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."
---------------

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.

You hit the nail on the head Susan. I can't count the times i've brought a buyer to the table of a listing by one of these super service discount companies and had to work both sides of the deal to get it to closing. You can't help but feel sorry for the home owner when they have to call me to find out what is going on with there deal. All I hear is " I'll never do that again" Word gets around real fast. So if you want to work for a discount firm...Please learn what your doing first. If you want to settle for a 1995.00 commission thats your business, but I don't want to have to hold your clients hand thru closing. BigC

I'm sensing some undertones here that suggest confidence and value, and possibly a lack thereof during the relational process with the client have an impact on compensation.

What I'm driving at is this:

Is this not a discussion on your true universal value, and having the confidence in skill set to project it?

May I suggest without getting too scientific, it is safe to say that realtors have both "universal" value and "individual" value.

A Realtor's Universal Value

+ Being accessible
+ Being prepared
+ Ideas or strategies not known before
+ Being knowledgeable about a situation or industry
+ Etc.

A Realtor's Individual Value

+ Straight talk - no B.S.
+ Accountability
+ Likeability
+ Praise or positive feedback
+ Etc.

So it also stands to reason that to provide "ultimate value," quantified by getting the highest compensation possible for your work involved (subjective, I realize) you must first uncover what the client’s "universal" and "individual" values are to see if they align with yours.

Because when this happens, the relationship becomes one grounded on more than just 4, 5 or 6 percent.

Thoughts?

Excellent analysis. May I add one simple thought... which I believe is sort of what you are saying...

Part of our fee structure is paying for the incredible system that our industry has created to facilitate the transfer of real property. Without us Reeeeel-tors and our systems (by systems, I mean MLS's, lockboxes, E&O insurance, title insurance, etc), the sale of real estate would be a FSBO world, which would be far too inefficient for today's consumer.

This is why I'm perplexed when I hear naysayers talk about eliminating the middle-person (us) and going to an Internet-based home buying/selling model. Do you know anyone who would buy a home from an Internet site?

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

Jennifer

The bottom line is that we, as real estate agents, are in the position to do several things that allow us to earn what we make. Some of them are:

- Protect our clients interests by seeing to it that all contractually agreed upon duties are carried out in a timely fashion
- Protect our clients interest by obtaining and reviewing reports, inspections and disclosures that may materially effect the property in question.
- Providing our clients with recourse in the event the worst should happen in a real estate transaction by putting in place agreements, inspections and reports that provide my clients with a responsible party to potentially take action against in the event that those reports or inspections fail to discover defects that reasonably should be been discovered.
- Obtaining for our clients the highest possible price for the home they are selling or the lowest possible price for the home they are buying.
- Finally, if we have somehow failed to follow through on any of the above, my clients have the option to sue me and my brokerage for restitution. Since the higher the priced the home, the greater the potential risk involved with this fact, my compensation is based on a percentage of the sales price of the home.

I am like an insurance policy for my clients. If I do my job, should the worst happen, they always have somewhere to turn. If they have nowhere to turn, they can come after me.

Now, not all real estate agents live up to a standard of full performance in the above areas. Sadly, a very large number (in my experience) do not. It is these folks who (rightly) leave the impression that the fee agreed upon is not being earned.

If we do our jobs, we earn our money. It is as simple as that.

So the real question should not be "Why do you make what you make?", but rather "Why don't you do what your supposed to?"

R

The issue of commissions for Realtors is driven by that there are way too many people playing Realtor and not enough professionals. As long as the barriers to entry are so low that house wives and anyone else looking to make some extra change on the side can call themselves a Realtor by taking some BS class, the public is going to have a poor perception of the value add.

Additionally, the public perceives the Realtors main role as finding the house. This may have been true as early as 10-15 years ago, but most buyers nowadays can find their own homes using the internet. Sure they need to see the property in person, the neighborhood, etc, but finding the house to look at is not all that difficult. This is where most people despise Realtors. Their attitude is I am not going to pay you 3% to printoff a listing sheet for a house that I can also look up on my own. The value add of the Realtor is all the other stuff that they assist their client's through that goes on with a home purchase.

It would be in the best interest of the industry to severly limit the number of people that are entering the profession. This can be accomplished by 1) higher education standards. I believe four year college degrees should be required. 2) Significant training and/or apprenticeships before being able to go out and actively call yourself a Realtor. Maybe having minimum number of transactions completed requirements.

However, I suspect the NAR would never allow this because it would hurt their coffers by eliminating all of the dues from non producing agents that get churned and burned out by the industry. Broker/owners would probably have the same issues too since it would cut out their ability to make money off newbies who milk their friends and family for a year before crashing and burning.

Until this happens, I imagine people will continue to find ways to cut commissions. I agree with the earlier poster that some commissions are way too high relative to the service performed. However, it is a lot easier to protect this income when you at least have some training and professional standards that the average joe can respect.

Russ
www.smartmortgageadvice.com

AMEN!!!!!

Not exactly sure what this would accomplish...?

Are we talking harder, tougher licensing and even [renewal (gasp)] standards...? Does NAR or any other association have a position on this?

Max:

It would accomplish several things. First, by raising the barriers to entry, you also by definition raise the standards of the industry. For instance, most lawyers will tell you that they don't learn squat in law school. However, the three years of schooling serves to keep people out of the profession. It also ensures that there is some minimum level of competency for ALL lawyers. Not saying there aren't any dumb lawyers, but you can be sure most lawyers are reasonably intelligent since they would have had to go through three years of additional schooling on top of college and then pass the bar exam. Second, it also helps keep salaries higher than they would otherwise be because the profession isn't flooded with unqualified entrants. Most jobs that pay well, do so because not everyone can do them because the barriers to entry are too high for the average person or it requires some other talent that not everyone has.

Let me give you another example on low barriers to entry. Take actors for instance. Anyone can call themselves an actor. You have your A list folks making big bucks, but the vast majority are still waiting tables. Until you get your big break, you are broke because you are easily replacable by some other starving actor. This serves to keep wages low for new folks, but doesn't really hurt the superstars. As a result, the public has little respect for actors until they really make it big and are unwilling to pay for no name actors. Same thing with Realtors. The public knows any idiot can say they are a Realtor, so the public has no respect for the profession and therefore is unwilling to believe Realtors earn their 3% commissions (even if we know how hard the job is).

To be blunt, as long as a cabbie or your bag boy can sell you a home on the side, NO ONE is going to respect what you do for a living and will always question what you are earning. PERIOD.

Russ
www.smartmortgageadvice.com

Education is not a guarantee for good service, or a way to elevate the respect one should get from a client.
How high do attorneys rank in the publics perception? Not that high, given all the education they have.

It's an interesting discussion, but sadly some people will either get it or not. Those same folks will question every other person's salary. That's the downside to being in a professional field, where you business is dispensing valuable advice. It takes a few minutes to give, so no one values it. Nobody sees that being a good realtor is about spending hours learning the market and all procedures involved in selling.

I think we provide certainty in the uncertain world (to quote Al Pacino). We give guidance and advice, which can transform a very confusing and stressful process into a smooth and easy one. That's our value, and it takes a lot of time and patience to perform these tasks. Something that deep discounters won't do because they make pennies on the transaction.

As for not justifying commissions...it's not snobbery at all to just walk away from the discussion. I charge a certain fee (even a small discount, maybe) because that's what I feel my time is worth. What I noticed is that people who start arguing with you over commission will be horrible clients anyway...they'll always think you're not doing anything and will not be happy with your services.

As a newbie, this is a great discussion for me! I know that when I go out for listing presentations, when someone asks about that 6%, I show them - visually - where that money goes and how little of it I end up actually keeping. It really helps, and I think that the public's perception of value is unrealistic because we don't do a good job of explaining that we don't keep the full 6%!

Selling real estate is not hard work. Digging ditches or doing summer construction work in Las Vegas (in 115 degree heat), is hard work.

I think that in the eyes of the public, agents whining about or trying to justify getting paid $45,000 in one month (I had a great October, what can I say ) for doing maybe 40 hours of work, is ridiculous (myself included; fortunately before real estate, I had one of those manual labor type jobs).

We are all given the freedom to choose the path that we take in life. Every path has its own challenges and rewards, and most will allow you to switch to another path if you no longer like the one that you are on. To me, being a Realtor or Loan Officer is the epitome of working smarter rather than harder. It gives me the most flexibility timewise, as well as the highest return on my invested time (at this point in my life), thereby being a more intelligent and fulfilling choice than working for an hourly wage.

I do agree that the requirements for entry should be 10x higher than they are now. I have never dealt with so many idiots when it comes to proper procedures/protocol/contracts/etc., but geniouses when it comes to generating business. I would like to see the profesional and ethical standards of our industry restored, but that is about as realistic as closing the hole in the ozone layer.

Just try your best individually to be as professional, educated, and responsible as you can be. We will never be able to justify our income, but don't need to either. If you do a good job and fulfill a need that your client has, they shouldn't mind (or even notice) the 3% that you skim off of the top. Most people don't mind paying for a job exceptionally done...

Russ,
Real Estate agent is not the only filed with low entry requirements. The requirements to be a Loan Originator/Consultant is also far too low and there are far too many LO out there that have no Idea what they are doing.

I have for quite some time beleived that the educational requirements to become an agent are far too minimal. I believe that the minimun requirement should be an Associate Degree in Real Estate, Business, Finance, Marketing or similiar major. This would put an end to the bored housewives that are just looking for something to occupy their time(I know I will take some heat for that comment but oH well!)or so they can sell houses to their friends. This may also improve the percentage of agents lasting past that 1 or 2 year mark. One of the courses I believe all agents should have to complete before they get their license is a class on how to start and run a small business because far too many starting agents do not realize that is what they are doing by becoming an agent. I believe that there should be increased CE requirements and the classes should actually be somewhat harder.If you are not willing to put forth the effort and expense to obtain an associates then you definately are not going to make it in this business.


NAR or the state associations would never openly support something like this because it would greatly cut down on the number of dues paying members in the organizations. Now before some of you go off on a tirade about NAR dues let me say I support all the work that NAR does in lobbying for both the agents and property owner rights. Many brokers would support such a requirement. The brokers that would support it are the ones you want to be working with anyway!

Absolutely great point.

I bet if you surveyed 100 people about realtors and real estate commissions, a large majority would say they believe that the entire commission goes into the realtor's pocket.

I once saw a display ad by an agent entitled, "The Truth About 6% Real Estate Commissions."

She went on to detail the actual payout the realtor receives vs. time and effort. Very convincing, and was told the ad convert to many listings for her.

Just look at those responses by our fellow collegues in the original posters Link. My gawd is it any wonder Forbes Magazine had us realtors listed in the top 5 most untrusted professions.

I could care less if it is way to easy to be an LO.....Lets focus on US and not pass the buck. NAR needs to step up and require much more stringent guidelines in order to become a Real Estate Professional.

Like it or not...our own arrogance (As seen in the responses by clicking on Link in this opening thread) is what shall lead to the reduction of our fees/commissions. HUD has already posted two opinions on this topic. Both times they wrote opinions expressing Real Estate Commissions of 6% to 7% being as big of a problem as Predatory Lending...............Change is coming.


Quit with the ARROGANCE and begin to EDUCATE your client...........

Wow! Lots of great points here. I haven't been around for a few weeks but have been having this exact discussion with some of my agents.

I have to agree that average agents *can* get paid a ridiculous amount for what they really do. Sorry. I think I read on this forum that the average agent spends 11 hrs on a listing & spends less than $1,000 marketing it. Agents spend an average of 24 hrs with a buyer.

I NEVER explain to my sellers that all my money is spent on "marketing" etc because it isn't. I am not a real estate "consultant". I am a salesperson and some of the highest paid people in the world are salespeople. If I can sell your home in 30 days in down market then damn straight I'm earning my money.

My fee is earned negotiating an airtight Purchase & Sale & minimizing their risk. However, most agents write a Purchase & Sale that has more holes than swiss cheese. I think we would get sued more if buyers & sellers knew we carried malpractice insurance.

I don't necessarily agree with the argument that there needs to be stricter education requirements. How about some accountability on behalf of the puppy mill brokerages out there that hire a warm body because it costs them money to have an empty desk? They are the ones responsible for turning loose newbs & other clueless, unethical, immoral & downright illegal individuals. We all know brokerages that keep the trouble makers around because they produce.

"As long as the barriers to entry are so low that house wives and anyone else looking to make some extra change on the side can call themselves a Realtor by taking some BS class, the public is going to have a poor perception of the value add"

....whoa Russ, slow down.. I resemble the house wife comment!

Originally posted by DebT:
...I think that the public's perception of value is unrealistic because we don't do a good job of explaining that we don't keep the full 6%! ...

The problem I have with this is that we don't determine the total commission paid by the seller. Aren't we doing a disservice & further fueling the fire by saying 6,5 or 4%? I think NAR should attack Assist 2 Sell's mantra that "Friends don't let friends pay 6%" because fees are negotiable but moreover, we DON'T determine what the seller will co-op. My husband heard me on the phone the other day w/ a potential seller. She asked me what my fee was. I told her I charge 2%. I could almost hear her jaw hit the floor. I then explained that she would determine what she wanted to pay the agent that brought the buyer based on what was customary for the area. My husband thought it was brilliant. And to think a few years ago I was one of those lowely house wives Russ referred to

I have to agree that average agents *can* get paid a ridiculous amount for what they really do. Sorry. I think I read on this forum that the average agent spends 11 hrs on a listing & spends less than $1,000 marketing it. Agents spend an average of 24 hrs with a buyer.


--------------------

There are people out there who do a lot less for a lot more. If you can realistically do only 30-40 deals a year maximum, and lets say you spend 24 hours on each and bill at $50/hr, that comes out to $48000 a year, for doing a lot of work.

Our business is risky and limited by the number of transactions, not by the number of hours. We get paid per deal, and there are only so many deals that even a top producer can do before the level of quality sharply drops off. Therefore it's wrong to see what we make an hour.

Almost all other sales are commission based, for that very reason. It remains the most fair compensation scheme.

I agree with others, the best way to raise our image is to reform the industry somehow. A combination of stricter entry requirements, tougher coursework. We should be required to pass courses on running a business, doing CMAs...etc. Practical stuff.

Taking GRI and other classes after getting a license is a good start.
Due to every states individual entry requirements from 40 hours to 200+ hours to obtain a license, NAR should step in to make association membership requirement a national norm, therefore providing the minimum educational standard for agents, regardless of which state license an agent has.
I would not compare attorneys to RE agents. We don't make $30K an hour.
http://www.freedomworks.org/informed/issues_template.php?issue_id=616

Paul:

I agree, the requirements to be an LO are even worse than Realtors. At least you have to take a 40 hour class. Until last year in Illinois, convicted felons could be LO's.

I think the requirements to be an LO should be even more strict than my suggestions for Realtors since we are the ones dealing with the money. We have the same problem too in that the MBA and NAMB wouldn't want to do anything to get rid of the boiler room, telemonkey hack shops.

Russ
www.smartmortgageadvice.com

A few comments...

Top Three reasons consumers get upset with commissions.

1. The ticketmaster rule.
When an intermediaty, such as a broker, publishes it gross profit margin it becomes subject to attack. The average convienence store makes huge markups, but isn't subject to scrutiny because they don't put the markup on a HUD-1, or break out a convienience charge.

2. Buying and Selling a home is stressful.
Realtors are ultimately sales people in what is often the most expensive and most personal financial transaction a person will ever make. A profession that specializes in dealing with people at this stage of their lives is going to run into complaints and concerns.

3. Loose lips sink ships.
There are a lot of people in the Real Estate business who have entered the field due to the low barriers of entry who try to position themselves as experts and trash the business. They ask witty questions like "how do you justify your high commissions" but fail to explain "how do you remain profitable charging x?"

This is absolutely a great thread...this should be sticky material!

There has been many great responses in this thread. Bottom line, the Realtor themselves have to believe their value before they can explain it to their clients.

This is making me want to come back into the business! Especially the poster who hinted he made $45G last month. I'm getting calls, I'm getting calls...

Doesn't the realtor need to do a better job of:

(a) asking the client directly if they found value in their work?

(b) staying in touch consistently, even years after the closing?

Thoughts?

maryknoll,
Face the facts this business is not for you.

Here in California houses go for an average of $500,000, so a 5% commission would be $25,000 and if your 50/50 with your broker then you get, after your costs, around $10,000.

Now a really good paying job makes between $2,000 and $5,000 a month.

The Bottom line is if you sell a house in two months then you make the high pay and if it takes you five months you make the low pay.

The FSBO's in my market area are a joke. Most of them have called 6 or 7 realtors and either are too cheap to pay or they can't because they already used up their equity, no matter what the reason is. Is that my fault? I dealt with a nutty owner who screamed at me once because she was a FSBO and I had a buyer. She wanted me to accept less than half of what I charge. I said no.. and was ready to just end it there and politely leave. You should have heard her. All she did was whine and cry, "why should I pay you a FULL commision?".. Boo Hoo Hoo... and so on.. So I said "Good luck", and I hope you sell your home.. Again, she started crying.. It wasn't the money, it was the fact she didn't want to pay.. She said.. "I will NEVER pay a full commision to you or any agent!"... So she listed the house with a discount broker.. 6 months later and almost $60,000 less, the house is still for sale.. I sold my buyer another house.. My buyer was happy.. and I got poetic justice..

HA HA!

Jim

What else is new? People don't believe car salespeople should make money either. I think a lot of people believe the only people who should be paid well are themselves!

I was just wondering....a friend of mine just hired an expediter to help her get some permits for a lot she owns. Does an expediter even NEED a license? What training do they have? This one will be paid about $900. But people use expediters to guide them through the process.

I disagree about a 4 year degree. There are people who do well in school mostly because they can pass tests. Not that they have learned anything. I think I am a pretty intelligent person. I've owned my own successful business. I'm a talented artist. I've organized many successful fundraisers. I also did horribly in school. This is the fallacy I feel many teachers engage in. At school budget time you always hear "with my advanced degrees I would earn 3 times as much in the corporate world!" Not necessarily.

Ronsmith's first and second replies were the best in this whole thread. I will study both and prepare myself in case I have a seller who is more aggressive!

Paceryder,

Hopefully you were attempting to make a bad joke when talking about teachers at budget time. As my wife is a teacher with a Masters degree I can definately say she could definately make more in the corp world than as a teacher. Other than basic longevity the only way a teacher gets a raise is to get additional educational credits. Where in a corp environment there are bonuses and you can get a raise for doing a great job. Also if you are one of those uninformed individuals that feel teachers don't work very hard and deserve less pay because they get summers off then you are totally clueless to the hours a teacher puts in during the school year.

I do not believe that a 4yr degree should be the minimum but I do believe that a 2 yr degree in either Real Estate or a related field should be the minimum. The fact that you are a talented artist or ran some other type of business has no real bearing on sucess in the real estate business. The fact that you did horrible in school may have been due to a lack of effort and poor study habits and certainly nothing to be proud of!

I believe that requiring higher education requirements for both entry and for CE would go a long way toward reducing the the number of agents that do not make it past that 1 or 2 year mark and would also reduce those that feel it is easy money!

Well I see you live in Illinois, here on LI it isn't unusual for a teacher to make close to $100,000 with great benefits, too. Where in the corporate world do you get a raise because you got more college credits? Some people in business get bonuses, but for the most part I don't think they're that huge. I don't disagree with you saying that an associates degree should be required with an emphasis on r.e. I do think a mentor is better to teach one how to "sell". I also believe that owning a successful business does indeed mean something when one become an agent. I have absolutely no problem motivating myself, making sure I don't procrastinate, and getting out there an getting business---because I've done it for years, just not in r.e.

Luckly, I haven not run into a seller that was that rude over commissions... I have had them tell me that they would rather try and sell it on their own than pay a commission and I tell them I understand and let them know that if they decide they need help marketing their property to let me know.. Personally, I did not get into this business for the money (it's a perk). I got into this business to help people (especially 1st timers) feel that joy I felt when I purchased my first home.. The overwhelming joy and excitement that you feel when the keys are handed to you and someone says "congradulations on the purchase of your new home" I think that if you treat people with the respect they deserve and always, always treat people like you would want to be treated.. Be HONEST, LOYAL, and TRUSTWORTHY!!! I am the same person today I was the day I got my license... And, under no circumstances should anyone change their attitudes just because they are making a little money now.... The reason that a lot of consumers think we are over paid is because of the attitudes that some agents get... You know the ones (NOT TRYING TO OFFEND ANYONE) that they think because they can afford the new Benz and mini mansion now that they are to good to deal with the common people... Plus, it does not help the cause when you slam consumers for making comments on this site or any other site about their opinions of Realtors...

With all the info that is on the internet many consumers think they have found a way to justify not paying the commissions... They do not understand everything that has to be done to get a property to actually get to the closing table.. And, this is where a "good" agent comes in to educate those who wish to be educated and walk them through this process... And, show them that you are worth what you are going to be paid once it closes... I am sorry for rambling... Just had to give my opinion.....

And a good opinion it was indeed. Thank you/


At what point does an Agent sacrifice opportunity cost educating people over being productive and generating revenue?

Isn't their a fine line somewhere?

A.C.

My fees have gone up as time has gone by. It does nothing to sift through vomit. So reading tripe like that and getting an emotional work out is not worth it. If you have value, demonstrate it, deliver on it and you will be rewarded. We have to as an industry do a better job of explaining our value to consumers. They are right though there is no sense in comparing us to lawyers and doctors. We work far to hard for far too little.

Could care less about candyman or whoever it was opinion.

This all has to do with perception.Who thinks 6 or 7 percent is too much,I sure don't!

Is 20,000 commission to much for an agent to make,not in my opinion.What did a seller do in a hot market to make 200k in equity in 3 years,not much.I can guarantee I worked as hard or harder to make my money as they did.

As agents we are there to do mainly one thing.Negotiate the contract!

Sellers and Buyers list this as the number one thing they have trouble doing and understanding.Contracts are getting more complex each and every year with more addendums,special stips,offers,counter offers,etc.

If an agent can't effectively communicate the value of what they earn,accepting a lesser commission is solely the fault of the agent.

How are you supposed to communicate your value or worth with someone who has never experienced your work or professional competencies? Show them a nice fancy brochure? What??

This is my first post, and before I begin I would just like to say hello and I hope I can contribute as much as everyone else.


As agents, all of us practice a limited amount of law. I have heard, although I am not certain, that the Colorado Real Estate Exam is harder to pass then the Colorado Bar Exam. Now, I don't know if thats true or not, what I do know is that I provide a service to my clients and assume tons of legal responsibilties that they themselves can't and should be paid accordingly. I'm all for variable commissions, but I am not going to discount just to get a listing. I am a full service agent, that is what you pay for.

"We work far to hard for far too little"

And we wonder why Housing & Urban Developement has begun to research the effects of 6% Commissions on an already inflated housing market.....

Alan Greenspan & Ben Bernake have already written opinions that Real Estate Commissions need to be reduced to a maximum of 4%. They cited the average home in when 6% to 7% became the normal commission was late 1960's...Median/Average house then was $19,500.00. When the current Fed. Chairman along its Former Chairman begin writng opinions like those submitted in the last 6 months....it is only time until we see major reform with a significant reduction in our commissions......

So much for the free market, huh? How about we limit Wall Street Bonuses and CEO pay, too? @@

I think that the public views real estate agents as being at the same level of abilities whether we've been in the business two months or ten years and whether we have six designations after our name or none. That is the real problem.

We know there is a huge difference in terms of ability, experience and knowledge between agents, but how do we communicate that to a client. I keep careful statistics on myself in comparison to other agents in my market. There is a difference and I can articulate it. The statistics confirm it.

We have to show results and prove that there is a difference, but consumers have to become more educated and realize that there is a difference between agents. We aren't fungible.

"They cited the average home in when 6% to 7% became the normal commission was late 1960's...Median/Average house then was $19,500.00."
It was in the early days of co-op, when the commissions increased because of efficiencies sake.
Before co-op, RE companies charged 4%-5%, houses took longer to sell, sellers were not happy and buyers had to call the listing company to see a home.
I'm sure the powers to be remember "the good old days".

It's important to note that this entire thread containing commission rates examples, when read by outsiders, or maybe taken out of context, could be considered a discussion of price fixing.

Those who have posted, or continue to post should try to avoid words like "normal" "regular" and "standard" commissions, since there is no such thing as a normal, regular or standard commission, except in your own office. Phrases such as "what everyone charges" should also be avoided.

Everyone reading this forum should realize that the percentages put forth in messages are hypothetical in nature for discussion purposes only, and in no way should be construed as a disclosure of what anyone is actually charging, since discussion of the rates your specific firm charges gets into anti-trust law areas that none of us want to go in.

Wet blanket time is over - go back to your very interesting and lively discussion.

Max: How about during the presentation to actually show samples of the work of your previous sales, or if you didnt have transactions in the past, it's also possible to take your own home to just that as a sample. I feel more comfortable doing that way so I wouldnt make any sellers or buyers (of the new homes) feel that their information are "floating" somewhere in the Internet or print world.

Do you think it will be a good idea?

It's a "free" market and people will work it out themselves.

Discount folks did well when the market is hot.

Now, to see any buyers commission at less than 3% is a bit odd. 2% is nearly gone from listings I've seen.

With the market getting tougher, lenders getting more concerned about values and appraisal being an issue- there's more for us to do for that fee.

When all parties are highly motivated it's easier.

Now, with uncertainty from both ends we can prove are value more.

I put in an offer for a condo 5K below a solid comp.

The seller freaked out and actually pulled the condo listing.

She contacted me via e-mail. After bringing up a variety of issues...she's really happy with me.

Her listing agent never gave her an estimate sheet, or much guidence in any way. He was with a large known broker. Her opinion of Realtors was very low based on her experience.

Let's face it- our industry attracts a lot of folks who want to put the least effort to make the most profit.

That womans condo is very nice. Too bad her listing didn't show the 1st picture, the description was just a price range and the tax ID was a different unit.

Since we deal with one of the larger transactions people will ever make- they will analyze and remember our performance or lack thereof more than most other services.

We can't get upset with people who were burned by agents/brokers who are poor at this work.

Our fees are related to time/money/effort required to get a closed sale.

If folks have enough equity, I am suggeting 6.5% with 3.5% to the buyers agent to stand out from the crowd.

We just need to know our own value and treat everyone with respect and do our jobs best we can.

So you are saying that we should make the same amount of money that we did in the 1960's? I feel that the cost to sell RE has gone up since then as well. Not just the average price of the homes.

I am not saying anything...I cited two opinions written by the Current Fed Chairman and Former Fed Chairman...Both have been submitted to HUD in regards to HUD's investigation about Real Estate Commissions and the housing bubble....maybe proof read?....

I am not sure about your anology though........I seem to believe NAR cited the Median Home price to be over 200K recently on CNBC. So, the math says 4% of 200K would be greater than 4% of 19K....

But if you sell alot of homes in your area for 19K...then I guess Mr. Bernake & Mr. Greenspan are saying yes..............

Why should we even be entering into a potential trusted relationship with someone with a "discounting" mindset?

Aren't we just setting ourselves up from the beginning to diminsh our worth and value if we do this??

Well, the average price of homes here are not 200k. I can understand people in million dollar markets not charging as much. But I do know that I am working my *** for my 6% of 100k. I couldn't afford to take a 2% cut. In every listing presentation that I go to I am always having to explain why I charge what I do. And after I educate them I get the listing about 98% of the time. If you know you work hard, and can inform your customers of that then they don't have a problem with paying the 6%. And I didn't mean to come off sounding like you had said it, just that i didn't understand how they can compare 1960 to now. I probably only get about 50% of all my commissions right now after office fees and marketing. In 1960 I'm sure you were able to keep most of it.

Hmmmmmm.... why not? We get discounts, early selections of products or a better product selection with people that knows, trusts and have connections with us. So why shouldnt we do that in return? How would value be perceived differently?

I'm not sure if "discounting" is the right word to use. Why dont just look at charging a "fee" based on a percentage of a house regardless of what NORM charges - it's specific. It is what it is.

Example: Agent A charges 6% as the standard fee. Agent B charges 4% as a standard fee. Dont think that it's discounting. Then can we resolve the problem?

I think we should focus/ spend energy on providing service well above expectation. Think about our "bottom line" like any other businesses do. We have costs associated to the flyers, sign, lockbox, various marketing pieces, estimated time involved in selling (whole transaction)..... There is a number there. Then, show evidence (with confidence, not snortiness) of how we are going to do that. If the Seller feels that what he/she gets for the fees charged do not match, with the "number" you know, decide to accept it or not. If it didnt work out, simply smile and walk away.

If HUD reduces the Maximum Commission to 4%...that is not called Discounting....If you charge 4% you would me Maxing HUD's allowable Commission.

If you think HUD has not capped fees involving Real Estate Transaction...just look at the limits they have impossed on Banks & Brokers.

For your above example, most LO's split that Broker/Origination Fee with their Principal Broker as well, just like we do......Yet, HUD is proposing a 5% Max on Total Closing Cost, which not only includes the Broker/Origination fee but also includes Escrow Reserves, Title Work, Appraisal, etc....

HUD is in the mood to Cap our Commissions, just like they have Banks and Brokers....Mr. Greenspan has been a big advocate of this for the last 3 years, and with HUD annoucing a formal investigation into the matter I believe we will see something announced in the not so distant future...

Just be Happy Mel Martinez has stepped down from HUD...Not a very Realtor friendly fella.

Jabronie,

HUD does not have the authority to CAP realtor commissions. Realtor commissions are Negotiated and agreed to before the transaction begins in the listing contract or the EBA agreement.

Real Estate agents do not suddenly at the last minute add or raise their fees while the transaction is in progress.

Lender\Broker origination fees and other closing costs are often changed suddenly during the process leaving the consumer little choice but to pay the higher fee.

Mr. Greenspan opinion is no longer relevant except possibly to his wife.

Unless we suddenly become a socialist county it is unlikely HUD would try something so foolish and beyond their authority as to impose a commission CAP on the realtor fees. What would be next...caps on doctor fee, attorney fees, CPA fees, plumber fees.....etc....

LMAO..You do not think HUD can regulate Real Estate Commission? Please tell this was a tongue and cheek response. You do understand that it was Housing and Urban Developement that brought RESPA reform to Congress and to the Housing Secretary...........You know that Little RESPA Act ALL Real Estate Transactions are governed by...........

Mr. Greenspan not an very influencial economic advisor on this matter after 20 years as the FED Chairman?..............not to mention it was the Housing & Urban Developement Committee that requested his opinion on the matter.......


I feel for the consumer who would stumble upon this site and find such Professionals who do not understand the Basic bodies of government who govern our every transaction..........

To say that if HUD pursues this reform they would be over stepping their authority is dumbfounding..........You don't think Freddie/Fannie and FHA will not be in lock step with the very Goverment Agency which provides oversite.......? It was HUD who thought the former Fannie Chairman should step down...within days the Housing Secretary concurred and WALLA resignation.

Where do you think the Housing Secretary gets his information as to new Regulations and or procedures which need to be brought before the Congress?.........H.....U....D......

Hence why we all should be very glad Mel Martinez is no longer running the show.

I apologize if the above came off as brash.....I was typing that as I just got off the phone with a Listing Agent whom my client made an offer on a 795K home, and she is splitting hairs over a $475 Warranty. Who in their right mind would come back with agreeing to the purchase price, but the Seller will pay $400 of the Warranty with the Buyer to pay $75. This is a 795K Home.......at almost a FULL OFFER.......I told her Fax the counter and stipulate my Firm is to pay the $75 Dollars, no way I am requesting the buyer to bring an additonal $75 for a Warranty..

I gots me one of those Glitter Wearing Listing Agents on this one...Gold Glitter and Blue Eye Shadow..........Nothing else screams Professionalism like GLITTER...........

A broker in East Hampton had 4 homes listed at between 1.5 and 4 million. She ran a TV ad 400 times during the past summer and sold 3 of them. Why should she discount her percentage? Obviously it costs a lot more to market those homes.

Jabronie,
The one with the flawed Understanding of HUD powers and responsibilities is you. Do you honestly believe that HUD ie the federal government is going to come down with a ruling that says Real Estate agents can only charge a maximum of 5%? < TEXT REMOVED BY MODERATOR FOR UNNECESSARY ROUGHNESS >

RESPA has no bearing on an agents commissions as those are earned fees. That commission is a charge that is negotiated and disclosed up front. It is stipulated in the contract and is in no way a hidden fee. The only thing that dictates agent commissions is the market of your area. There is no way that elected officials are going to say "sorry but you make too much money so we are going to limit what you can charge" NOT GONNA HAPPEN! I doubt you will find that many politicians in congress willing to commit political suicide.

< TEXT REMOVED BY MODERATOR FOR UNNECESSARY ROUGHNESS>

I live in San Jose, silicon valley. The average
home here is $700K. Possibly the highest in the nation. There are also tons and tons of agents.
I was always looking at open houses over the weekend because myself want to move to a bigger
house. A lot of agents want to prospect me, and
the common theme is that they will give me 1% rebate. The current brokerage that I interviewed with, both the broker and the sales manager sound the same tune!

I myself also question this. If the average house in San Jose is $700K and the same house in indiana is $70K, with same amount of paperwork, does the agent in San Jose deserve to make 10X the income?

Kelingdun: Here's my thought on $700K vs. $70K. Somehow, I doubt it's just how much "work" that is put into the transaction.

You in SanJose has a MUCH higher cost of living - much contributed to your housing vs. the person in Indiana. So, would it be fair for you to be paid "the same" where you are at? Pretty soon, things will be real tight for you, or you in CA would have to work 10 times just to get the same....

Paul,
When HUD opens an official investigation into the belief that 6%-7% Real Estate Commissions are contributing to the Housing Bubble by requiring inflated values in order to cover commissions...well that is a serious statement.

Now, RESPA governs us all (I am hoping you have read all articles on the Reform that all SFR are governed)......Per the housing Secretary on Squawk Box his office, along with Housing & Urban Development is investigating if RESPA should not be EXTENDED to cover REAL ESTATE COMMISSIONS, as HUD's position along with the CURRENT FED CHAIRMAN & FORMER FED CHAIRMAN believe 6-7% Real Estate Commissions have lead to Inflated Home Values in order to cover the COMMISSIONS........

Political Suicide?....Do you do any research on your opinion/stance? Per an article on MSN.com where they stated Real Estate Commissions were excessive...a poll on MSN showed over 70% of the public agreed.........Good Lord do you even know why NAR is lobbying so hard right now? These are serious issues which will effect us all, and it seems people like you are oblivious to PUBLIC & GOVERNMENT OPINION on the matter.

I cannot believe anyone can be so oblivious to such possible regulation of our commissions. You think this Housing Bubble is going to magicly disappear? Hell READ the ASB/Appraisal Standards Board (You know those people who created USPAP Guidelines Appraisers must follow) position on the matter. They cited for HUD that their members recount numerous instances where they were pressured by Real Estate Agents to get the Values/Purchase Price in the appraisal in order for the Full Commission to be earned......

To think the Goverment would not come in and limit commissions is nieve and dangerous. Especialy after they announce an open investigation on the matter. It has happened in other professions and it very well could be coming our way........

Hidden or Upfront Fee(s) have NO Bearing on the matter....HUD believes that the commissions are creating INFLATED VALUES......Ignorance it must be Bliss.

A Fool is someone who is not educated and/or informed about pressing matters which directly effect his/her profession.

Chances are the average commission rate in the lower price point market are higher, and the San Jose agent better make more money if he actually wants to live in a house.

I can hear the discounters and a-la-carte companies cry foul for increasing the commissions to 4%.
What Bubble? Not in my neighborhood.

Not at the federal level and here's why.

The practice of real estate is regulated at the state level and while the loan is a federal matter the sale and purchase is conducted intrastate and the federal government does not have a constitutional role.

If commissions were capped at 4% it would practically bankrupt Real Estate Operations in smaller communities with a average sale price under $150,000.

This would lead to more consolidation and far less competition.

While Real Estate commissions, which averaged 5.1% last year, might seem high. There are very few operations that could exists in a balanced or buyers market charging a cap of 4% commission.

HUD won't touch this with a 10 foot pole.

Not even getting into whether or not the paperwork is equal with those two examples, but asking: do you think that is all that being an agent is about? Paperwork?

Keep it civil guys... Remember... attack the argument, not the arguer (is that a word?)

Please do NOT forget the cost of doing business we have as Realtors: Board fees, Desk fees, General advertising cost, Web site design & hosting, E&O Insurance etc. It cost us a lot of $ before we ever close a transaction.

California is an extremely litigious state. The paperwork, costs of doing business and risks involved are not the same.

Jabronie,

At the risk of being edited by Jennifer :p for telling the truth...Bulls**t!

Agent commissions have nothing to do with the "housing bubble" as you should be well aware. There is no "national Housing bubble" only a few areas where the values have been artifically over inflated. The realtor fees did not drive these values through the roof instead it was simple economics! Supply & Demand is what drives our marketplaces!

Here is a real life example for you. I have a friend that purchased a home in San Jose about 15 years ago. She paid about $150K for the property. That house is not worth about $750 based on current comps. Please use your advanced economic knowledge to show everyone how a 5-7% realtor fee drove the value of that house up $600K!

Perhaps you could post the official link to this open HUD investigation to limit/cap agent commissions in covered SFR real estate transactions or perhaps the NAR governmental affairs link showing the lobbying efforts against this fee cap.

I am sure that 70+ percent of the population also believe that Doctors, Attorneys, Plumbers, Corporate Executives and others also make too much money as well but you do not see the federal government stepping in and placing caps on wages and commissions.

Now you had better pull your covers up over your head and hide so the RESPA boogieman doesn't come and cap your commission!

This thread is getting a little long. There is basically one statement about commissions that I think everyone will agree on...

Charge what you want to charge.

My question is......

who would go to school for 4 years when there is a 10% success rate?

Since the average for your first sale is 6 months how can someone pay off 4 years of school and have money saved for those 6 months?

I think that the way it is now at least gets your foot in the door but I think continued education is a must. I understand where everyone is coming from but for all the bad apples there are plenty of great ones and by setting the barriers up you may never see them.

Charge what you are worth!

Is your time only worth the low end of the industry commission scale?

Is your expertise still a value to the client at the high end of the industry commission scale?


What are YOU worth and why?

If "decider" is a word, then yes, "arguer" is a word.

-jeff

I just tell them that I am a second degree black belt in martial arts and love inflicting pain and that I can can make them forget about the commission real quick.

Well, if an American clothing company pays their employees $7.00 an hour, and a company in the Philipines pays there employees $7 or $.70 a day, should Americans really make 10-100X the amount as the Philipine employees? Should the American employees justify why they make $7.00 an hour?

I don't hold what people make against them, as long as the there's a competitive market and I can choose what I want to do or purchase.

Health care, real estate, law, etc are obviously debatable as to how much of a free, competitive market there is. But there are still plenty of choices. Especially in the case of real estate, where there's an industry that works for free a lot, there are reasons why things have evolved the way they have.

I think the hustle is important for humanity. Long live the hustle! The potential to make some real coin makes people hustle. The lack of potential routinely fails to produce productive societies.

Then the debate shifts to what is a productive society. I'm probably far to the left of many of you in that debate. But I still love the hustle!

-jeff

Good point here.

Wondering: Why have many Realtors conditioned themselves they must work for "free?"

Is this a self-confidence issue, at heart?

Well.... it's just sort of "how it is", right? I mean, I could hardly charge people to drive them around or to do a CMA when there are experienced agents falling all over each other to do it for free...

-jeff

Remembering: I can remember a unpleasant time in Canada when the real estate industry was under investigation by Federal authorities with respect to allegations of "Price Fixing" ”.

This was also a time when the news media took the opportunity in numerous articles, to "jump on the bandwagon" and cast doubts upon the integrity of all real estate agents in the country.

A time when federal police armed with search warrants entered the office’s of real estate brokers and real estate boards and seized records in search of evidence.

The legal costs borne by the industry and its members ran into the hundreds of thousands of dollars and resulted in a Federal Court Order governing the real estate industry nationwide.

It also clearly established that it was an “offence” ( and still is ) for anyone to conspire to fix or set prices on anything and in particular real estate fees and that all fees are negotiable in a free and democratic society.

I remember it well.

Right. But the point here, as has been made earlier in this thread and in several other similar theads I've run across on this forum, is that our "high commissions" should be viewed within the context of the fact that we, industry-wide, do a LOT of work for free.

That's not price fixing...

-jeff

Quoted by Jeff Olson... " Right. But the point here, as has been made earlier in this thread and in several other similar theads I've run across on this forum, is that our "high commissions" should be viewed within the context of the fact that we, industry-wide, do a LOT of work for free."

The following is an excerpt from Sell with Soul (it's easier for me to copy & paste than re-type! Call me lazy...)

"Successful real estate agents can make big bucks. For a career that requires only a month or two of education, the rewards can be tremendous. But be aware of the reasons the economy supports paying real estate agents such high fees.

You agree to be paid on contingency. You take the risk every day that the work you do will not be compensated. More Risk = More $Reward$. Less Risk = Less $Reward$. Not too many professions work with no guarantee of payment. Therefore, you can justify higher fees upon success. If you could convince your clients to pay you hourly (good luck), you could charge a reasonable hourly fee and would probably make much less money per transaction. Overall, you might come out ahead though.

So remember that the next time you get a $10,000 paycheck for, say, ten hours of work–that $10,000 is also paying for those flaky buyer clients who run you around and mysteriously disappear. It doesn’t mean that you and your services are worth $1,000/hour.

We real estate agents get spoiled by our big paychecks. We actually think we earned that $10,000 check during that specific transaction. Even if a client put you through the wringer for a year, it’s not likely you spent more than 50 hours on his transaction. And, $200 an hour is pretty good pay for anyone."

Great way to put things into light Jennifer.

That's not how it is! My previous life experience caused me to do 50 transactions in my 3rd year in the RE business. My education started 44 years before real estate.

I have not found success yet, so I'm not coming at it from that angle, but I agree with Mr. Peak in that several of the major lines of my life had to converge for me to feel like I WILL be a success at this.

But, Jennifer has a point- there are plenty of 22-year-old agents out there who are essentially doing it on a month's training. And I'm sure there are some very good ones like that.

I do know, even just a few months into this, that I can call another (opposing) agent and my "social engineering" skills do wonders for me... I've just been in a LOT, like thousands, of (much smaller) negotiations in my life, and I've had a lot of intense, ongoing relationships with clients at my business, so I do feel that there's a skill set there aside from the 5 weeks of schoolin' for my RE license... and I also know that I made mistakes in my past client relations that I don't want to repeat.

-jeff

www.HomesByOlsen.com

Life experiences which create wisdowm in business are everything, though.

This is what I tell people who question my commission. DO NOT GET MAD!!!! . Defend your commission. Let them know that you are providing a service to them. explaine to them that your commission is what pays' for the marketing of their home. It is what pays for the time you spend doing the CMA on their home it pays for the time you spend showing their home to buyers. If they don't feel that you are worth your commission then there are 2 ways to fix it. #1 You and your broker need to sit down and come up with a list of reasons why you are worth every penny of that commission and provide that to the seller/buyer who ever is paying you. Or #2 You need to work harder to prove that you are worth that amount and no one will question it once word get's out about how good of an agent you are. You will always have some cheep @$$ who thinks you should sell there house for 1% and there is nothing you can do about that, but either walk away or smile and take it...

It's never about the commission or money. People may try to justify that indeed it IS about the commission or money, but it is NOT. This is a convenient excuse.

It IS all about the prospect/client recognizing your value as a professional. Not value, as in the superficial term -- but in the true difference your representation makes to the entire transaction.

The problem is we do a terrible job of projecting and proving our value and core professional competencies, and we are surrounded by other agents. Therefore the public views us as a commodity that caves to price concesssions.

I would suggest that those clients that are REFERRED to us by friends, family and colleagues, typically haggle LESS over commissions because they already have a window into our experience already -- via the person who introduced us to them.

On the other side, I would also suggest that those clients/prospects that were NOT referred to us, are the ones that typically balk over commissions.

ON POINT: For what it's worth,the following and well written article was originally published March 10, 2005 and again published January 19, 2007 and related to the current topic.

How To Negotiate a Commission Cut Request
by Blanche Evans - Realty Times - March 10, 2005 and can be viewed at
http://realtytimes.com/rtapages/20050310_negotiate.htm

And ours too. As a full-service agent, I could not sell a referral of mine to a discount-agent. I can't sell what I don't believe.

I wonder, could a discount agent be able to refer one of her clients to me and sell her on the idea of paying 6% to me? Somehow, I don't think so. I think this works both ways.

Competitive issues aside for a moment, if that discount agent's client had a need for a more specialized skillset with the transcation that their current agent didn't possess, the agent would likely try to refer the business. It happens all the time.

People in this biz are so hung-up on the fees and percentages, they let it get in the way. Yet in most markets, full service realtors often outperform discount agents, on transactions and earnings. So someone is surely seeing -- and paying for -- their value.