I’ve read a couple threads on commision didn’t really find out an answer for the question above. If there is a discussion already going please lead me to the right direction. First off let me say my experience is minimal. I have only bought two properties and have yet to sell one. I can see for a first time buyer, a buyer’s agent getting paid a full 3% percent. We went to a million houses, had accepted offers on two houses - failed to pull the trigger on either - and finally about 9 months later bought the house at an auction with no turning back! Needless to say our realtor was extremely happy to take that earnest deposit cashier’s check from us. The next house we bought was by going to an open house and talking with the realtors showing the property not the list agent (in fact she was the sister in-law of the listing agent). This home was a distressed property, vacant for over 36 months, had been reduced twice, and owned by the separated wife of the previous owner who was ready to cash out. We ended up getting a really good deal and gifted our agent ~$6000 commission. The deal would have happened regardless of what agent we used, we could have called anyone it would have happened because we the buyer had a bottomline purchase price that seller accepted. Looking back at it I should have negotiated a rebate from our agent. Further, throughout the closing process, the agent made some absolutely terrible paperwork errors, missed multiple sent documents, etc… Really just a complete hassle to work with. I do however think that seller’s agents are grossly overpaid for turn-key, single family properties in hot, robust markets. Furthermore, in a market where there are multiple offers on a house the agent’s listing price has far less of an influence on the final selling price. In these types of markets the house rather than the seller’s agent make the sale. The above leads me to these questions for all you seller’s agents out there: • In the market described above does a seller’s agent sell a home? Or does the home sell itself? • How much do you seller’s agents have to pay a broker for home sales in the $300,000-$600,000 range? • How do you justify your high hourly rates from “lay-up sales” like the one above? Is it because you decided to take on the potential nightmare first-time buyers, hoping to get referrals and future business from them?

Does a seller’s agent sell a home? Or does the home sell itself?

Developer · New Orleans, LA · Member since 2015 · 1k+ posts · 898 votes

10y

@Scott SzurekPretty sure everything under 250k is going to be a 6% commission (3% buyer side, 3% sellers side, but that split varies by area). Over 250k, you can sometimes see 5% commission.

As for your questions, the seller agent does do work. They help determined the value, price point, pay for pictures, enter it in the MLS and sometimes additional websites like Zillow. The can also market it directly to other agents where they think they have clients for that property. If they dont do their job, nobody knows its for sale.

Then there is the assistance a sellers agent provides once the property is under contract. Including follow ups, being presence for inspections, etc.

I think its easy for someone that has not sold a property to question the sellers agent fee. But once you have sold a property, it would make sense. This is coming from someone that has bought more than I have sold.

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Coire Fox

Indianapolis, IN · Member since 2014 · 17 posts · 5 votes

10y

1. Every property is different. Every transaction is different. Sure a FEW homes sell themselves and buyers would rush to them no matter what condition they are in and who lists them and (as long as the listing agents are providing an equal level of basic service). But most properties that sell are well marketed through staging, good pictures/info for the buyer, and pro-active agent activity. How long do you think a typical listing agent spends on one property? If properties sell themselves, why do people continue to use agents? There are multiple options for flat-fee MLS listings. Also, GOOD agents aren't just there to sell the house. They are there to support you through the entire process.

2. I have to pay my broker 40% of any commission I get up to a yearly cap no matter if I sell a house worth $20,000 or $2,000,000. The commissions I split with the agent that brings the buyer are not set in stone. The seller and I are in control of what we offer the buyers agent, but it is usually a 50-50 split between the listing agent and the buyers agent.

3. When you get a surgery done, do you ask the surgeon what his hourly rate is? Agents are not paid by the hour. They are paid for their knowledge and service. Did the transaction go smoothly because you had a good agent, or did it go smoothly because of luck? There is no way to know sometimes... Also, there is no guarantee that any sale will be a lay-up sale. I guess the seller could consider it insurance against a complicated transaction. We are liable for mistakes in paperwork. An agent in my office bought his sellers a new refrigerator to the tune of $4000 after the buyer's agent matched the purchase agreement's font type and size in the "personal property" section and he missed it. He owned up to it and made it right.

1 Reply

Russell BrazilBusiness Member

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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

10y

Originally posted by @Scott Szurek:

I do however think that seller’s agents are grossly overpaid for turn-key, single family properties in hot, robust markets. Furthermore, in a market where there are multiple offers on a house the agent’s listing price has far less of an influence on the final selling price. In these types of markets the house rather than the seller’s agent make the sale.

I agree that probably 80% of listing agents add no value, but that is why it is important to get one that does. I operate in a very hot market (DC) although there are plenty of areas in my market that are not hot. But even in a hot market, I add plenty of value, and there is a reason my homes sell for more. Anyone can throw a house up on the MLS....but not everyone has the market knowledge to understand why 2 houses on the same block that are very similar sell for a $50,000 difference in price. I begin working with sellers often as far as a year out to prepare their home to sell. There is one home now I am working on which we plan to list in Spring 2017. Some of the things we are doing over the course of that year are taking the carpet out of the basement and putting down a granite or travertine tile floor, replacing mailbox, painting some of the house to suit the tastes of buyers in that neighborhood. When we get closer, it means adding some curb appeal to their home, and doing something about the abandoned home next door (ah got to love gentrifying neighborhoods). By having my sellers spend about $5-7,000 we are going to raise the value of this particular home by about $60,000 on the open market.

There is also the fact of my relationships with other agents, and networking with them to help generate buzz on the house. It is understanding where to advertise a property outside the MLS...this property will be best served by being advertised on a neighborhood blog.

So yeah, 80% of agents are not really adding value....but that is why 80% of the money being made out there is being made by 10 or 20% of the agents.

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Lee Smith

Residential Real Estate Broker · Indianapolis, IN · Member since 2009 · 477 posts · 304 votes

10y

I can count on one hand the number of Realtors that are worth their salt, and I lost 4 fingers in a chainsaw accident... You sound like you have not worked with a good agent, and that is not surprising... Once you work with a good agent, your mind will be changed.

Hot markets, the listing agent doesn't have to do much to get offers. They can get by with the 3 p's.. Place a sign in the yard. Put it in the MLS, and Pray it sells.....

In a cold market, you need someone with the capabilities to get it advertised, continually advertise it, do creative advertising, and get you an offer...

Once you get a house under contract, then you still need a Realtor with experience or know how to get the sale to completion... Getting a house under contract is easy.. That's the first round of negotiation.. Then comes the inspection and that 2nd round of negotiation, and then you also need to keep on top of the buyers agents/banks/title companies to get it closed... This is where most agents are left in the dust... You need someone with a level head that realize it's their job to get the sale to close, not kill the deal over ego or that they feel slighted... What if during those 2-3 rounds of negotiations, I saved you more than my commission, would you still feel I ripped you off?

As someone else mentioned, you have to bear in mind that a Realtor charging 6-7% may only be making 1-1.5% on the deal. Your 100k house may only mean a paycheck of 1-1.5k, and he/she has to take taxes out of that... I put a lot of time in on my purchases/sales, 1k is the bare minimum I want to make on a deal.

300k house in our market is generally 6-7%... up to 600k is 5-6%..

There is really 3 types of Realtors.. Listing agents, Selling agents(work with buyers), and a mixture of the two... Your listing agents do not generally work with buyers.. They refer them out, and same with Buyers agents not working with buyers.. I hear all the time people complaining, "My agent(listing) never shows my house!" Well, you listed with a listing agent, he just gets the buyers agents to come calling.....

I understand the frustration at someone taking your hard earned profits, I am an investor as well as a Realtor. Find a guy/gal that can make you feel like they earned your money and you won't mind so much.

1 Reply

Brie SchmidtBusiness Member

Moderator

Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes

10y

Getting it under contract is a cake walk, it is getting it to close that is difficult. You probably have no idea how much work it can take to get a deal to close and that any good agent doesn't even tell you what is happening in the background because they don't want to scare you.

Some transactions are easy and I probably spend 40 hours all together, some are difficult and I could spend 200 hours on it, you don't know until you are in the thick of it.

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Russell BrazilBusiness Member

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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

10y

@Lee Smith and @Brie Schmidt bring up the great points about post contract ratification issues. Right now I am working 3 very complicated deals. One has massive title issues we are trying to clear up, one is running into problems with TRID and keeps getting delayed, and the other is an apartment building deal which has massive amounts of paper work and due diligence on the back end that the sellers dont want to deal with.

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Sam Lin

Real Estate Agent · Gaithersburg, MD · Member since 2016 · 99 posts · 32 votes

10y

A top-tier agent near where I live recently got a townhouse $30k more than the townhouse 2 doors down, with same floor plan, similar upgrades, sq ft and age. Even though realtors are slowly getting the rep like creative artists where people are expecting them to do more for less, it's a good way to separate the good and the bad ones.

1 Reply

Scott Szurek

OP

Ann Arbor, MI · Member since 2016 · 40 posts · 2 votes

10y

Originally posted by @Mike Wood:

@Scott SzurekPretty sure everything under 250k is going to be a 6% commission (3% buyer side, 3% sellers side, but that split varies by area). Over 250k, you can sometimes see 5% commission.

As for your questions, the seller agent does do work. They help determined the value, price point, pay for pictures, enter it in the MLS and sometimes additional websites like Zillow. The can also market it directly to other agents where they think they have clients for that property. If they dont do their job, nobody knows its for sale.

Marketing a private, "pre-market" sale fails to hit the open market and will not have the chance to get outbid by other clients. Today's technology allows the average joe who can gain access to the internet the capability to list a property on multiple realty related websites, and can also do all the other old school things, like, posting in local adds and for sale signs.

In the last 10 years what media outlet have sold more cars, the one with sign in the back window or the one that was listed on the internet? Yes, the sign will help with the sale but the one the web got a lot more attention.

How well do they determine price? Again, there is a lot of information out there that can help a non-agent buyer to determine a price. The home can get more information from the realtor market, after several agent interviews the home owner could determine an averaged out price from the possible agents initial listing price. Again, I am talking about properties that are turn-key in near mint condition, ones that may receive multiple offers and go for beyond list price! The open market, therefore will determine the actual exact price of the property and not the agent.

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Scott Szurek

OP

Ann Arbor, MI · Member since 2016 · 40 posts · 2 votes

10y

@Coire Fox

How long do you think a typical listing agent spends on one property? If properties sell themselves, why do people continue to use agents?

Like you said all properties are different, but if I had to narrow down an agent's time required to just list a property I would say right around 6-8 hours. Based on the following:

15 minutes to hire a photographer or 30 minutes to take own pictures
30 minutes to upload pictures to comp and decide which ones to use
30 minutes to write mls/property description
1-2 hours to determine listing price
2 hours to list on various media outlets, mls, zillow, trulia, craiglists etc...
1 hour to manage staging, if needed.
1 hour to figure out/talk with home owner on what needs to get fixed before listing

There are many reasons why the average home owner will use an agent. Most probably do because of their lack of local real estate knowledge preventing them from pricing their property correctly, liability on transaction, and having bias attitudes towards their property.

When you get a surgery done, do you ask the surgeon what his hourly rate is? Agents are not paid by the hour?

There are zero bounds to compare a listing agent to a surgeon. The amount of testing/study/practice/intellectual skill required to become a surgeon is beyond lightyears when compared to the 50-100 hours and one 80 percent or better passing 90 minute exam. A better comparison is possibly a salesman who sells a high-price commodity. Possibly a boat/yacht salesman is the best I can think of off the top of my head. There is major problem in your industry if brokers are taking that much commission for pretty much only providing access to local MLS. They essentially inflate the value of properties across the board.

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Drew Francis

Real Estate Agent · Kansas City, MO · Member since 2015 · 30 posts · 18 votes

10y

@Scott SzurekAs you mentioned at the start of the post you have very limited experience on the subject. @Brie Schmidtand @Russell Brazilhave presented some very good points as to what a good agents value is. FSBO sales account for approximately 8% of all home sales and sell on average for 15% less than agent assisted sales. Who cares whether your agent has a PHD or barely passed his 90 minute exam after a 6 week course if the know their stuff they will more than pay for themselves.

1 Reply

Scott Szurek

OP

Ann Arbor, MI · Member since 2016 · 40 posts · 2 votes

10y

Originally posted by @Drew Francis:

@Scott SzurekAs you mentioned at the start of the post you have very limited experience on the subject. @Brie Schmidtand @Russell Brazilhave presented some very good points as to what a good agents value is. FSBO sales account for approximately 8% of all home sales and sell on average for 15% less than agent assisted sales. Who cares whether your agent has a PHD or barely passed his 90 minute exam after a 6 week course if the know their stuff they will more than pay for themselves.

Where are you getting these stats on FSBO from? Are these experienced FSBO or is this the entire field? It's nearly impossible to get 100% complete FSBO data.

Again, I am talking about turn-key, recently rehabbed properties.

I am not suggesting the good agents do not add value to the sale of a home. There are clearly pros to using a real estate agent. I am suggesting that they are overpaid and have an insanely high hourly rate as a listing agent for higher-end turn key homes in robust markets.

"Who cares whether your agent has a PHD or barely passed his 90 minute exam after a 6 week course if the know their stuff they will more than pay for themselves".

My argument was that real estate agent's, more specifically, listing agent's hourly rates should not get compared to one of a surgeon.

Agents that barely pass their exam, do not know their stuff and do not pay for themselves.

0 Reply

Sarah Ziehr

Real Estate Broker · Chicago, IL · Member since 2015 · 531 posts · 266 votes

10y

I agree that a lot of agents/brokers are terrible. I should know, because I work with them every day. Something like 50% of them won't even be in the business in 2 years from now, and another big % might do 1 deal a year.

As a sellers agent, the home may be a slam dunk as you say- but what if the buyers agent is a total nightmare or a noob? Then I'm stuck doing double time, working on them to get everyone to the finish line.

1 Reply

Russell BrazilBusiness Member

Moderator

Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

10y

@Scott Szurek One flaw though in your thought process is trying to apply an hourly rate to a profession. This is not just the case with a real estate agent, but any number of professions. As someone running a small business, the cost structure to provide that service can not simply be boiled down to an hourly rate. There is a multitude of time that is unbillable per se that it takes to run a business whether this is a real estate agent, a dentist, a liquor store owner...whatever the case may be. What may seem like an unreasonably priced per hour basis, if you were to divide that over the amount of hours any small business person actually works will bare little resemblance to the hourly rate that you think you are actually paying.

Now does every one need a real estate agent? Of course not. However the majority of consumers do need them....and also probably a pretty high percentage of people who do not think they need them in fact do...which is why by far the vast majority of attempted FSBO's end up listing with an agent in the end anyways.

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Mike D'ArrigoPro Member

Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes

10y

@Scott SzurekYou can always debate whether agents earn the commissions they do but you have to keep in mind that what an agent does goes beyond driving people around and showing them properties. Your agent is representing you in what is usually the largest single financial transaction you'll make and a big part of what they do is handling the negotiation and dealing with all the legal aspects of the transaction.

1 Reply

Brie SchmidtBusiness Member

Moderator

Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes

10y

Originally posted by @Sarah Ziehr:

I agree that a lot of agents/brokers are terrible. I should know, because I work with them every day. Something like 50% of them won't even be in the business in 2 years from now, and another big % might do 1 deal a year.

As a sellers agent, the home may be a slam dunk as you say- but what if the buyers agent is a total nightmare or a noob? Then I'm stuck doing double time, working on them to get everyone to the finish line.

Couldn't agree more! You have no idea what the other agent is like and what they know, I have had my fair share of awful and amazing agents on the other side. When you get an awful one it takes so much more work to close the deal.

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Brie SchmidtBusiness Member

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Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes

10y

Originally posted by @Scott Szurek:

Originally posted by @Drew Francis:

@Scott SzurekAs you mentioned at the start of the post you have very limited experience on the subject. @Brie Schmidtand @Russell Brazilhave presented some very good points as to what a good agents value is. FSBO sales account for approximately 8% of all home sales and sell on average for 15% less than agent assisted sales. Who cares whether your agent has a PHD or barely passed his 90 minute exam after a 6 week course if the know their stuff they will more than pay for themselves.

Where are you getting these stats on FSBO from? Are these experienced FSBO or is this the entire field? It's nearly impossible to get 100% complete FSBO data.

Again, I am talking about turn-key, recently rehabbed properties.

I am not suggesting the good agents do not add value to the sale of a home. There are clearly pros to using a real estate agent. I am suggesting that they are overpaid and have an insanely high hourly rate as a listing agent for higher-end turn key homes in robust markets.

"Who cares whether your agent has a PHD or barely passed his 90 minute exam after a 6 week course if the know their stuff they will more than pay for themselves".

My argument was that real estate agent's, more specifically, listing agent's hourly rates should not get compared to one of a surgeon.

Agents that barely pass their exam, do not know their stuff and do not pay for themselves.

I will tell you this... taking the exam is easy, and it teaches you NOTHING about selling real estate. Being licensed for 12 years now, I learned 90% of what I need to know outside the licensing exam. Like Sarah said before, not all agents are proficient with a lot of what we do, which causes more work on the other agent.

In my market, there are challenges. Last week I had a seller remove upper cabinets to get an appraisal done, a few weeks ago I submitted a "freedom of information act" request for 100+ year old water records to combat a zoning mistake, I have called/emailed/texted agents 20+ times to get a single appointment, you have no idea how much work goes into it.

I did not use my license to take on clients until 18 months ago, and I can tell you it is so much more work than you can ever imagine.

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Joe Facenda

Realtor / Investor · Vienna, VA · Member since 2014 · 133 posts · 114 votes

10y

I have been a Realtor for 27 years and I believe 100% that homes sell themselves BUT how did that home get presented so it could sell itself, that is the question.

I am not selling a pair of jeans or a car where I can "convince" you to buy, you agree, put your money down and leave the store with the item - all done in a few hours or a day or two. No, a real estate deal as you all know, takes weeks or months to complete from contract to settlement and if a buyer believes they have been "sold" the home, they will find a way to back out.

So where is the value? The value is in making sure the home is presented properly for what it is. Whether it is a stunning, updated move in ready home or the home of a hoarder, as we know, there is a market. So how do you reach that market and what is the price that type of buyer will pay?

I believe, that a strong Realtor does not "sell" the home but "closes" the deal. I can not make someone who is the wrong match for a home pull the trigger. But I can, if I look at the world thru their eyes, help guide them to a favorable decision.

And I can present myself to the other agent in a professional way so they want to work with me. If they have 2 homes their client likes and I am one they know "plays well with others" while the other believes in strong arm tactics which home are they guiding their client to?

I believe that a Realtor's' value comes before and after the contract is signed. Showing homes is the easy part. For sellers it is advising and guiding on how to prep, price and present their home and for buyers it ensuring they understand the process, contracts and financing before they look.

For both, after the contract is signed, there are countless problems that can happen and a good Realtor will prevent molehills from becoming mountains.

I often compare the transaction to flying a plane. If I take off from Washington DC and fly to LA, chances are 99.9% of the time I will arrive safely. But say there is turbulence over the Midwest. An experienced pilot will avoid the turbulence and the passengers will not even know any existed while an inexperienced pilot may fly right into it and create a rocky ride for all aboard - but they still get to LA.

Or the weather may be so bad that an experienced pilot will know that it is best to turn around and try another day while the inexperienced pilot may push through and need to make an emergency landing.

The problem in real estate is that until you lift off you don't know what type of flight is in store. Sellers, buyers and even agents, who acted one way before the contract can take on completely different post contract personas. There can be inspection items or title issues that, without finesse, could derail a deal.

Yes, if I knew upfront which deals were the easy ones and which were the hard ones, I could change my payment structure accordingly but I just don't know which are which. I'd be happy to give a rebate on the easy deals if I could charge more on the difficult ones.

Hourly pay? I would love it. I think I would have a higher income if everyone I worked with paid by the hour. I agree I am often overpaid for my successful deals but my pay on my unsuccessful deals is $0. And those happen all the time. Sellers have a change in plans, markets shift, buyers say they will wait until this or that happens in their life, interest rates go up, etc. More than once, I have seen the pressure of making such a huge decision freeze folks or put so much stress on relationships that they fall apart. Many times after hours and hours of work, the client says they've decided not to move forward.

All that said, I find this profession tremendously rewarding. The people I meet are great. Several have become friends. The income has let me do what I want. And they joy I get in helping folks - particularly helping folks build a secure future through real estate investing - is priceless.

2 Reply

Drew Francis

Real Estate Agent · Kansas City, MO · Member since 2015 · 30 posts · 18 votes

10y

I think another thing that is worth noting is that an agents whole job is to handle real estate transactions. If you are an engineer and you are trying to sell your home yourself you do not have at least 40 hours worth of your week to deal with the transaction. Then there is the headache of dealing with investors low balling, tire kickers, and God forbid a dangerous felon entering your home. No decent agent is going to be driving around unqualified clients and looking at property.

1 Reply

Joe SplitrockPro Member

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Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes

10y

Originally posted by @Sarah Ziehr:

I agree that a lot of agents/brokers are terrible. I should know, because I work with them every day. Something like 50% of them won't even be in the business in 2 years from now, and another big % might do 1 deal a year.

As a sellers agent, the home may be a slam dunk as you say- but what if the buyers agent is a total nightmare or a noob? Then I'm stuck doing double time, working on them to get everyone to the finish line.

Add to this, my hard working agent gets calls on a Friday night when he is out to dinner with his wife. He works all weekend long. He has to "sell" my low offer as a good deal to the buyers agent in a hot market, because believe it or not a good realtor can deliver an offer with better success than a bad realtor! Even the relationship the buyers agent has to the sellers agent makes a difference.

Consider these two ideas about how a real estate market works:

1. If a home sold itself, the market would move away from agents. There are many examples of industries that have changed and moved towards a different sales model. If agents had no value, their pay would decease or an alternate sales model would replace them.

2. If it is true that an agent just makes tons of money for doing nothing, everyone would move into the profession. As Sarah pointed out, a large percentage of people who become agents fail. That supports the fact that it is not as easy as it looks.

In the posters original example, the first deal he did the agent probably did more work than he got paid for. The second deal, maybe they got more paid more then the work they did. They are not paid for the difficulty of each deal, so it has to average out.

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Scott Szurek

OP

Ann Arbor, MI · Member since 2016 · 40 posts · 2 votes

10y

Originally posted by @Joe Splitrock:

1. If a home sold itself, the market would move away from agents. There are many examples of industries that have changed and moved towards a different sales model. If agents had no value, their pay would decease or an alternate sales model would replace them.

2. If it is true that an agent just makes tons of money for doing nothing, everyone would move into the profession. As Sarah pointed out, a large percentage of people who become agents fail. That supports the fact that it is not as easy as it looks.

In the posters original example, the first deal he did the agent probably did more work than he got paid for. The second deal, maybe they got more paid more then the work they did. They are not paid for the difficulty of each deal, so it has to average out.

In the for seeable future, the traditional real estate sales model with 5%-6% commission on the final sale price - at least for single family homes - will slowly fade away. Home-buyers and seller's will benefit from the advancement of technology and software, relieving the consumer's need for a real estate agent.

How much more work did a real estate agent do 20 years ago? 10 years ago? 5 years? The average home-buyer today has a vast amount of resources to access an data that was once unavailable to the open market.

Justifying commissions based on the law of averages is not a very solid sales model. The agent has to take ownership for a client they decided to take on, but in the end turned out to be a complete nightmare.

Commissions on sales are just one of the many grossly inflated costs that are involved in the home buying and selling process. I really think that further advancements in technology will slowly eliminate this gap and will lower the final price of home buying.

0 Reply

Joe SplitrockPro Member

Moderator

Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes

10y

Originally posted by @Scott Szurek:

Originally posted by @Joe Splitrock:

1. If a home sold itself, the market would move away from agents. There are many examples of industries that have changed and moved towards a different sales model. If agents had no value, their pay would decease or an alternate sales model would replace them.

2. If it is true that an agent just makes tons of money for doing nothing, everyone would move into the profession. As Sarah pointed out, a large percentage of people who become agents fail. That supports the fact that it is not as easy as it looks.

In the posters original example, the first deal he did the agent probably did more work than he got paid for. The second deal, maybe they got more paid more then the work they did. They are not paid for the difficulty of each deal, so it has to average out.

In the for seeable future, the traditional real estate sales model with 5%-6% commission on the final sale price - at least for single family homes - will slowly fade away. Home-buyers and seller's will benefit from the advancement of technology and software, relieving the consumer's need for a real estate agent.

How much more work did a real estate agent do 20 years ago? 10 years ago? 5 years? The average home-buyer today has a vast amount of resources to access an data that was once unavailable to the open market.

Justifying commissions based on the law of averages is not a very solid sales model. The agent has to take ownership for a client they decided to take on, but in the end turned out to be a complete nightmare.

Commissions on sales are just one of the many grossly inflated costs that are involved in the home buying and selling process. I really think that further advancements in technology will slowly eliminate this gap and will lower the final price of home buying.

I generally agree with you. That was really my point number 1. Many industries have been disrupted by technology and it has changed the sales model. If you would have asked me 5 years ago, I would have said technology would have reduced commissions or removed agents by now. I don't see a trend that way in my market. So although I agree in the general trend, I don't think we are there today. It is worse in other areas of real estate such as lending where the process has gotten more complicated, more time consuming and more expensive.

There is also the establishment factor. Look at the automobile industry and the attempts Tesla has made to forge a direct sales model. They have struggled to unseat dealerships. I am not saying this will not change, but changing an established way of doing things were people in the middle make money can be hard to disrupt.

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Dawn BrenengenBusiness Member

Moderator

Real Estate Broker · Raleigh, NC · Member since 2014 · 2k+ posts · 1k+ votes

10y

Originally posted by @Scott Szurek:

@Coire Fox

How long do you think a typical listing agent spends on one property? If properties sell themselves, why do people continue to use agents?

Like you said all properties are different, but if I had to narrow down an agent's time required to just list a property I would say right around 6-8 hours. Based on the following:

15 minutes to hire a photographer or 30 minutes to take own pictures
30 minutes to upload pictures to comp and decide which ones to use
30 minutes to write mls/property description
1-2 hours to determine listing price
2 hours to list on various media outlets, mls, zillow, trulia, craiglists etc...
1 hour to manage staging, if needed.
1 hour to figure out/talk with home owner on what needs to get fixed before listing

There are many reasons why the average home owner will use an agent. Most probably do because of their lack of local real estate knowledge preventing them from pricing their property correctly, liability on transaction, and having bias attitudes towards their property.

When you get a surgery done, do you ask the surgeon what his hourly rate is? Agents are not paid by the hour?

There are zero bounds to compare a listing agent to a surgeon. The amount of testing/study/practice/intellectual skill required to become a surgeon is beyond lightyears when compared to the 50-100 hours and one 80 percent or better passing 90 minute exam. A better comparison is possibly a salesman who sells a high-price commodity. Possibly a boat/yacht salesman is the best I can think of off the top of my head. There is major problem in your industry if brokers are taking that much commission for pretty much only providing access to local MLS. They essentially inflate the value of properties across the board.

Your timeline is oversimplified. First, listing a home is just the beginning. Once the offers start coming in, we are negotiating, fielding calls, etc. Once it's under contract, we are managing the process of making sure the buyer stays on track. We are coordinating with the closing attorney to get everything settled. I will concede, though. We do get a high hourly rate for selling a home. However, we also put COUNTLESS hours of time into transactions that never close. If it didn't average out to a decent living, no one would do it.

Podcast Guest on Show #101

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Does a seller’s agent sell a home? Or does the home sell itself?

Does a seller’s agent sell a home? Or does the home sell itself?

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