All Forum Posts by: Gary Lucido

@Steve Vaughan, "Think outside the box or don't" Seeing how we've been doing discounted commissions, buyer rebates, and hourly rates for almost 10 years I'd say that's pretty out of the box thinking. But agents don't really network like they say they do and like you describe because it's horribly inefficient. And the odds of a listing agent "having a buyer" for your house is damn near zero. What I would do for a seller that thinks their sale is going to be easy is offer them our hourly option. But the other thing is that you have to make sure you're not underpricing the property. If buyers are lined up out the door the property is priced too low.

@Steve Vaughan the problem with "I will give you 2 weeks to tell all your realtor friends about this house. I will pay you 3% and them 3.5% for bringing the buyer." is that that's not how you get a buyer for a home. You have to get it out there, properly presented, on some database like the MLS or Zillow or somewhere else with a large audience. Agents can't do that without a listing agreement. It's license law. Now, they could sign a non-exclusive listing agreement with you but I can't imagine some agent doing all that work for a 50% chance (my estimate) of getting the deal when an exclusive listing agreement would give them a 100% chance of getting the deal. That is assuming, however, that the home was priced to sell, which apparently it was.

Redfin does list Oregon, in addition to a few other states, as not permitting rebates. However, they clearly do offer rebates in California which they do not list as a problem. The reason they are losing money right now is that they spend a ton on Web site development and marketing. But those expenses scale really well. I've monitored a few of their deals here in Chicago and they are clearly making money on individual deals. We pay larger rebates on many larger deals than they do and we make money on them. And we always make money on hourly deals. Where they might be losing money is on those 1% listings but I've seen them make money on the ones I've tracked.

@Jay Hinrichs then how do you explain Redfin's business model? They operate throughout California and they rebate.

Illinois license law is very clear on this matter. You can't pay an unlicensed individual who is not a party to the transaction. Buyer's are a party.

I don't think any real estate agent is worth $500k and that's why the traditional real estate model is under attack from all directions. New models are popping up left and right. How many high paid stock brokers do you know? They used to be all over the place.

@Jay Hinrichs It's totally legal to give rebates in Illinois and if it's not legal in California then Redfin is in big trouble and their recent IPO is a sham :)

The average agent in the country makes probably half per hour of what we charge so it would be a pay raise for most of them to do hourly work like what we do. The reason some clients like this arrangement is because they are confident they don't need much of our time and they are almost always right. Today they are subsidizing the clients that don't know what they want. If I had the demand I would do all our work by the hour. My agents would make more than they do today.

Let's do some math based on the numbers you provided. The average agent is probably doing less than 10 deals a year but let's run with 10. Let's say the gross commission is $9000/ deal. That's total commission revenue of $90K/ year or $45/ hour on a 2000 hour year. We charge way more than that.

No, they're not spending 200 hours/ deal. That's the problem. They probably worked with 15+ clients and never got anywhere with a bunch and they spent way more than 200 hours with a couple of clients.

@Brian Pulaski the way we work it is we get our hourly clients to deposit a retainer with us from which we bill our time. We ask for periodic refills. Then we ask the lender and title company to credit our commission to the buyer. If they won't do that we receive the commission and then turn around and write a check to the buyer.

I operate a brokerage in the Chicago area and we've been doing SOME of our deals by the hour for several years now - and we deliver the same great service to these clients that we do to our regular commission clients. There is no reason for us not to. The average agent is making way less than $500/ hour when you factor in clients that suck up a ton of time and clients that don't end up closing. I know. I've run the numbers. 

You won't get your current agent to switch his operating model because agents just can't think outside the box and this guy has internalized $500/ hour but a new agent might consider the proposal since it would be incremental business and they are guaranteed to be paid for their time. Try googling variations of "pay realtor by the hour". Or you could tell your current agent that you want a 50% commission rebate on all your deals.

Thanks for the mentions, guys. Yes, we have an hourly option and I would be glad to discuss it with you. My advice to anyone who thinks they might want to go this direction is to get their own realtor involved at the beginning so that the listing agent doesn't have a claim to the commission and doesn't feel like they are "doing all the work" (yeah, we've heard this before). The problem with trying to get the listing agent to take a reduced commission is that they may not want to and you won't know if they really did until you get to closing.

We do offer our buyers, many of whom are investors, the option of paying us by the hour. Then we give them the commission. We have a lot of takers who know what they want and don't waste our time. They end up making money on the deal.

Thank you. I appreciate the feedback. It's a tough row to hoe!