All Forum Posts by: Gary Lucido

I also flatly reject the notion that you don't want to work with any of the bottom 90% of the agents. Agents fall into the bottom 90% for any number of reasons. Sure, you don't want to work with the part timers or the ones that are truly bad (there are many) but some are in the bottom 90% because they are not good at promoting themselves, yet they are very good agents.

In Chicago we have been offering an hourly rate a little above $100/ hour for several years. We are probably the only brokerage doing that.

There is an entire field of economics devoted to irrational decision making. It's called behavioral economics. In this case the consumer over estimates the risk of an hourly model costing more than a traditional commission model. Therefore, I find that only really analytically smart people are doing this when they are fairly certain that they won't need much of our time. The rest think it's too risky.

When it comes to hiring real estate agents I've observed all kinds of irrational behavior.

On the agent side...well, the average real estate agent is not the sharpest knife in the drawer. They cannot wrap their head around the notion of the value of their time. Also, they prefer an uncertain big payoff to a certain but lower payoff - even when they on average earn more per hour if they just charge for their time. Makes no sense. It's the same reason people gamble.

I agree with @Aaron Hunt. Easy clients are subsidizing difficult clients. There are a few realtors that offer hourly options and if you think you are going to be an easy client then that makes sense for you. We offer our clients an hourly option and you'd be surprised how many don't want to take the risk. So, basically, they want the realtor to take the risk and...well...there's a cost to that.

As far as the seller is concerned you have to pay your agent yourself. In reality though you just bake that into the cost of buying the property and adjust your purchase price accordingly. In reality the seller is paying the cost but never realizes they are.

You should be able to either negotiate a favorable commission with your realtor since you already have a property in mind or you can agree to pay them on an hourly basis. Unfortunately, most realtors have a hard time grasping the concept of getting paid by the hour but you never know. We do it in Chicago. Try different Google searches in your area such as "realtor by the hour", "realtor hourly rate". Try real estate agent also.

Yeah, that's pretty ambitious and I think you underestimate just how much work would be involved finding a deal that way. A ton. I suggest that if go that route you put a value on an hour of your time and track how much time you spend working on this. You may find that all the money you save finding an off market deal nets you $10/hour. If you do find something you'll want to get an attornney to help you put the offer together and get the deal to closing.

Or you could just get an agent.

Let me understand your motivation for working without a realtor and then I can give you an opinion. If it's commission savings there are realtors out there that will share the commission with you.

I agree with @Justin. Maybe $125/ hour.

@Mike Cumbie it is working for us and many of our clients today. It's not for all clients though.

@Mike Cumbie Actually I think tipping is a bad concept and would prefer that everything be baked into the menu prices. Some restaurants are eliminating it and it's a uniquely American concept. And I do think about what the wait staff makes per hour and I do think that different types of restaurants with different service expectations should result in different hourly earnings for the wait staff. But at the end of the day all I really care about is how much the meal costs me and how the wait staff is paid doesn't really matter.

I also think that a realtor working on a $2 MM deal should be able to earn more per hour than a realtor working on a $200K deal.

Nothing is sacred in this world - especially not the commission structure of real estate agents. All you have to do is look at the market for evidence of what makes sense and what doesn't. The medallions system for Taxis was utterly stupid and overnight Uber killed it. Stockbrokers used to make $600 on a trade and they convinced people for decades that they were worth it but today I do that same trade for $4.95 and I get better service than I used to get from that stockbroker. Similarly, new real estate brokerage models are popping up all over the place to wipe out the excess profits in the real estate industry.

To further support @Matthew Olszak's point:
1) Some academics just did the first legit study on FSBO sales that I've ever seen (unfortunately, BP won't let me link to my blog post on it) and it shows that FSBOs get about 5 - 6% less for their properties than when sold by agents. Hmmm.
2) Even if you don't believe commissions affect the price, the fact of the matter is that if the buyer doesn't have an agent there is one less person involved in the transaction asking to get paid. Sure the listing agent could insist on pocketing that but they don't always choose to do that and the sellers often won't let them (depends on how the listing agreement is written). So the buyer and the seller could split those savings however they want.
3) This is exactly why we started the hourly model because there really is no need for an agent to get paid for work they didn't do and the fact that an agent makes a lot less on other deals doesn't mean that a seller should subsidize those other deals. All we should really be arguing about here is how much per hour an agent is worth. How they realize that hourly rate is not worth debating.