Why not charge less?

Question

As a real estate investor, one of the main reasons why I've been reluctant to sell is the 5% selling commission fee. When the internet has compressed commissions everywhere, it's amazing people are still willing to pay 5%.

Given volume is down, why doesn't the real estate industry just lower their commission costs to increase volume? This way, more people will get paid.

Sam Dogen · Answer

@Josh McCullough Definitely. If I was hurting for income, I would lower my price to increase demand for my services. I would undercut my competition to gain more clients. Seems logical. Would you not?

Joel Owens · Answer

You can be the cheapest or be the best. There will always be someone willing to be cheaper and devalue themselves. One week that person may be the cheapest then next week they are not and if that's all they have to offer they have just lost out.

Being the best takes a lot more work and skill.

There is a small segment of the market that just thinks of a transaction and hyper focuses on the brokers or agents fee. I do not want to work with those types.

My clients tend to be ultra wealthy so they want experience and the long term relationship. When they have made millions to tens of millions the last thing they want to do is be cheap and go with someone inexperienced where they can make a bad mistake.

I do commercial and not residential so I can see on the residential side where (Joe homeowner) is trying to pinch pennies and step over dollars thinking they are saving something.

I usually want clients for life if we work well together and enjoy the relationship.

Juliet Grossman · Answer

Agree about cheapening the value that an agent brings to the transaction. This isn't a race to the bottom. I don't compete on price; I convey the skills and knowledge I offer.

Steven Greenhill · Answer

In NYC, they're 6 -- mostly everyone is doing 5 though. They are down for sure.

Josh McCullough · Answer

Would you lower your fees so more people will get paid?

Matthew Paul · Answer

Or go For Sale By Owner . In my neighborhood 3 houses have sold in the last 6 months , on Facebook . No agents , no commission .

I have bought 5 houses , 4 out of the 5 there was no Agent involved . things came together easily . The one with an agent went OK . But the selling agent was a PIA . And at settlement she was there and she started to whine about what she was receiving , and I basically told her if she kept it up , I will walk from the table

Mike Dymski · Answer

I'd recommend a couple of paths. If you consider 5% high, I'd recommend finding a better agent. Good agents are very important (buying and selling) and yours must not be providing good value. The agents I have worked with were essential to my investing (and there were plenty of profits to cover commissions).

2nd path...get your license. If it is a big piece of your pie, it may be more profitable for you to broker deals than to invest in them.

Kris Lippi · Answer

Find a quality flat fee real estate broker. They understand that not everyone needs or wants the white glove concierge service a listing agent gives you. They will list your house on the MLS, so you can sell on your own and save the listing agents commission.

Why not charge less?

Why not charge less?

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