Thursday, March 27, 2008

How Much Are Realtors Worth?

Many people don't want to pay the traditional 6% commission (3% to listing broker and 3% to selling broker) so they turn to discount brokerages in order to save a quick buck regardless of the service or competence of the agent they hire. But aren't some agents worth more than others?

If Ebby Halliday wanted to list your home, would you tell her she isn't worth 3% and ask her to reduce her commission? Would you tell Virginia Cook to take a hike because you would rather list your $1.5 million dollar home with a no-name, start up, discount real estate brokerage? Of course not.

If you list with a discount brokerage then you should expect discounted service. With all of the criticism surrounding Realtor commissions, how has no one come up with a commission structure that consumers are truly happy with after 106 years? The sad truth is that no one ever will because consumers will always be cheap and Realtors will always have a poor reputation.


  1. I don't think that anyone disputes that Realtors deserve to be paid for their work or that their work is valuable. My issue is that 6% is such an arbitrary way to compensate. It doesn't take much more work (if any) to sell a $400,000 house than it does to sell a $200,000 one, yet the Realtor makes twice as much. I think it should be a sliding scale or a tiered system, where the commission is reduced as the price of the house increases. Similar to the way the IRS taxes income.

  2. My opinion.

    The commission structure will not change.

    As a REALTOR, if you do a crappy job, there goes your name.

    As a REALTOR, what I'm going to do because of that commission structure that is already in place and is not budging, I'm going to provide true value and earn that commission. Moreso than the next agent.

    I don't see the commission structure changing anytime soon or in the next 20 years. I'm happy, because hey, I'm in this for the money. But at the same time to build a growing, sustainable business.

  3. 6 % (3% / 3%) does seem a bit arbitrary--is there any history behind this number? I'm not saying it's high, I was just wondering how the industry got to that percentage. Commercial is typically (keep in mind it's all negotiable) 4 % (2% / 2%), but commercial transactions tend to be lease oriented or higher priced listings/sales (more sizable single transactions than in residential).

    In the service industry (and real estate most certainly is a service-based business), I think the "fee" that agents charge is a pretty reasonable amount, considering what a major asset and investment a home is. Most homeowners out there really do need to think about it: someone is willing to pay to list their home (all the costs associated with getting it in the MLS, putting a sign in the yard, making flyers etc), to market your home (in the newspaper, in magazines, on the internet), to handle its promotion on the open market (open houses, to make it available to other agents) and to offer financial incentive to other people in the business to bring their clients to see it (and buy it), all for a flat fee (6%). What is that really worth if one was to break it all down? Probably more than 6 % of the sales price of the average home. So why aren't there any NAR ads that bring that up? Seems like it would be money well spent, considering the livelihoods of agents depend on being paid for what they do (and we all know which professionals pay the dues that keep the NAR around).

  4. This really is crap.

    And I am an agent. I know a TON of sucky "full priced" agents and a bunch of amazingly great discount agents.

    Somebody needs to call the DOJ on you.

    Oh, and by the way the average commission is 5.2%, so your "6%" is inflated.

  5. Anonymous, I have a couple of points for your "well thought out" comment.

    1. I never said ALL 6% agents were good agents. Nor did I say ALL discount agents were terrible. Just that if you pay less for something, you should expect less service.

    2. I never discussed average commission percentage. Only what traditional commissions have been since I started selling real estate 8 years ago. For the record, I've also been very clear that commission rates are negotiable.

    3. If you truly are a real estate agent then thank you for proving my point that real estate agents will continue to have a bad reputation. In addition to your comment showing that most agents lack basic reading comprehension skills, it also shows agents are of below average intelligence and lack professionalism.

    4. If believe someone should call the DOJ on me, why not do it yourself? You never gave a good reason as to why this is needed. Refer to #3 as to why I'm not surprised.

    Us Realtors are lucky to count you among our peers. Keep up the great work!