Oh boy, a heated debate between a consumer and realtor, asking to justify their high commission with all the real estate info around.
(Snip below.)

Here it is:

http://www.bloodhoundrealty.com/BloodhoundBlog/?p=621

---- Excerpt Snip -------
"You are lowly paper pushers compared to doctors and lawyers who had attended YEARS OF SCHOOLING PEOPLE to get what they have. They didn’t take an online course and sit an easy written test of 150 questions. I am sick of reading about parallels between doctors and Reel-torrrrs. The old adage is alive and well - no one thinks more highly of a Reeltorr than the Reeltorr himself... I won’t be paying no stinkin 6%,5% or even 4%. Try 3%. IT WONT BE LONG NOW."
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Next time that idiot goes to the store and pays $20 for a shirt that cost less than $1 to make, he should ask the same question. How do they justify the price?

The response from me would always be the same: don't like it, go somewhere else where you can get a better deal. This is a free market economy. Once he gets burned with a discount realtor, he'll learn his lesson.

At the risk of being incendiary, we really do need to take a long hard look at real estate and where it is headed. You think Google is "just a search engine"? Guess again. Do you think this "idiot"'s point of view is isolated? Do so at your own risk. I run into sellers like him every day. So much so, that I have had to map a course I was not really expecting to map. I can no longer afford to risk my future on the large traditional franchise office manager, who wears blinders and refuses to see the writing on the wall.

Actually, I thought Candyhead (or whatever his name was) made some good points. He's certainly unpleasant, but I think his questions and accusations deserve good answers, not snotty rebuttals. If we can't calmly justify our commissions in a dignified manner and we just respond with puttering indignation, the general public will continue to be suspicious of us. Did you know that real estate agents are third in a recent list of the most UNtrusted professions?

I just finished up a blog related to this topic... will post the link in a bit.

There was a more civil follow up to this discussion on Active Rain at:

http://activerain.com/blogsview/19936/So-what-do-you

You bring up some valid points Jennifer. What do you think the real issue is there -- the public doesn't find value in a realtors skill set? What??

Here's a blog I wrote about "Our Sacred Commissions". It wasn't written in response to this thread, of course, but it includes my ramblings on how much we real estate agents might be worth these days.

http://www.sellwithsoul.com/oursacredcommissions.html

The main thing I agreed with CAndyhead about was his statement that we are NOT doctors, lawyers or CPA's. Yes, we took a month or two of classes, passed a one hour exam and were let loose on the public with no other training required. My stomach churns when I hear agents compare themselves to these higher qualified professions - just because we can make as much money as they do doesn't mean we're as smart, as talented or as educated as they are. Maybe we are, but a real estate license is certainly no guarantee of it.

I think if we were more humble and "soulful", people wouldn't have such a problem with our fees and our perceived value. But keep in mind... the GENERAL PUBLIC was also reading the Bloodhound forum and was probably horrified at the attitude of most of the agents on there... I know I was.

Okay, didn't mean to rant, but I got on a roll...

Jennifer

So, as to your blog comment... are you suggesting that real estate commissions charged are inflated and un "reasonable?" That 5, 6, even 7% is excessive for the competency of professional guidance, counsel, and work?

Sometimes, yes, I believe so. I don't think that anything we do is worth a $20,000 paycheck, even if the buyer or seller is happy to pay it. Of course, if an agent does $10,000 worth of advertising for a $1m house, of course he should be compensated for that, but otherwise, our skills and expertise simply don't justify that kind of paycheck.

I mean, I had surgery last month and the surgeon's fee was $3700 for some rather extensive work. I lived through it and am deliriously happy with the results. Do I think that my service as a real estate agent even compares with the skill, expertise and education my surgeon required to cut into my body, fix my problem and send me on my way? No, I don't.

I don't expect everyone to agree with me; in fact, the more controversary, the better, as there is no such thing as bad publicity (but I'm not thick-skinned, so don't beat me up too bad, I might cry). I've made a lot of money selling real estate and I'm not embarrassed about it. I've worked damn hard sometimes too and not been paid a nickel for my efforts.

On a $100,000 home... or even $200,000... 6% is reasonable. On $500,000, I don't think it is.

Jennifer

Jennifer:

Two points you need to realize:

1. Even in the legal or medical profession, education is no guarantee of quality. There are many bad doctors and negligent surgeons. What it comes down to is diligence and work ethic, and no amount of education can teach someone that. Unfortunately, in this world the skills that earn people big money (good investing skills, business savvy, good sales skills, etc..) are not taught in schools (not extensively anyway) so it's hard to point to a diploma to justify your salary. In the end, the job market's demand for good doctors or lawyers or realtors is justification enough for the salary.

2. Realtors live paycheck to paycheck and have no stable salary or insurance. Your surgeon who operated on you was fully expecting to get paid for the work he did. If I was guaranteed a paycheck for every "client" who takes up my time, I could afford to charge less. As it stands, we're like those wild animals who eat all they can while the food is there, to save up for the leaner times. That's what many people don't get...not only are we not on a guaranteed salary, sometimes we don't even get paid for work we perform. The inherent risk justifies the commissions.

3. So what would you charge on a $500k house? What are your cutoff points for various commission levels? If I'm going to make as much on a $500k house as on a $300k house, I'll take the $300k listing any day. Did you forget that at the very least, taking on a more expensive listing entails taking on a potential for a more expensive lawsuit if things go wrong? Higher end clients require more pampering, extra care, more responsibility and it also takes a lot of years of networking and establishing your reputation to get to that level. Is that not worth something?


I personally will never argue with a seller and justify my commission. I'm not being a snob, but like the point I made, if they question my salary, why not question everyone else then?

People's services are just like any product and governed by supply and demand, not by someone's subjective opinion of worth, amount of education or skill level. I'll ask the uncomfortable question again...the one everyone avoids: Why not question the athlete's salaries or those of movie actors? They make a lot more and do a lot less than surgeons.

On a side note, people just don't see the years of effort and learning that goes into being a good realtor. The pathetic education requirements are just a tiny tip of the iceberg. Maybe we need to start requiring a 4 year college degree, if for no other reason that to create a perception of worth. We live in a sad world....

You make lots of good points and I can't argue with you. In fact, I think one of the major reasons we can justify our fees is that we ARE willing to work on contingency, unlike a surgeon or a CPA (however, lawyers do it all the time). If we could charge by the hour, we might come out ahead, but I think the entrepreneur in us Realtor-types likes the excitement of a variable commission-based paycheck. I'd much rather work as a bartender for tips than as a secretary for a salary. Work harder, make more money. I have no problem with that.

One thing I did with my listings was to offer sellers the choice to pay my marketing expenses up front in exchange for a lower commission percentage. That way, I wasn't out-of-pocket any cash, just my time and energy if the home didn't sell. It worked for me and my sellers loved it.

Anyway, I think there is going to be continuing pressure on our fees and we need to be prepared for it. My original point, above, was that if the best the real estate community can do when confronted about our fees is to "sputter in indignation" and attack the questioner personally, then that says to me that many agents aren't convinced themselves of their worth.

When I charge 6%, I feel just fine about it. If I don't, I charge less. I am confident that my services are worth what I charge for them, whatever that number is. If a $500,000 house is pristine and is going to fly off the market in a week, I have no problem listing it at 4%. If a $100,000 condo is likely going to take six months to sell, if ever, I'm happy to charge 7% or decline the listing all together.

Jennifer

I just tell the homeowner that you get what you pay for. If you don't want to give up any of your equity on a realtor then you need to sell it yourself. If you want to let a professional handle it all, give me a call. You think your clients would work 6 months at half pay? Why hell no, so why should you. I wouldn't dare compare myself to a doctor or a lawyer, Most of these highly trained pros don't have enough common sense to set their watch. No offense to any doctors or lawyers who are on this board..but you know it's true. To sum it up, i'll give you the best commission closing you can say...Tell the home owner that you never take a cut commission upon listing a property, HOWEVER if I need to reduce my commission in order to make a deal work, then we'll talk about it. After all the sale of your home is the most important thing to me..not my comm. It leaves the door open for negotiation. Ive used it for 13 years, works for me. BigC

Oh and by the way Jennifer, I'll send you $4.97 for your ebook. What do you think? Just kidding. Best of luck to you, I hope you sell 10 million copies. BigC

I like Jennifer's attitude and approach. I can be flexible on listing commissions as long as it's a win-win deal. I saw a lot of large teams offer move-up programs and variable-rate commissions, so that seems like a direction for my team.

I run a practice based on being an expert and going above and beyond, so there will need to be a good justification for my team to receive less pay.

You'd think that with the limited service fee broker firms that enable FSBO sellers to put their homes on MLS, that we'd be feeling the pressure. However, I haven't seen that in my market. The LS sellers I've seen tend to price the homes way too high and then they sit. They also turn down excellent offers in the first few weeks and then look back wistfully at the what they turned down as new offers come in lower and lower. I've also noticed that the photos they put on the MLS and that end up on Realtor.com are not good quality and they are reluctant to spend any money on advertising or marketing. They also end up paying about 2.5% to the buyer's agent. At the end of the day, I think most of them lose more from not having the marketing, negotiation, and networking advantages of a listing agent than they gain from the few percentage points they save by going with limited service. I realize these are generalizations, but these have been my observations. I keep hearing that the market is going to be impacted by the limited service model, but I just don't see it yet.