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Daniel Jeung,  in Woodinville, WA

How much would you pay...?

Asked by Daniel Jeung, Woodinville, WA Tue Jun 3, 2008

for the services of a Realtor. There is quite a bit of lively discussion here about Realtor commissions being too high. How much is too much? Would you be willing to pay your Realtor on an hourly basis instead of a % of the sales price? For example, as a buyer, would you pay your Realtor $100/hr (up-front as a retainer) to drive you around and show you homes? As a seller, would you pay $500 per magazine ad to advertise your home and $100/hr for consulting, phone calls and paperwork (like an attorney)?

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Good question.

People talk about the real estate "model" being broken. What if we did go to another model. Something like a legal model, for instance, where a professional would bill for his/her time. In that case, my gut reaction is that hourly rates for real estate agents (recognizing the lower barrier to entry than for lawyers) might be in the range of $80-$150 per hour. But there'd also be a greater use of assistants, billed at a lower rate. maybe at $30-$60 per hour. Some of the licensing regulations might have to be changed, since it might make sense for the assistants to do not only the paperwork but also some of the driving around, or sitting in at open houses. Under this model, you'd probably initiate a relationship with an agent with a retainer, with monthly billing. Or, perhaps, to retain some of the same structure as currently exists, the charges would accrue (with interest being applied to any unpaid balance), but with the full amount paid by the client at closing.

Even today, we have something like the legal model with lawyers who take cases on a contingency basis. If they win, they get a share of the winnings. If they lose, they get nothing. In today's model, if a Realtor is successful in helping a seller sell a house, he/she receives a percentage of the sale. If the Realtor is unsuccessful, he/she gets nothing. It's interesting, though, that lawyers will pick up 33%-40% (or even more) on a contingency basis. Realtors are much, much lower. (Interesting to speculate on what the market might look like if Realtors charged something closer to what lawyers do on a contingent basis!)

There are a whole bunch of other interesting models out there. The consultant model--which formed the basis of the question--is another: Kind of a pay-as-you-go one.

Or, how about this one: Something like pre-paid legal plans. Clients would sign up--maybe at work, maybe independently--and pay a set amount each month. Maybe $100. That would entitle them to a certain menu of services. Some would be included as part of the plan. Others would be a la carte, but at a reduced rate. Meanwhile, real estate firms would sign up with the pre-paid service to provide those services to the plan's members. As with the legal plans, you might receive unlimited telephone consulting. You might "receive" a certain number of offers made on properties per month, and a certain number of CMAs per month. You might discounted marketing packages if you were selling. Or you might receive X number of hours of drive-time previews, or open houses, per month. And you'd receive some sort of discount on the sale or purchase of a home.

Just a few of the many possibilities.
0 votes Thank Flag Link Sun Jun 15, 2008
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
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I see in your answer below, that you have used more than one agent. Why is that? Are these agents representing you, or are they the listing agents that you contact to see their home (even though you already have an agent that you've been working with?

You also mention that if you were working with an agent, paying $100/hr, that you would not have looked at so many homes (for the sake of looking). What if (in our current way of doing business where the agent is paid after the sale occurs) your agent told you that you shouldn't bother looking at many of the houses you went to see? Would you have listened to the advice and not seen them? Why should the compensation structure make any difference in the homes you see? Is it because you don't pay the agent up front out of your own pocket?

Maybe your agent perceives you as "not serious" in your search and that's why he/she isn't being more pro-active on your behalf?

btw, this is great feedback! I wish more consumers would answer this question!

-Daniel
0 votes Thank Flag Link Sun Jun 15, 2008
So in your situation, how many times has your agent met you at a home you were interested in? On an hourly basis, how much time has your agent spent driving to meet you at these homes, and waiting while you looked inside?
0 votes Thank Flag Link Sat Jun 14, 2008
Daniel - great points! I don't believe that our clients know how hard we work because good Realtors make it look so easy!
Web Reference: http://www.cindihagley.com
0 votes Thank Flag Link Tue Jun 3, 2008
The Hagley G…, Real Estate Pro in Pleasanton, CA
MVP'08
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