't working!

As far as trying to keep prices up to inflate my commission--3% of 800k is much better than 0% of 950k. I don't consider my commission when negotiating a transaction--But there are times when I have to use part of it to get a deal done. I have paid costs for my client, for the other agent's client, for the lender, for the title company, you name it. This is NOT an easy job, nor is it cheap. If you want cheap, then you'd be better served hiring a discount agent who may not be as aggressive in negotiating every aspect of the transaction in your favor. If I were hiring an agent, I would think twice before going with someone who will immediately give up his OWN money to work with me. That's not much of a negotiation.

Jared,

If you think a product like a home is just as comoditized as a car then I would love to see where you live. So if you think a car salesman and a realtor do the same job then I can see why you feel the way you feel. But the reality is far from what your claim.

If someone charges you less for something or gives 2/3's of their pay back shouldn't that make a light in your head light up. The reason why they are doing this is not because they make too much money, or they really like you its because they feel that this sort of practice will make them alot of money.

So someone who engages in this type of discount model will have to work 3 times as many deals a a normal realtor works to make the same living. If these are all smooth deals then it is very feasable that they can pull this off, but that is not realistic. I have clients who are looking for their dream homes, and have been searching the market for over a year now, how patient are these professionals to work with individuals like that. I have other clients who after they are interested in making an offer on a home want to go over the reports and disclosures in person in my office before they decide, I wonder do they just email the reports and have the buyer go over them. What I am talking about is service. If you are a discount agent or are working with a discount agent, you will not expect the same level of service than you would from a full service brokerage. You can't refute that its logical and common sense.

Also I wonder how many individuals out there that are working with these discount agencies who are crediting so much money back if they reach a point in the transaction where they know they are getting 2% back and are less concerned with negotiating a better price or other terms. So in essence that will cost them money as well.

If you are a realtor and do not for for a full commisison then you are litterally saying my value is not worth that much money. If you don't have the confidence in your abilities to negotiate effectively, which is a skill, or to make sure you provide top service to your clients, negotiate then you should discount and you worth what you charge. And if you work with a discounter you are working with a sub standard agent and you will recieve sub standard service, its logical and the truth.

Then, why would a savvy consumer want to accept a 6% commission when there is many quality agents out there that will do a quality full service job for a flat fee and/or greatly discounted rate...?
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Cause they'll get what they pay for--an unsold house.

Your agent has a fiduciary duty to serve your best interests. If a $1M property gets an offer accepted for $900K, you just "saved" $100K. The agent loses $3,000, but still makes $27,000. Believe it or not, money is not always our motivator. Working in our clients best interest is. Does the property fit your wants and needs as described to your agent ? What about negotiating $20,000 of termite repair that the seller does not want to pay for (which is an out of pocket expense for the buyer), or what if the seller wants to move out in 30 days and not in 45 as the buyer wants. What if, when the home inspection comes in there is $200K worth of work that is recommended? I just had a $1.71M transaction in Silver Creek, and the seller wanted to close escrow in 3 weeks. Unbelievable. Thye lender could not work that fast.
Our hope is that for the $3,000 in commissions that we lose, we will still make money to keep the lights on.
All Realtors are not greedy people. Customer satisfaction usually rules the day for those that have been in the business for a while, and that want to stay in the business. We hope the $100K you "saved" would get spread around your office and we'd get a referral out of it.
I forgot to add one thing to my last post... Does a OBGYN charge differently for a baby that was delivered at 8 lbs. vs. 12 lbs.? Would the lawyer who charges $350.00 and hour on a $1M contract disput charge only $3.50 and hour for a $10,000 contract dispute.
Let me just say this, and bounce it off some wealthy real estate families you might know. When they have been acquiring their wealth through the years, was a Realtor by their side. Yes, most likely. That's why lawyers use real estate agents. They no nothing about "the market"... Yes, they know contract law, and some things about disclousre laws, but they still know they should hire a Realtor who has the data to have them make an INFORMED decision.
A mother who has had a kid fall off his skateboard and is crying and walks in with a bone sticking out of his arm does not need to be an MD to know that the kid has a broken arm. She does need to take the kid to the doctor to set the arm, X-ray it to make sure there is not a compound fracture, prescribe the needed medication for pain relief and prevent infection, apply the cast, perhaps administer a shot, stitch up the wound where the bone was sticking out, and make sure it is all done in a sterile environment. Yep, mom called it--the kid broker his arm. Didn't need med school for that!
Let me ask a logic question. If you wanlk into a barber shop, and there are only two barbers in there, and one has a great haircut and the other a lousy, choppy haircut, whose barber seat should you sit in? The one with the bad haircut. Reason, he's the one who gave the guy with the good haircut his haircut. If you're thinking of asking your agent for a "rebate" or "kickback" don't be surprised in today's market that your lender will not allow it. Every penny must be sourced and verified.
Next question: IF real estate pays so well, then why are so many agents leaving the business? My God, even the unlicensed agents are getting the heck out. Is that because they made so much money they are all retiring early. If the agent makes the $27,000 on your transaction, he may only get a 60/40 split with their Broker, which is $16,200. Roughly 48% of those commission will go to State and Federal taxes and self employment taxes, so by now the agents now nets $7,776. Minus expenses. This is paid ONLY if the transaction closes. If you die, lose your job, get divorced, decide not to buy, the agent gets Zero, nada, zip, nothing. In other words, they have worked for free. The experience does not pay the bills...
When Price becomes the issue, value becomes the question. Why are a lot of discount Brokers seemingly going our of business these days, and there are a lot of them. Because like every other business, they do not have the revenues to sustain themselves. Remember the fiduciary duty aspect of it. Car sales people work for the house. Your Realtor knows that most likely you will move in the next 7-10 years. Life is not a straight line. Typical stuff like divorce, growing families, death, taking care of an ederly parent, job relocation, etc. makes on rethink their current house is their last house, as they intended. We are a mobile society. There is always something bigger and better that we as creatures desire. Do we want to do a good job for you so you will call us on your next move. You bet. I think most people can tell if they are being fast talked. A house is an important decision. We can always return a faulty purchase in other aspects of our lives, but getting rid of a bad choice for a house is tough, and expensive. Good luck.

Realtors are one of the only professionals that do not work unless they get a postive result. Try finding a lawyer that would not charge you unless they win.


http://www.amirShahkarami.com
http://www.888siliconValley.com

In many cases, they deserve much more them 3%.....

This is the most active post I have ever seen. Another item that hasn't been discussed here are the brokerages. Many people seem to be of the mentatilty that all brokerages and agents are the same. While in my earlier post and some one aluded to it in another posting, is that talented, hard working professionals like to be compensated for their work and what they bring to the table. Real estate agent's talents vary as much as lawyers and doctors vary amoung their respective professions. Thats my first point.

My second point pertains to the various real estate brokerages that exist. Brokerages are designed to support agents and they typically get involved when there is a problematic transaction. You as a buyer should know that you are culpable for anything your agent does. If he misrepresents you or does not manage the transaction, you could lose your deposit. Well known and established brokerages have a culture of ethics and fair dealings with their clients, and other agents. Culture in smaller firms have full time managing brokers who do not sell real estate by just support the agents so they are dedicated to the agents and any problems they encounter. Also bigger firms have legal counsel on retainer and are available should their be disagreements between buyers and sellers in a contract. Smaller firms, independents, and discount brokerages do not offer this type of assurance to their buyers.

The old adage is true in real estate as it is in any service or product, "you get what you pay for" so buyer beware.

As I mentioned in my earlier post you have received a multitude of answers to your questions, most of them well considered and presented. Let me see if I can suggest an approach to your homebuying that addresses what appear to be your major concerns.
1. The logic of a percentage based fee structure for a defined process.
2. The apparent resulting incentive for the agent receiveing the fee to keep the price as high as possible.
Rather than trying to change the established system you should consider hiring an agent to work exclusively for you using a legal contract designed for this specific circumstance. You can then decide on the fee to be paid by you for a service mutually defined by both parties. Just as you would if you hired any other service provider. If you go with the lowest bid then you risk getting the lowest level of ability and vice-versa. However, you are in control of how much the agent will receive, and they have a client commited to them who is not going to buy through anyone elso while the mutually binding contract is in force.
If you would like to see a blank copy of this contract form give me your e-mail address and I'll send it to you.
.
Bill

Don Tepper -

In the SF Bay Area, it is relatively common to see commission rates differ for transactions of different size - smaller properties or bare land typically have a higher commission rate, while higher-end properties - say > $1M or so - typically have a slightly lower commission rate.

I ran an analysis using historical MLS data regarding commission rates for homes in the $750-$1M range; I didn't see any correlation between higher/lower commission rate and the time on market or the delta between asking price and selling price, so my conclusion is that a relatively small adjustment in the commission rate (.5 % is typical here) doesn't have a significant impact on the behavior of buyer's agents.

I'm not a statistician, YMMV, and all of that - but I found it interesting (and a little surprising).

Ultimately, for better or for worse, commissions are typically negotiated and paid outside of the relationship between the buyer and the buyer's agent so it's tough for buyers to get a lot of information about them, or to have a lot of leverage to change commissions.

This is a great question! A short answer would be that Realtors are obligated to look out for the best interest of their clients and if one is working with a buyer it is an awesome feeling to negotiate the best deal possible. Thus, Realtors must put their clients interests before their own.

Hi,
My name is Allyson, The other agents have given you some realistic answers, but to add another view point, lets say we buy that 200k home you mentioned well if I did a good job for you, you would begin to trust me more and use me again. Also mainly my business is from referals so if I didn't work hard for you and negotiate for you and get you the best deal we could make then you wouln't refer me to friends and family. So whether I am purchasing a 200k home for a client or a 2.5 million home I still work to earn your trust as I WANT TO BE YOUR REALTOR FOR ALL YOUR TRANSACTIONS and those of your family and friends. It's really simple when you look at it do a great job and your client can recommend you, don't do a good job and your client won't recommend you and may even tell his friends not to use me.
As far as commissions go most good realtors earn every penny of it. If you did a good job would you like to share your pay check with your Boss or take a lessor percentage of your pay check? I didn't think so, neither does the good realtor.

Sincerely,
Allyson